AI Reality in Firms: Richard Lynch | MP: Sikich

How ingrained are you with AI? Are you using every day? I am using it every day. If you allow yourself not to think about it, you don't do it. So I push myself every day to consider how AI can impact our world. I think the very first piece is going to be the recomposition of how we do work. The inevitable of do you still honor the pyramid structure or do you start to move yourself to the diamond? Do you expand more people at the base to do more compliance work, try and generate more revenue that way, or do you move your people or elevate your people up? Richard lynch is our special guest today. So I am the managing principal Sikich's assurance, tax and wealth management practice. The ironic piece about that is even though we built our platform around this ours concept, the truth of the matter is we've always known that the value that our people can contribute isn't ours based which leadership decisions on AI are going to matter most over the next few years. I think you have to decide if AI is going to become core to your strategy or a shadow. There's always been this concept of elevation of what their job requirement is. Technology is constant. Replace that. We're looking ahead now. By 20, 27, 28, what do you feel will separate the leading firms from the foreign? This is AI Reality. Inside Firms, a series here on Accounting Voices where a select group of senior firm leaders answer the same five AI related questions based on what they're seeing, what they're deciding, what they're being held accountable for in their firms. Richard lynch is our special guest today. Richard, a big welcome to you. Thanks Rob, Great to be here. We'll get into a quick intro from you in a moment Richard. But first I want to honor five technology companies that are supporting this series and genuinely shaping how AI is applied inside accounting firms. So we've got filed the Intelligent Tax Workspace for preparation and review automation Digits, the AI powered financial intelligence platform for accounting firms. Carbon, the global leader in AI powered practice management software. Instead, the first AI tax agent for end to end research, planning, filing and defense. And finally fieldguard, the AI native platform for audit and advisory firms. So Richard, great to have you with us. Tell us briefly what you are and what you do and then we'll head to five questions. Sounds great. So I am the managing principal Sikich's assurance, tax and wealth management practice. So on a daily basis I get to lead the strategy and direction of our firm both from a compliance perspective as well as a consulting perspective. I've been in the role for probably now two and a half years. My background is on the technical side of the business. So you're talking to a purebred assurance guy. Got a little bit of tax in there, but they kicked me out of tax pretty quickly and found my passion in the administrative side and been doing that ever since. And from a personal perspective, how ingrained are you with AI? Are you using every day? I am using it every day, and I force myself to use it every day. I force myself to use it in ways that I hadn't thought about. I challenge myself in ways it can contribute. It is something I'm, you know, if you allow yourself not to think about it, you don't do it. So I push myself every day to consider how AI can impact our world. Great to hear it. Let's get into these five questions. Number one, Richard, that we're asking everybody, where is AI reshaping strategic direction for accounting firms? Great question. I see that as somewhat of a domino effect. I think there is some inertia to AI that will have just the impacts that it will have, and we won't be able to resist those. But there also is a piece of positioning where you place those pieces and how they fall. I think the very first piece is going to be the recomposition of how we do work. The movement from the idea that compliance will certainly shorten in terms of capacity as well as the amount of labor requirement for our compliance pieces. And then it comes down to what do we do with that excess capacity? I think that inevitably leads to realities. You fill it with more compliance or you do more advisory and consulting. And the inevitable of do you still honor the pyramid structure or do you start to move yourself to the diamond? Do you expand more people at the base to do more compliance work and try and generate more revenue that way, or do you move your people or elevate your people up? So it's reshaping the decision making in terms of what your play platform looks like and what your training looks like. And inevitably, if you've based yourself in a compliance world, the pricing structure and the value proposition has to shift. If our clients become accustomed to the fact that it's taking less time and less manual hours, they'll expect a fee concession. However, if you elevate your thinking and your value to a higher level of complexity and strategy, I think they'd anticipate fees going in a different direction. So the redesign, I think, is somewhat the momentum of AI that it will all be subject to, but also how you position yourself I can tell you with absolute certainty SIKICH sees itself on the consulting realm. We want to be advisory. We believe that there's more untapped opportunity there. And so we're going to be designing our people, our training process and our interaction with our client based upon that reality. Question two, Richard, is what are firms getting wrong about AI? Well, not to assume that I know all the answers and that I have everything figured out. What's AI? There's still a lot to unpack and still a lot of pieces to think about. I think the first piece is, and it goes back to that first question, viewing AI as simply a productivity tool, making us faster. It will certainly have that impact, but I think there's much deeper impacts that could have and how we use that capacity and how we continue to engage with it. I think the piece to think about is that this first slice that AI is absorbing is not the end. And so if you continue to base your firm on this idea of doing more compliance work, you'll inevitably be chasing this reality of what AI is replacing next. However, you reshape your model to think about consultation, you'll be looking for AI to generate more capacity so that you can do more consultation and advisory. So I think it comes down to this concept of are you going to be battling against AI on an annual basis, trying to figure out how you can do more compliance work? Are you going to be partnering with AI in terms of allowing you to do more strategic work? Two very compelling ideas and I think firms are getting can get that wrong. It's also the equation of hours to value. Our industry has long since tied itself to the concept that this is how many hours it takes, so this is how much you're going to pay. The reality of that is really shifting. And I see the ironic piece about that is even though we built our platform around this hours concept, the truth of the matter is we've always known that the value that our people can contribute isn't hours based. You take someone that has 30 years of exposure and experience and they may be able to answer a very detailed strategic question very rapidly based upon what they've seen, what they've heard, what they've read and what they know, and yet that may only take them five minutes to digest that. And so there's tremendous value in that five minute conversation well beyond just the billable hours. So breaking that tie officially from this concept that hours creates value, this idea and concept to think about, no guardrails or no clear governance controls. It's a dangerous environment We've lived in that space since kind of the reality of kind of the Internet and the access