From Timesheets to Trusted Advisor

On this podcast learn what happens when technology turns a three-hour research project into a 15-minute test. Hello everyone and welcome to the Tax Section Odyssey podcast where we offer thought leadership on all things tax-facing the profession. Today I'm delighted to have been a Larry with me, he's been on the podcast before, Ben as the CEO and co-founder of BleJay. I'm just going to go ahead and say wonderful tax research option, which I use daily, not a commercial, but that is a fact. I'm delighted to have you with us today, Ben. Thanks April for having me again. This conversation is one that we're having a lot lately, but as artificial intelligence really becomes embedded in tax practice, firms are learning and discovering how it's not just changing how work it's done, it's changing how clients perceive value, how firms think about pricing, and even how regulators are viewing professional responsibilities. So we're going to really get into that today and we're going to talk about some new research on AI adoption and tax practice. We'll talk about a growing shift towards value-based pricing or why we think you should really be thinking about that if you haven't been already. And then also we'll address that IRS preliminary guidelines on responsible AI use, what that means for us, what we should pay attention to and what it should make us think about. So, Ben, Blujay has been tracking along with CPA.com, tracking AI adoption among tax professionals for several years now. And we'll actually put a copy of the report in the show notes. So if you want to dig deeper, but just kind of talk about what surprised you the most from the survey results? What the survey results show is there's increasing adoption and faster adoption than last year's survey that we did. So this year we surveyed 1,000 CPAs across America, asked them a litany of questions about AI and tax research, how it's affecting them in their practice. It was amazing that the adoption rate far surpassed what people predicted a year ago when we last surveyed everyone at that time, about a third of the respondents had adopted AI for tax research. And I think about another 20% said they would be doing so in the next few years. This year 60% already had. So the numbers were running ahead of where the respondents a year ago expected themselves to be. And a further third said they were going to. And they had plans in the coming, it was a little bit unspecified, but in the coming years to adopt it. So over 90% of respondents are saying yes, AI for tax research is something that they have either brought on board or are going to be bringing on board. But that wasn't the surprising thing to me, April. The surprising thing to me is what people want to do with the time that they're saving. So there were three big outcomes that people consistently checked off when they were responding. And as you say, the details are in the report. So people want to really dive into it. But the headline is people wanted to respond to their clients faster. That was number one, they wanted to achieve better work life balance with some of those time savings. And then they wanted to deliver higher quality advice. And I think there's a fourth thing lurking there, which we did not offer as an option for them to select. But they just want to enjoy their work more, which is really interesting. So it's yes, like if you if you're using AI and you can you can get through, you know, what otherwise would be a really laborious tax research task. And as you said, you know, in the lead in, you something that might take three hours, turn it into 15 minutes, that does a few different things. Of course, you can get back to your client faster because like just the elapsed time that you're engaged in this task is is a lot lower. Yes, it means you can probably get back to like family life and, you know, eat your dinner while it's still warm on the kitchen table. You know, and then yes, it's going to mean you can spend a little bit of extra time to really double down on, on the dimensions of the advice to make sure that it's rooted in the right authority. So yeah, it's higher quality advice. It's missing is it actually makes the whole thing as, as like your professional life feel a lot better because you have better tools. You're not grinding. You're not dealing with that angsty like what do I do next? How do I, how do I reconcile these things? What should I be reading here? You can get right to the core of the challenge and get right into exercising your professional judgment, which is another finding. And so 77% of the respondent said this is giving them a lot more time to really think about the client's situations and provide value through exercising their professional judgment, which is really fantastic. So I think it's really the story is about removing some frictions that have kept humans from doing the work that clients value most. And so that that can like leave you closer to your client and more joyful about your work. And it sounds hokey, but I think it's completely true. Yeah, not hokey at all. I think it's such a cliche life is short, right? But why not enjoy what you're doing every day and certainly underlying all of that is the world of compliance is changing. You know, whether we want to agree with that or not or think that AI's answer to everything or not, right? The world is changing what people expect are changing. People want more advisory work. Having this opportunity to like have time savings wherever it might be in your tax practice. Is it research? Is it tax prep? You know, all the different things. I mean, I'm in total agreement with you. I do still hear for sure. And I think sometimes it's size of firm. Sometimes it's just the individuals that make up a firm, right? It is not across the board that people are on board with moving to AI for tax research. Definitely. I'm still here since skepticism about, oh, I put a question in to whatever tool, right? And it was their answer was wrong. What I do, I don't know what you do. I'd love to hear is I just say like you have to dig deeper. You have to make sure because any tool is going to be dependent on the facts that you put in the way you ask the question, how