Why Accounting and Business Valuation Professionals Must Rethink Productivity, Technology, and the Future of Their Work
Artificial intelligence is changing the professional landscape, but it may not be the biggest threat to traditional accounting and financial services careers. The more immediate challenge is the growing gap between professionals who embrace automation and those who continue relying on outdated, manual processes. As technology improves productivity, accounting and business valuation professionals must reconsider how they spend their time, deliver services, and create value for clients.
In an episode of ValuationPodcast.com, host Melissa Gragg, a mediator and business valuation expert, explores this issue with guests Jesse and Tom of FinOptimal, an accounting automation software company. Their discussion highlights an important distinction: artificial intelligence and automation are not interchangeable, and understanding how each technology works can help professionals remain competitive.
The central message is that technology itself may not replace experienced professionals. However, professionals who use technology to complete work more efficiently may gain a significant advantage over those who do not.
The Real Threat to Accounting Professionals Is Falling Behind on Automation
Accounting firms face an ongoing challenge: finding and retaining qualified accounting professionals. As experienced employees become responsible for increasingly large workloads, firms must identify ways to maintain productivity without relying entirely on additional staff.
Traditional accounting processes often involve repetitive tasks, manual data entry, spreadsheet calculations, financial adjustments, and multiple rounds of review. These activities consume valuable time that could otherwise be spent analyzing financial performance, advising clients, or supporting complex business decisions.
Automation offers an opportunity to reduce this administrative burden.
Jesse and Tom emphasize that accountants who adopt automation can potentially complete recurring work faster, reduce errors, and serve more clients. The competitive risk is not necessarily that software will eliminate accounting positions. Instead, professionals who understand how to use technology may outperform those who continue performing the same tasks manually.
This distinction is particularly important in business valuation. Valuation professionals depend on accurate, organized financial information. When accounting records contain errors or inconsistencies, valuators must spend additional time requesting corrections and reconciling information before they can proceed with their analysis.
Better accounting processes create a stronger foundation for more efficient valuation engagements.
Artificial Intelligence and Automation Solve Different Problems
One of the most important points discussed in the episode is the difference between artificial intelligence and traditional accounting automation.
Artificial intelligence is particularly useful for language-based activities, including content creation, drafting communications, summarizing information, and supporting certain research activities. However, it is not automatically equipped to handle every technical accounting process.
Automation focuses on completing structured, repetitive tasks according to established rules. These tasks may include calculating adjustments, recording journal entries, transferring information between systems, and generating recurring financial reports.
Tom compares adopting technology to building a foundation before attempting more advanced applications. Rather than expecting artificial intelligence to solve every operational problem immediately, businesses should first identify smaller processes that can be automated successfully.
The most effective starting points are generally tasks that are repetitive, structured, predictable, and governed by consistent rules.
For accounting firms, this approach can create measurable improvements without requiring an entire transformation of their existing operations.
Why Accrual Accounting Matters for Business Valuation
Another major topic in the discussion is the difference between cash-basis and accrual-basis accounting.
Many small businesses rely on cash-basis financial statements because they are relatively simple to maintain. Revenue is generally recognized when payment is received, while expenses are recorded when payments are made.
Although this method can help business owners monitor cash movement, it may not accurately represent the company's financial performance during a particular reporting period.
Accrual accounting provides a different perspective by recognizing revenue when earned and expenses when incurred, regardless of when the corresponding cash transaction occurs.
Consider a business that receives payment from a customer in August but pays a contractor for related work in October. Under cash-basis accounting, August may appear unusually profitable, while October may show a significant expense. These results do not necessarily reflect when the underlying business activity occurred.
Accrual accounting helps align revenue and expenses with the periods in which they are economically relevant.
This distinction becomes especially important during business valuation. Valuation professionals need reliable financial information to understand historical earnings, operating performance, profitability, and cash flow.
If financial statements do not accurately reflect the timing of business activities, additional adjustments and analysis may be necessary.
Automating Journal Entries Can Reduce Repetitive Accounting Work
Recurring accounting adjustments are among the processes that can benefit significantly from automation.
During the episode, Jesse and Tom identify several areas where automation can reduce manual work, including:
Accrued expenses: Recording expenses in the appropriate accounting period even when payment occurs later.
Deferred revenue: Recognizing revenue over the period in which services are delivered rather than recording everything when payment is received.
Prepaid expenses: Allocating payments across the periods in which the related services or benefits are received.
Fixed asset depreciation: Spreading the cost of qualifying assets over their useful lives.
Data transfers: Moving information between accounting, payroll, and other business systems in a format that supports meaningful financial reporting.
For example, a company that pays its annual insurance premium in July should not necessarily recognize the entire payment as an expense in that month. Instead, the expense should generally be allocated across the applicable coverage period.
Similarly, a business purchasing $200,000 in kitchen equipment expected to last seven years should account for the asset over its useful life rather than treating the entire purchase as an immediate operating expense.
These processes are important, but manually calculating and recording recurring adjustments can consume substantial accounting resources.
Automation can perform these calculations and generate the necessary entries, allowing accounting professionals to focus on reviewing results and addressing more complex financial questions.
Better Financial Reporting Leads to Better Business Decisions
Automation is not simply about reducing the number of hours required to complete accounting work. It can also improve the quality and usefulness of financial information.
The discussion highlights an important example involving payroll reporting.
A business with 100 employees across eight departments may receive a single summarized payroll expense in its accounting system. Although the total payroll expense may be accurate, the business owner may have difficulty understanding how much each department costs or whether individual departments are generating sufficient revenue.
