As more and more professional services organizations lean on AI-driven tools to enable new ways of working, there is some question as to how this will impact pricing models.
Accounting firms, of course, are not immune to this development. Thanks to technologies like next gen search, knowledge graphs and generative AI, tasks that previously took multiple days and/or accounting professionals to complete — such as gathering and analyzing reams of financial data to prepare tax returns, or creating detailed tax reports and summaries — can now be accomplished in a matter of hours.
What does this trend, which is only poised to gain steam as these technologies become even more commonplace, mean for accounting firms' pricing models over the coming decade?
An accelerant for new fee arrangements
It's tempting to think that accountants might be creating a pricing conundrum for themselves by embracing this new technology, given that the billable hour has been a cornerstone of accounting work since time immemorial. Is it a viable option for this brave new world that accounting is entering?
Make no mistake: the billable hour is a highly resilient pricing model, and it's likely that it will continue to be one of the delivery options for accounting work for the next decade — but it will increasingly be rubbing shoulders with fixed fee arrangements and other types of value pricing.
The shift from billable hours towards value pricing didn't start with the emergence of generative AI — but this latest technological wave will accelerate the shift. The question for accountants, then, is how best to ride this wave.
Repetitive workflows? Use AI and value pricing
As a technology, AI is best utilized for repetitive, high-volume pieces of work. Think of our example alluded to earlier: AI is well suited for combing through heaps of financial statements and plucking out the right pieces of information.
After all, why have a small army of accounting professionals poring over a year's worth of financial records if AI can glean the necessary nuggets of data much quicker and for much less "cost of delivering the service"?
Value pricing makes sense for this type of work. Picture a Venn diagram with three items: repetitive accounting workflows, AI and value pricing. There should be significant overlap for these three items.
Keep the billable hour handy for the high-end work
Critically, leveraging AI for these aspects of accounting work frees up accounting professionals to focus on higher-value activities.
For the tax specialist, that means less time gathering data for the tax return and more time offering advice on tax implications for various business decisions or advising on ways to legally minimize tax liabilities and take advantage of tax incentives.
For the audit professional, it means less time pulling data from supporting documentation or any previous audit reports and more time coming up with recommendations and action plans for any identified deficiencies. And for the advisory professional, it means less time summarizing market and industry research or the salient points within a client's internal process documentation, and more time developing actionable insights.
This type of strategic high-end work should fundamentally be based on time, and the billable hour makes most sense here because these services represent non-repetitive workflows that AI isn't able to tackle yet.
A future-proof blend
In the long term, accounting firms will need to refactor the way they do business and undertake the "hard yards" of process change management and better attention to their underlying information architecture if they hope to make the most of what AI can potentially do.
For now, though, the way forward for accounting firms in the coming decade — from a pricing perspective — is coming into focus: In areas where AI can be deployed to good effect, use value pricing. In areas where AI can't yet provide meaningful results, use the billable hour.
This blend of pricing models will help accountants to safely navigate this latest wave of technological change and deliver the best results for clients — all while maintaining a healthy bottom line for themselves and positioning themselves for future success.