you can follow up and say, you know, what are the opposing arguments? That's what I try to continue the conversation with. I don't know how you handle that pushback. I don't know either. It all it depends on the audience. It depends on who I'm talking to. If I'm talking to someone who I feel like I can push back on, I can be a little bit more commanding in my response. And so if it's a faculty colleague, for example, at the law school at the University of Toronto where I teach, I will say something like, what percentage of the answers and the books on the bookshelf behind you do you think are now currently wrong or out of date? And then they start to think and they're like, oh, well, yeah, a lot of them, but I don't fault the book for that. And I know it's on me to like double check and see what's changed and update it. I think we just need the corresponding muscle memory to do the same thing with these systems. And so it's often a very good practice to run the same question through multiple different models and just see what happens. So if you run through some of the commercially available horizontal frontier models, so a chat GPT or a Gemini or a Claude, I would put some weight on that, but not a ton. And then I'd run it through BlueJay. And I'd see what BlueJay says. And you know, if they all the sources agree and you can drill down into the authoritative case law and the, you know, the IRS materials and some of the academic and professional commentary through BlueJay, you're going to be really confident that that's the right answer. But you don't just like ask once and then you're one and done. It's, you know, just pick up the book off your shelf and go, well, I read it on page 78. So therefore, that's for sure the right answer. The book was published three years ago, like things have changed and like there's no mention of the OBBBA and in the book that was published in 2023, I guarantee you. So you've got to check these things. And and the risks are different from, you know, the paper led world that many of us came to agent, but it's echoes with that, right? Like you got to double check. You got to go into the source material. You got to see what the latest and greatest is. And tools like BlueJay are really good. So, you know, we're promising our closed system of vetted tax materials and a curated white list of really authoritative web basers. So we're updating everything every day. It doesn't mean that it's perfect and it's, it's not perfect yet. I hope someday April, you have me back on and I'll be able to say April, I know back in 2026, I was saying you've always got to double check it, but it's now perfect. But I don't see that happening and you're a tax professional. So you know this, like it's not black and white. There's never one answer. It depends is the main answer that I give. So I continue to have these conversations with people. And I think it's important to have these conversations. And I think people shouldn't expect that a tool, like you say, is perfect. And I have heard some universities teaching tax research different teaching our students and our professionals, right? How to evaluate the answer that you get and take it, you know, when I was in graduate school, I went to the law library and I read books, right? I mean, those days are over. All right, let's shift to our next topic, how AI in general, but specifically maybe around types of research is driving billing conversations. And it does kind of tie back to the research that we talked about. Why do you think AI adoption and alternative billing models are so closely connected? Sure. I mean, let's be clear about where we're moving from. So, you know, the past has been, you know, all about rates and hours and that's been a workable, it's been an amazingly robust kind of compromise equilibrium that professional services firms have found themselves in. And I think the reason is, and people who are critical of the billable hour, give this short trift. But I think there's something really deeply robust about it, which is you're capturing part of the cost equation that is the time that goes into doing the work. And then you can capture a big chunk of kind of the the differing value piece, attribute it in. So, the rate is limited to that work by changing the rates. So, the rates are reflecting have historically been reflecting like relative expertise, reputation for excellent work. The scarcity, like if I'm, if I'm a top tier professional on the top 1% of professionals for the particular thing that I'm great at, like I can't help everybody, I have to ration my time for the market. So, there's scarcity of my time. So, that's baked into the rate. And the exercise of my professional judgment, which doesn't take a ton of time, but it's kind of embedded in that rate number. So, you got the rates number, and then you got the hours number, and then you do some multiplication, and you got like this is, this is what this engagement is going to cost. So, that's been a workable compromise. AI is destabilizing that a lot because it can really dramatically reduce the amount of time. And so, if we're going to restore an equilibrium, the only thing that's going to make that work is if we drive up that hourly rate to something that's going to seem quite silly, I think, to a lot of our clients, because they will say, wait, last year, you're charging X dollars per hour for your time. And this year, you're charging five X or two X or three, or whatever the number is, and I can just imagine these conversations, Ben, April, you are not five times better at your job this year than you were last year. But, of course, it's because, these are proxies, right, and the proxies for the value delivered to the client. So, it depends on the complexity of their issue, the value of that issue to the client, us taking on professional responsibility and accountability for the quality of the response that we're giving them. So, yes, one option is that firms can drive those hourly rates much higher, but that really invites a difficult conversation with clients, and it creates distorted incentives to spend additional time, inefficiently on these files. So, I think the better answer we can talk about this, if you want to, is to have conversations