Small practices in the AI era: staying competitive

The accountancy profession is experiencing rapid, technology-driven change. Recent industry research paints a clear picture: nine out of ten accountants are using or planning to use AI, whilst separate finding from Taxfix reveals that well over half of Brits will use AI for their self-assessment returns. For CPAA members running smaller practices, this shift presents both challenges and opportunities.

The landscape has become particularly dynamic following recent product launches. Sage announced the UK's first MTD for Income Tax Agent at Accountex Manchester, promising full automation by 2026, whilst Briefcase has launched an 'AI-native and MTD ready' bookkeeping tool claiming to reduce bookkeeping time by two-thirds. These developments signal fundamental changes to how the industry operates, and it still feels like the tip of the iceberg.

The reality check

The choice facing smaller practices is clear: embrace strategic technology implementation, whilst strengthening human advantages, or risk becoming less relevant in an increasingly digital marketplace.

There’s genuine cause for optimism here; research shows that over a third of accountants believe AI's biggest impact will be unlocking efficiency and time savings, with a similar proportion seeing it as the key to delivering enhanced advisory services. This suggests the profession increasingly views technology as an enabler rather than a threat.

The skills identified by the London School of Business and Finance as essential for future accountants – technical proficiency, analytical thinking, strategic communication, and data visualisation – work in harmony with AI capabilities rather than competing against them. These competencies allow professionals to interpret what technology produces, apply contextual judgement, and communicate insights effectively.

Current industry trends support this collaborative approach. Automation handles routine tasks like data entry and basic calculations, freeing practitioners to focus on analysis, strategic planning, and client relationship building. Data visualisation tools help present complex information more clearly, improving both client understanding and decision-making quality.

The key insight is that good, well-chosen technology solutions can amplify human expertise rather than replacing it. For smaller practices, this represents an opportunity to redefine service delivery, using AI as the foundation that supports its own skilled professional capabilities.

The personal touch

Despite technological advances, smaller practices retain important advantages that cannot be easily automated. Personal relationships remain crucial when clients face significant financial decisions or unusual circumstances, as they still value human expertise and local knowledge. A practice that has worked with a client for years understands their business patterns, personal circumstances, and risk tolerance in ways that no algorithm can replicate.

Professional judgement matters more than ever. Research shows that nearly half of accountants worry about AI accuracy, and this scepticism isn't unfounded. Current AI excels at pattern recognition and routine processing but struggles with nuanced judgement and complex problem-solving. Complex tax planning, business restructuring, and strategic advice require professional expertise that interprets data within broader contexts. Small practices can position this human element as a point of difference – there is value in being a trusted adviser.

Strategic implementation approaches

For successful technology adoption, these approaches are worth considering and factoring into your planning and training:

·        Use AI as an intelligent assistant. Rather than viewing AI as competition, successful practices integrate tools for routine tasks like data categorisation, expense recognition, and basic compliance checking. This frees professional time for advisory services whilst maintaining human oversight for client-facing decisions.

·        Develop hybrid service models. The most resilient practices combine technological efficiency with human expertise. This might involve automated data collection and processing, whilst positioning accountants as strategic advisers who interpret results and provide contextualised recommendations.

·        Focus on advisory services. With basic compliance increasingly automated, practices must emphasise services requiring human expertise: business planning, tax strategy, and financial analysis that goes beyond automated tools.

·        Use MTD as a springboard for change. The upcoming MTD requirements present an ideal opportunity to upgrade technology infrastructure whilst repositioning client relationships around more frequent, value-added touchpoints. It also gives you an opportunity to use the emerging tech solutions that bring AI and MTD together.

Playing catch up

For practitioners feeling behind the technology curve, it's time to assess your competitive position honestly. This could involve looking at which services clients can now obtain through AI tools themselves, and where your current value proposition differs or needs to evolve.

Cloud accounting platforms, automated data processing, and client communication tools are no longer competitive advantages – they're minimum requirements. Start here before considering more sophisticated solutions.

The next stage involves building team AI literacy. Every team member should understand what AI can and cannot do reliably. Training should focus on practical applications relevant to daily work, emphasising how AI enhances rather than replaces professional judgement.

The pace of change is accelerating and the profession must evolve alongside it. The window for strategic adaptation remains open, but it's narrowing. Practices that act thoughtfully now, can position themselves strongly for the future. Those that delay risk finding themselves disadvantaged in an increasingly competitive market where client expectations continue to evolve rapidly.

Stronger together

Small practices possess inherent advantages: personal relationships, local knowledge, and professional expertise that remain valuable in an AI-driven world. The key is combining these strengths with appropriate technology to create services that neither purely automated nor traditional approaches can match. Success isn't about choosing between people and technology—it's about creating the right combination that delivers exceptional value to clients whilst building a sustainable, profitable practice.

For CPAA members, the association's resources provide ongoing support through this changing landscape. The member newsletter, website, and CPD programme offer practical guidance on new trends and regulatory updates. The ongoing seminar and webinar programme helps members stay current with industry developments and share practical experiences with peers.