I caught up with Keri Gohman, President of Xero Americas, after her keynote at Xerocon 2018 yesterday right here in Atlanta. One of the themes of her presentation centered on how automation will free accountants from the time-consuming but important tasks of collecting and processing data, allowing them to focus more of their time on more valuable advisory services – services small businesses want them to provide. And artificial intelligence, coupled with automation, is providing accounting advisors insight into creating their own specialized niches that can provide additional opportunities for growing their businesses while providing their customers with more reasons to stay customers longer.
Below is an edited transcript of our conversation. To see the full interview watch the video below, or click on the embedded SoundCloud player.
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Small Business Trends: In your keynote, you talk about the role of automation. And how that’s going to impact the job of the accountant to be more of an advisor and less of a data entry person. Maybe you could talk about that a little bit.
Keri Gohman: One of the things that we’ve talked a lot about is a recent study that came out with McKinsey … and it said that by the year 2030, 800 million jobs would be lost to automation. And listen, technology has always played into a role in disruption but technology and the pace of change is going faster and faster. McKinsey said the collection and processing of data is actually a prime candidate for disruption and replacement. And one of the industries that would be most impacted is accounting and another one would be things like back office processing.
We think McKinsey got the whole idea wrong. Specifically that accounting is just about collecting data and processing that data. That’s actually not what accounting is really about. Accounting is really about helping small business owners understand their financial picture and interpret it and that they get the right support along the way from and expert in financial management.
What we think is going to happen with accounting jobs is simply that the part of the job, and there is a part that is data collection and processing, that will be automated. We want to provide a lot of that automation, leveraging machine learning and artificial intelligence. In fact, we just passed a billion recommendations, using artificial intelligence in our system to help accountants code transactions. That’s incredible.
Small Business Trends: Yeah.
Keri Gohman: It saves lot of time. But what want to then do is help accountants know how to use that extra time. How do you provide services that small business owners really value and need. And, we believe as a whole if accountants are able to do that, they’ll add more value to their small business clients and the demand for more accounting services will actually go up. And, what we hear from business owners is that they want the help and I can talk a little bit more about some of the studies we’ve done there.
What we know is half of business owners fail within five years. That’s a startling statistic. But when they’re connected to an accountant their chances of success go up. 85% of them survive past year five and they grow their profits 23% faster. That’s amazing. That’s pretty compelling stat.
Small Business Trends: Your advisers, how are they beginning to position and transition their relationships with their customers from the more mundane aspects of data entry to being more of an advisor where they’re able to look beyond just the numbers of today to help get their customers to where they want to go to?
Keri Gohman: I think there are two things that I would highlight. One is, and we have, by the way, we have partnerships with accountants in every part of that journey, right. Accountants that are still providing just compliance services. Accountants that are getting into simple advisory, which we think about that as like budgeting and forecasting or complex advisory which would be more virtual CFO or a coach and so, one of the things we really do in our community is try to find ways to help accountants who are further along in their journey, coach and mentor accountants that aren’t quite so far along in their journey. And that’s a really wonderful opportunity.
Keri Gohman: When I think about how does an accountant make that transition there’s sort of two things to think about. One is, we spend a lot of time in research saying … asking small business owners, “Do you want your accountant to play that role? Is that even a role they can play?” So, we just got a study back- a benchmarking study – and what we heard from small business owners is accountants are still my number one advisor. They beat out peers. They beat out family and friends. They beat out bankers and lawyers and anyone else. And we also said to the small business owners, “If we gave you a ton of automation would you still want your relationship with your accountant?” And the vast majority, over 70% said yes.
In fact that, roughly that same amount, said the advice I get from my accountant is incredibly beneficial to me and I really appreciate it, which is fantastic. One is accountants need to know that’s a role that small business owners want them to play.
The second thing to know is, if my business owners want me to play that role, how do I think about that? The first thing we talked about, and this applies to really any industry in transition is accountants have a wonderful opportunity to figure out who they’re going to serve first. And once you figure out who you’re going to serve you can really get clear about the services you offer.