up front with your clients. Like, in most other lines of business, it's very common to have a discovery call, like, let's talk about what are your needs, what, like, let's canvas, what, what you need done here, let me explain to you your options, let's kind of define the boundaries of the engagement, let's figure out what makes the most sense, let's agree to all of that stuff. If the scope is hard to figure out, let's talk about how we design a process that's going to allow us to discover the right scope for you, so that you're happy with the bargain, I'm happy with the bargain. And so, I think that's what this is really inviting all of us to do, is to have these kinds of conversations with our clients, and we'll get good at it, we'll get much better at it, practice makes perfect on this as in other things. But, it really is so to answer the core question, like, what's AI got to do with, like, the billable hour, it's got a lot to do with it, because it just, it kind of breaks that, that workable compromise that we've, we've seen for a lot of several decades. Yeah, that definitely encapsulates the issue, what is difficult, or it's difficult for me, I've been at the ACB for 10 years, so I've been out of practice for 10 years, but thinking about what value I'm providing to my client. Like, sure, here's a tax return, but the value really is your relationship with me, and what advice I can provide, and the fact that I understand your situation, you know, like all of that, like, you're right, somehow that's wrapped up into a billing rate. But, again, take it out of the, out of the equation, you're still paying me for my many years of experience. How do you do that? So, I acknowledge that it is difficult to figure out what that right number is, what is the number that is the value that I'm providing that everyone agrees with. But I also agree it doesn't seem like it's making sense to continue doing the same time and billing for everything, for all engagements. It's not like we need to do this with a completely blank slate. Like, we have a lot of historical, like, every firm will have a repository of, like, past engagements and what they cost the client on a rates and hours basis. They will know when clients push back and said, you know, this seems exorbitant compared to the value that I got out of the engagement, what went wrong, why did it take so much longer to do this? And the firm will know how many hours they wrote off, how much revenue they wrote off, and all of that can be mined for tremendous insights into the value to clients. So, we don't have to sit as an ivory tower exercise where, you know, we sit in the law library, we sit in, you know, some monastery somewhere and need to divine, like, what is the meaning of value to clients? We have so much commercially applied data, and we may not think about it in that way, even just experience intuition. We know generally what different kinds of work will bear. We know generally how long historically that work is taken and how much we've been able to charge for it. If the art is really in understanding that those prices should probably be a lot stickier, even if the delivery happens faster, and think about it this way, you're actually increasing the value to the client by delivering the work product more quickly. So, if you're in a collision in your car, I hope you don't, I hope you're not driving anywhere today. But if you're in a collision in your car today, a fender bender, and, you know, you take your vehicle in, and they say, oh, yeah, you know, you know, it's not, you know, you got to pay your deductible, but the rest is going to be covered, like, we think it's going to take you a week to get your vehicle back. And here's a smelly rental car in the, in the interim, free to drive around. You'd be like, much happier if you could just go and they'd wave a robotic AI magic wand at your car, fix it immediately, say, yeah, you still have to pay the deductible, but we use our fancy new robotic system and, you know, fix it in 90 minutes while you're waiting. And here's your car back. It's, it's better than you. We also discovered some other things and we like, we fixed those things too, just because we could. And here you go, getting your car back in 90 minutes is way better than having to drive around that smelly rental car for a week. And you're same out of pocket, but you're like, actually way happier. And you don't really care how the work got done. Your result is just like flat out superior. I would argue in that state of the world. Now, would you expect that auto body shop to feel like a little bit sheepish or some compunction about charging you the same price or charging your insurance company the same price. I don't think so. They'd be like, yeah, we invest in the technology to do this. We knew it would be a better outcome for you. Everybody's thrilled with this. What's your problem, April? That you're like, well, it didn't like you didn't have the toil for a week on my vehicle. Like this was only done in 90 minutes. They'd be like, ah, you know, but that's not how this works. Now, and the fancy tool costs something, right? Of course, of course. So you have to capture that. That's we were talking a little bit about that yesterday. Like we'll get into the OPR guidelines, but that's a piece that they're kind of missing, right? It's like these tools are not free. If people are using chat, she BT the free version. No, that's a problem. We can talk about that on another discussion. But like you said, our theme here is we're talking about clients aren't buying time. They're buying our judgment. They're buying our valuable relationships and conversations. I mean, that's what they're buying in. I think that's important. All right, let's dig into then. We talked around it a little bit. The OPR guidance and professional responsibility, which even before these gatherings were introduced, we have absolutely been saying a lot of the same things. I'm really all of the same things that these guidelines have said, right? You've got to check the model. to check the answers, use your professional judgment. There is something around considering whether you need to disclose to your client that you're using AI or not. That is definitely