Accounting & Auditing | Technology

Withum’s Ed Mendlowitz on technology transformation: We’ve got this!

Some in the accounting profession fear the onslaught of changes in technology as a threat to their jobs and livelihood. Not Ed Mendlowitz, the prolific and well-known partner from Withum , the nation’s 27th largest audit, tax and advisory firm.

“If the future follows the trends of the past,” said Mendlowitz, “the future is fantastic!”

In an in-depth interview, Mendlowitz, the author of regular columns in Accounting Today and CPA Trendlines and founder of The Partners’ Network, walked us through paradigm shifts the accounting profession has successfully undergone and argues the past will be prologue.

CPAs at the forefront of technologyMendlowitz, whose career spans a half-century, is a champion of technology. Specifically, he champions technology that makes jobs more efficient — not just for efficiency’s sake, but to enable tax, audit, and accounting professionals to expand into higher-level, more analytical areas.

“Across the decades, (CPAs) have been at the forefront of technology,” he said. “We are early adopters, utilizing new technology for better client service, better staff utilization, more interesting and exciting work for the staff, and lessening peripheral work that doesn’t benefit clients as much, such as keypunching.” [Millennials: You can Google keypunching.]

Mendlowitz said some of the world’s largest computer consulting firms were started within the Big 4 accounting firms. In many ways, audit firms have been at the forefront of paradigm shifts in technology.

1970s: Service bureaus, messengers, keypunching Mendlowitz saw his first paradigm shift in the early 1970s, with the advent of service bureaus that prepared tax returns.

“We went from doing tax returns completely by hand to filling out input sheets and sending them by messenger every day to the service bureau,” he said. “Three days later, they would deliver finished returns.” CCH was among the early service bureaus.

Rather than taking away business from accountants, the service bureaus – for a fee – freed up a great deal of time for accountants so they could increase the volume of returns they filed or take on more complex returns.

1980s: PCs, VisiCalcThe 1980s ushered in personal computers and, importantly, VisiCalc: a pre-Lotus, pre-Excel spreadsheet program.

“Before VisiCalc, the only people using personal computers were viewed as computer geeks,” said Mendlowitz. “Starting in 1980, it was accountants who started using PCs, making them a usable tool for business.”

Toward the late 1980s and early ‘90s, when software was developed that could be run on PCs to do taxes, almost every small firm was doing tax returns in-house.

1990s / 2000s: QuickBooks, GruntWorx

More seismic shifts came to the way accountants do their job in business and industry with the introduction of Intuit’s QuickBooks program.

Initially, QuickBooks took some getting used to, even for CPAs. “I would go to a client who had QuickBooks, and I hated it — I hated everything about it,” said Mendlowitz. However, he added, “I ended up loving it. QuickBooks is fantastic and totally replaced what small accounting firms used to do.”

Mendlowitz speaks of a friend, a sole practitioner, who was afraid QuickBooks will put him out of business. “I said, ‘You don’t know what you’re talking about. There’s more work for us now – it’s different work.’”

Mendlowitz said his firm uses a program called GruntWorx, which allows firms to scan tax information provided by clients. A day later, the tax software is populated with the data and a file with all the original documents in order as part of the PDF is received. Described as a “smart scanner,” GruntWorx takes the “grunt work” out of preparing tax returns, thereby saving time, but there is still an expectation that accountants will perform quality control on the output.

Cloud-based, paperless filing systems came into their own in the 2000s. Data analytics programs (to mine and analyze big data), software-as-a-service, and everything-as-a-service (XaaS) were not far behind.

Today … and tomorrow: A.I.How does Mendlowitz feel about the advent of artificial intelligence? (Baby boomers: you can Google “‘machine learning.”) Has the CPA profession finally met its match?

Similar to his response to his friend about opportunities that would arise from QuickBooks, Mendlowitz believes there will always be a role for accountants, above and beyond that which technology and automation — even A.I. — can provide.

“Accountants are the trusted advisors because we know the most about our clients of any outside professional,” said Mendlowitz. “We are the first person they call when they have a problem or want to do something new. We apply our training and experience, including our knowledge of the client and their personality, how they feel about things, how they reflect. There is a very big psychology aspect to accounting — hand-holding, so to speak.”

Case in point: Mendlowitz has had clients tell him they are getting divorced before they even told their spouse. “They ask me, ‘What should I do?’ The client then tells their spouse, ‘Speak to Ed. He’ll tell you what to do.’

“No technology can replace our role as the trusted advisor, which has been earned by every single person in the profession today and every single person before us,” he added. “Technology won’t replace CPAs, but it will increase our ability to serve our clients.”


Edith Orenstein