So, we had some wonderful examples that we shared at our conference of accountants that have focused on, we have a group of accountants that are focused on food truck accounting. We have another group …
Small Business Trends: Food truck accounting?
Keri Gohman: Yes, I’m not kidding.
Small Business Trends: They’re getting this “nichey” with that?
Keri Gohman: That’s very niche but when you’re in the cloud you don’t have to be constrained to the small business owners that are in your city. You can work with people worldwide.
Small Business Trends: Mm-hmm (affirmative)
Keri Gohman: And that’s an incredible opportunity. So, you can find any niche.
Small Business Trends: Right.
Keri Gohman: We also had examples that we shared of accountants that have focused on the creative industries. And, so they really get … understand those industries really deeply and are able to then provide more guidance and more advice.
Keri Gohman: The second part is, once you’ve decided who you’re going to serve and what your unique value will be, well how do you decide what services to offer? And we in our research asked business owners, “What are you worried the most about? What do you want to … some help with?” And you can imagine if you start on compliance there’s actually very, a very few percentage of small business owners want a lot of help or guidance on basic compliance. They want some but as you transition from compliance to simple advisory to complex advisory the desire for help goes up exponentially.
Small Business Trends: And it also solidifies your relationship as an advisor the more you’re able to move up that pathway.
Keri Gohman: Absolutely. So, advisors should feel really comfortable playing the role because small business owners want it. They want the more complex support and there’s a wonderful opportunity for advisers to think about well, who do I want to serve, so how do I develop deeper expertise in a particular industry or area. How do I find my niche, if you will.
Keri Gohman: The other thing that we learned when we did our benchmarking, is we benchmarked accounting firms too.
Small Business Trends: Hmm…
Keri Gohman: Yeah, and we asked those accounting firms, “Well, tell us about your practice and how you’re growing.” We saw that firms that all firms grew by about 17%.
Small Business Trends: Just general, all over?
Keri Gohman: Generally, which is great news for the profession, right.
Small Business Trends: Yeah.
Keri Gohman: We actually saw in our research that firms that were just offering compliance, grew by 11%. Firms that were offering advanced, more advisory services, complex advisory services, grew by 29.2%.
Small Business Trends: Wow. Yeah.
Keri Gohman: So you can see how that demand is going to fuel the next generation of accounting.
Small Business Trends: Yeah, and also allows the accounting advisers to figure out how they can select the kind of customers that allow them to go the direction they want to.
Keri Gohman: Exactly, exactly. And what we saw is, what really fueled that growth as well was when you’re focusing on advisory you want to make sure that you start with the automation of compliance services and then in that extra time that you have you can actually charge more for your services because you’re dealing with more complex offering.
So, we saw firms that were offering only compliance guidance had about 78 thousand dollars revenue per client. Those that were offering complex advisory that number jumped to 150 thousand dollars of revenue per client.
Small Business Trends: Wow.
Keri Gohman: That’s meaningful.
Small Business Trends: That’s huge.
Keri Gohman: That’s really meaningful.
Small Business Trends: Yeah, okay. So, it sounds like with your data with the transactions that you’re able to gather I think I saw it was over two billion in …
Keri Gohman: Oh yeah.
Small Business Trends: Yeah. And with your AI machine learning … you’re able to find these kinds of insights that are helping advisors to figure out these kind of pathways.
Keri Gohman: Yes, so our goal is really, I mean our ultimate goal is to figure out how to do this rewiring. How to put the right pieces together. But, when I think about the journey from compliance to complex advisory, it is a journey.
Small Business Trends: Mm-hmm (affirmative)
Keri Gohman: What we try to do is offer tools for the automation of the basics of compliance. That’s where everyone has to start. How do I begin using technology to change the way my business works. And then we try to also provide tools that allow folks to get into complex advisory. One service for example is technology. Assessing which technology and implementing that technology a small business owner should use.