to information, where the reliability of data has now somewhat questionable. You have to ask yourself, where is it coming from? What's the source? AI exacerbates that. We still have to ask ourselves, are we getting reliable information? It's quick, it's prompt, it's fast, it's intuitive, is it accurate? And we have to have some guardrails around that reality. And not building those out and just introducing AI because it's the sexy new topic is a dangerous reality. I think people are getting that wrong. It seems tougher at the top now with all the things you have to contend with as a leader. Question three asks which leadership decisions on AI are going to matter most over the next few years? I think you have to decide if AI is going to become core to your strategy or a shadow. That core perspective is built into what you do. It's built into a consistent implementation process, consistent evaluation process. If it becomes a shadow lurking kind of in the background, where you have this technology but aren't really relying on it, aren't really using it to its fullest extent, that reality, that has to be a decisive action and strategy that you take. You have to decide how you're going to implement. You can't toy with it and expect it to be effective or reap the value and benefits. But I also think more importantly, the biggest decision is redesigning the operational model. The idea of how our training takes place, what the pathway of our people are, what the capabilities are coming out of educational institutions with, how we invest in them, how we elevate them, the expectations. This is not something that our industry hasn't encountered in the past. There's always been this concept of elevation of what their job requirement is. Technology has constantly replaced that. I've seen it just in my career, in the 26 years I've been doing this. The expectations, the things that people are doing coming out of school now is much different than what I did. And I'm very envious of the technology they have and the things that they can do. The challenge is AI is really adding a catalyst to that. It's moving at a much faster pace. And so we have to respond with training and opportunities and making sure our people understand there's opportunity still in this profession and how we're going to lead them in that direction. So I think there's significant realities around that. I do think it's also a movement to continuous advisory as opposed to compliance. How do you create that capacity for your people. How do you prevent them from being tied to the compliance orientation of our work and not enabling them to dive into the consulting or strategic side. If you train them to do this consulting, you then have to create the time for them to execute on that. And this profession as we all know can be a grind in the production side. You have to really start to think about how do we create capacity and opportunity for us to not only take advantage of what we know but also our clients to see the value in it. With pace of change and opportunity comes challenge. Question 4. Where is the AI phenomenon creating the greatest internal tensions inside firms? The thing with AI is that it hits on some of the most key metrics that you look at. It hits on staffing and hours and risk and training and value. It hits on all those pieces and so the anxiety and tension is there. So from a staffing perspective our people certainly feel the anxiety of what does my job look like and will it exist? What's going to happen? I don't think that's unique to the the accounting profession. That's people are asking that question all over the place. What we've seen historically is that technology and advancement creates opportunity. I don't think this is any exception. The reality is this will be a staff augmentation and not a replacement. But I do believe that comes with somewhat of a handshake reality in that our people have to come out of educational opportunities at a higher level and we have to provide them that opportunity to come out at a higher level. We can't continue to do the same thing and expect there not to be disruption. There will absolutely be disruption. I think that disruption can be met with opportunity if we meet it with the training structure necessary. We have to break away from this hours reality. We have to find different measures of productivity and value. We have to understand the risk and make sure we have proper governance control surrounding it. And again, our training platforms and our value proposition has to shift and change away from this hours mechanism. And this idea of the grind of long hours and hard nights earn you the ability to be a consultant. I don't think those are the realities that we're going to be dealing with in the future. I think we're going to have to find other means to where you can't undermine exposure and experience. But we can accelerate it. I think we're going to be challenged to do so. We've got one more question coming up before we get to that. Thank you. To instead field guide filed digits in carbon for Their partnership with this series. Each of those companies plays a role in how accounting firms are attempting to bridge the gap between AI ambition and operational reality. And I'm grateful for their part in this conversation. Richard, final question. We're looking ahead now. By 20, 27, 28, what do you feel will separate the leading firms from the rest? I think the first thing has always been this profession is the people getting the right people on the bus, getting the right people motivated. That doesn't change. It's always been the reality. Having the right people is imperative. But when you start to think about AI and its impact, I think it's those that get away from the idea of experimenting with AI and really make it core or essential to their process that's going to make a vast separation, probably navigating the change from automation to actual AI integration. As a non tech guy, I've learned over the years that a lot of what we talk about that we call AI is actually just automation. Automation's been around for much longer. So truly embracing AI is a different step, a different movement. Moving away from this concept of automation, which I think is there's a lot of things that can be automated. It's a very valuable process to think about, but it's not true AI integration. And we got to make sure we don't confuse those two. And I think the firms that embrace AI and not confuse it with automation will benefit adopting a platform to understand how it's going to impact the services we provide. As I mentioned, I think technology creates opportunity. And so as our clients, our prospects, the industries adopt AI, there's going to be opportunities for us, us to facilitate that strategically as well as from a compliance perspective. We're seeing the average complexity of a tax return increase, we're seeing the average complexity of an organization's audit increase. We're seeing the average demands in the wealth management side of the various products they can purchase increase. All those create opportunity for what is a trusted advisor relationship that sikich has always had. So continuing to build a platform around those things where we can add credibility and confidence in the market surrounding AI as well as us using it internally, I think will also create tremendous opportunities. Community Superb answers. This is AI reality inside firms. Five questions, one leader, 12 minutes. No script, no spin. You can find the full series on accounting voices across YouTube, LinkedIn, CPA trend lines and all the major podcast platforms. Thank you Richard lynch of Sikage, for your passion, your candor and being part of this critical conversation. It's been wonderful having you on the show today. Been great to be here. Thank you very much, Rob.