part of the conversation and we don't really have a firm answer on that and that's not really what we're gonna talk about today. But then also there was the piece about billing and considering the cost savings around billing. So then I'd love to hear what was your reaction when you read through those guidelines? - Well I heard about the OPR alert before I actually read it and when I heard about it I was like the headlines that I took from it were quite concerning but then I read it and like actually this is not unreasonable. It strikes me that there is a framing that is alarming about it which is hey basically everybody has to charge a lot less for everything because now AI exists. That's the alarming characterization. That's not actually what it says. And I think what it says is perfectly consistent with this way of thinking about things is like what are clients actually paying for when they're retaining our services? Well they're not paying for like seconds a lot elapsed on a stopwatch. They're paying for a correctly professionally framed question a reliable articulation of the facts. They're paying for a correct or at least highly defensible interpretation of what current law requires, what substantial authority supports, sensible options for the client, a clear recommendation from the professional and then that professional standing accountable for the analysis and the recommendation and the result. And so yeah, timeliness is part of it but all that stuff takes time. I think when I read the OPR alert, the thing that sticks with me is you have to have integrity about how you present this to the client. So you cannot just arbitrarily add a multiplier to the time that you're spending and say well, you know AI and able tax research is now five times faster for me so I'm gonna five X the time and charge you know phantom hours for work that I didn't do. Okay, I agree that is off side. The right way to do it is to have integrity to have that conversation with the client and say, hey, let's talk about this engagement. Let's talk about what you need. Here's what I recommend. Here's here the terms like for that kind of scope, here's what the pricing's gonna be. And done well, that is going to have the effect of satisfying everything that the OPR alert is talking about. So it's going to share efficiencies with clients but it doesn't mean give all the efficiencies to the client. It means you know you as the professional are going to be able to charge potentially the same. Maybe even more if you define the scope differently, you deliver more value to that client and remember speed of delivery is valued. That's an asset. So if you can deliver the same work product to them in half the calendar time, that's more valuable to them than making them wait another week for the work to be done. And so you could arguably charge more for that deliverable being done in less kind of clock time for you as the professional. So I see nothing in the OPR alert that means that firms need to reduce the amount that they're billing. They can deliver more value leveraging AI. What it does say is you have to have integrity about the way that you approach these things and you need to have transparent conversations with your clients about what the scope is, what you're going to do for them, how it's going to work, all of that stuff, stuff we should be doing anyway and stuff that's like it's table stakes for us as professionals to have those conversations. The good news is April, as I said earlier, we're all going to get better at these conversations over time and it's a lot like some of the junior sales reps that we hire here at BlueJ, like the first few weeks on the job are just hard. They don't know how to call prospects and have those conversations in the same way. A lot of folks who are providing tax services aren't used to having these conversations with their clients. They're used to having easier conversations where they can answer questions about their rates and how much time they think something will take. But this force is a slightly different conversation. We're here to help, like at BlueJ, this is so important for the profession. We want to help everybody figure this out and we're motivated because this is key to firms figuring out why BlueJ makes sense for them to adopt. And so I'm up front, I'm transparent about my, like it's partly my commercial motivation here because I want to make sure people are using these tools, like it's no good for me if people adopt BlueJ and then their firms are less successful. No, it's exactly the opposite. You should adopt BlueJ and your firms should be significantly more successful and we can help capture and propagate best practices across firms that are using tools like BlueJ to make everybody better off including clients, including the firms, including like getting home and having a warm dinner with your family. Like those things are all things I really, really value. So yes, there's a commercial motivation, but it's about making work life better for everybody, including those sales reps at BlueJ who are making these calls. They have to be able to answer these questions too, like people ask them on the call. It's like so, they're like, let me get this straight, junior sales person at BlueJ. You know, if I bring on your tool, I'm gonna be working fewer hours and I have to pay you to use the tool. How does that make sense and it's like, okay, this is the challenging conversation for a new grad who's three weeks into their job to answer, but there are really good answers as we've been talking about. - Yeah, yeah, I totally agree. Like my team is called Tax Practice and Ethics, right? So the ethical standards, Starler 230, yes, but also like the statements of standards for tax services. I mean, all of this absolutely online with that, it's just that little sentence and people read it in a way that may seem like, oh gosh, this means I need to reduce my fees for my AI savings. It is concerning and I can understand why it calls a little bit of alarm. - I read it the exact opposite way, which was like, I heard it initially frame that way. And then I read it and I'm like, oh, this is great. This is like a clear list of, here's how you make this more valuable for you