More detailed payroll integration can help allocate expenses according to departments, employees, or other relevant categories.
This information provides greater visibility into operating performance and helps management evaluate profitability, expenses, and resource allocation.
For business valuation professionals, more detailed financial records can also support a stronger understanding of the company's operations. Instead of relying exclusively on summarized financial statements, valuators may be able to examine the underlying financial activity more effectively.
The quality of business decisions depends partly on the quality of the information supporting them.
The Problem With Relying on Billable Hours Alone
Traditional accounting and professional service models often rely on hourly billing. While hourly fees can make sense for specialized consulting and project-based work, recurring services create a different challenge.
When a firm performs essentially the same accounting tasks every month or every year, billing exclusively by the hour may provide limited incentive to improve efficiency.
Automation changes this equation.
If a firm can complete recurring work in significantly less time, it may be able to maintain profitability while offering more competitive pricing or serving additional clients.
This also allows experienced professionals to redirect their attention toward higher-value services.
Rather than spending hours entering transactions and preparing repetitive adjustments, accountants can devote more time to financial analysis, client relationships, and strategic advisory work.
The same principle applies to valuation professionals. Time spent manually entering financial statement information or reviewing repetitive documentation is time that cannot be spent researching industries, evaluating business risks, or examining the assumptions that influence a company's value.
Productivity improvements can therefore benefit both the service provider and the client.
Building a Technology Foundation Before Adopting Advanced AI
The episode also addresses the tendency to view artificial intelligence as a complete solution to business technology challenges.
However, AI depends on the information and systems available to it. Business-specific financial information, including internal accounting records and general ledger data, may not be available through publicly accessible information used to train general-purpose AI systems.
Consequently, AI may have limitations when asked to make highly specific judgments about an individual company's financial performance without access to the necessary underlying information.
Automation provides a practical foundation by organizing and processing structured information.
Once reliable processes are established, businesses can explore more advanced applications of artificial intelligence and other technologies.
The recommended approach is to begin by examining everyday workflows:
Which tasks are performed repeatedly?
Which processes follow predictable rules?
Where does manual data entry consume unnecessary time?
Which calculations can be performed automatically?
Which activities require professional judgment and human oversight?
Identifying these opportunities can help firms make more informed technology investments.
Cash-Basis and Accrual-Basis Reporting Can Work Together
Businesses do not necessarily need to choose between understanding their cash position and maintaining accrual-based financial statements.
Management still needs to know how much money is available, what has been received, and what has been paid. Cash flow remains essential for monitoring liquidity and managing daily operations.
However, business owners also need financial statements that reflect operating performance accurately.
Jesse and Tom explain how automation can help businesses maintain both perspectives without requiring accounting professionals to enter the same information multiple times.
For example, an annual insurance payment can be entered once, while automated accounting processes distribute the expense across the appropriate reporting periods.
This allows businesses to examine cash activity while also generating accrual-based profit and loss statements.
For valuation professionals, access to both perspectives can be useful when evaluating a company's financial position, operating performance, and historical cash flow.
The Future Belongs to Professionals Who Improve Productivity
The broader message from Jesse, Tom, and Melissa Gragg is that productivity improvements are essential to sustained business growth.
Technology should not simply be adopted because it is popular or because competitors are using it. Instead, professionals should identify where their existing processes create unnecessary work and determine which solutions can improve efficiency.
For accounting firms, this may mean automating recurring journal entries and improving integrations between financial systems. For business owners, it may mean obtaining more accurate financial reports without dramatically increasing accounting costs. For valuation professionals, it may mean spending less time correcting financial information and more time performing meaningful valuation analysis.
The goal is not to eliminate professional expertise. It is to make that expertise more valuable by reducing the time spent on repetitive activities.
AI may change the way professionals work, but the inability to adapt to automation could become a much more immediate competitive disadvantage.
To explore more conversations about business valuation, financial technology, accounting practices, and professional productivity, visit ValuationPodcast.com for additional educational discussions and expert insights.
FAQs
1. Will artificial intelligence replace accountants and business valuation professionals?
Artificial intelligence may change how accounting and valuation professionals complete certain tasks, but the discussion emphasizes that automation and AI are not automatic replacements for professional expertise. Professionals who use technology effectively may gain a competitive advantage over those who rely entirely on manual processes.
2. What is the difference between artificial intelligence and accounting automation?
Artificial intelligence can assist with language-based tasks, content creation, communication, and certain research activities. Accounting automation focuses on structured and repetitive financial processes, such as calculating adjustments, recording journal entries, and transferring data between systems.
3. Why is accrual accounting important for business valuation?
Accrual accounting helps align revenue and expenses with the periods in which the underlying business activities occur. This provides a clearer picture of operating performance and can give valuation professionals more reliable financial information when evaluating a company's earnings and financial position.
4. Which accounting tasks can be automated?
Common examples include deferred revenue recognition, accrued expenses, prepaid expense allocations, fixed asset depreciation, recurring journal entries, and data transfers between accounting and payroll systems. Automating these activities can reduce repetitive work and improve consistency.
5. How can accounting automation benefit small businesses and accounting firms?
Accounting automation can reduce manual work, improve financial reporting, minimize certain processing errors, and help professionals complete recurring tasks more efficiently. Small businesses may gain better financial visibility, while accounting firms can improve productivity, serve more clients, and dedicate additional time to advisory services.