in your firm. And here are the things not to do and here are the things yes you should do. This is a checklist for how you can ethically and transparently bring this stuff on and make your firm more successful financially. I'm like, oh, this is great. This is a real service. This is an alarming. This is like, hey, here's how you do this. (laughs) So I actually welcomed it, although it was put in an alarming way, I felt. - Yeah, yeah, yeah, I completely understand. And that is interesting because I think it's just like, it's not a tax thing, but it's like when you read something, the different interpretations that people can have about it. It is interesting. All right. What's one thing you think the firm leaders should be doing right now to prepare for the future? Well, gosh, a huge thing that firms can be thinking about is really, really talk to your customers, talk to your clients, had those conversations, get comfortable with having those conversations about what the bargain is around engagements before they, before the work begins, right? Way before an invoice is written. Do some work. Think about the process for defining scope, identifying assumptions, review responsibility, the role of the technology that's gonna be used in the engagement and the fee. And so discriminate between things that, where hourly billing is still probably the right answer where you genuinely don't know exactly what you're getting into. And the client doesn't know enough to tell you what, like, and that's part of the problem, right? A lot of times clients actually really kind of don't know what the scope needs to be. They need you to help inform them what the scope needs to be. Clients lead a lot of messy lives and make a lot of messy choices. So sometimes, and that hourly billing is just gonna be inescapable in some of those circumstances. But where you're able to have a better definition of the deliverable, like, think about how you're gonna have those conversations and start having them 'cause the best way to learn is just to do it. Now, maybe you start with only the firm leadership or the practice area leadership having those conversations 'cause they're gonna be the most trusted. They've got the kind of the biggest clients and they can probably be the most vulnerable with those clients. Or be like, hey, so we're making a big investment in AI in our practice. It's really costly. We wanna, like, we wanna figure out a better bargain with you. Let's talk about what this means. And have those conversations. When you have those conversations with your most sophisticated clients where there's a high level of rapport and trust in relationship, that's a safe space to have those conversations. And they will understand, like, nobody's gonna be like, oh, AI, what's that? They'll be like, oh, this is very interesting. So you're going through it too. We're going through it in our business. You're going through it in your business. Let's have that conversation. And then learning from those conversations that can kind of like work its way down through the org as you like pinpoint the process and how you want to have these conversations. But I think just embracing the learning, it's naturally going to allow us to find the path forward together. And so I think that's the one thing. Is pick your friendliest, best, closest client, the one who you know the names of their kids and their spouse and maybe see them socially. Be like, we've got to figure this out. Let me run something by you and learn that way. Because that's going to be your best source of information. Those people are going to tell you the truth. They're not going to mislead you. And then I'll give you a really good sense of how to take those conversations with the rest of your client base. That's the one thing. Start by having these conversations. Yeah, I think that's really good advice. All right, then you have been on here with me before. But you know, as we're wrapping up, we are tax action odyssey. I like to think about us taking a journey together towards a better profession and a better professional. So talk about your journeys outside of tax. Do you have any trips planned? The summer is, whoa, it's rapidly going away. But maybe you have something planned or something you've been on recently. I'll tell you what we do have planned. So the timing for this is really cool, April. I have two daughters. One's 21, the other's going to be turning 15 in a couple of weeks. And something new that we're bringing into our family is we're having a contest for you know, planning our next trip. And so we're having the trip showcase Saturday at the Allery Residence. We're each leading a short presentation of where we propose we go on a family trip next summer. And my 14 year old, soon to be 15 year old, is like super excited. And she's been working on her presentation for a few weeks. I don't know what, with Charlie, my 21 year old, I don't know where her presentations at. Chris does put together my wife's, put together a presentation. I finalize mine this morning. I'm not going to tell you what it is. 'Cause it's a secret. We're all like it's, it's all a secret. And then we're going to, we're each going to do our presentation, then we're going to vote and we're going to see. Oh, I can't wait. Yes. I don't think mine's going to win, even though like I really enjoyed putting my presentation together for this thing. But I'm excited. So it's going to be fun. So maybe next time I'm on, I'll tell you about how it went and where we decided to go. I love that so much. I wonder what happens if there's a tie. I have so many questions. I think I'm going to be the tie breaker 'cause ultimately like, 'cause you're putting down the wallet. Yes, I get it. I get it. All right, Ben, this has been a great conversation. And like I said, we'll continue to have these conversations as things are evolving and changing faster and faster. I think. Thanks for listing everyone. I'm April Walker with the ASCPA Tax Section. The home of trusted technical guidance, practical tools, and a supportive network built specifically for CPA tax professionals. If you're not yet an ASCPA Tax Section member, it is always a great time to join. 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