40 years ago, a $99 piece of software transformed the accounting profession. VisiCalc, developed by Harvard business student Dan Bricklin, was the first affordable and interactive electronic spreadsheet.
VisiCalc was as important for the accountants of the 70s and 80s as Microsoft Excel is for today’s CPAs: an essential tool for doing their jobs properly.
The invention of VisiCalc
Before VisiCalc, accountants worked with cumbersome paper spreadsheets. The paper method was time-consuming: if an expense needed to be changed or a mistake corrected, the entire impacted area had to be erased and recalculated based on the new value. In an episode of the NPR podcast Planet Money titled How The Electronic Spreadsheet Revolutionized Business, Bricklin recalls that he questioned the traditional pencil-and-paper spreadsheets that accountants were using in the late 70s. Perhaps, he thought, there is a faster way to do this.
The arrival of the Apple II coincided with Bricklin’s idea and ultimately served as the platform for the first prototype of VisiCalc. The first consumer version of the software was released in 1979 and was co-developed by Bricklin and Bob Frankstone.
Scared of the unknown
When VisiCalc was initially introduced, many accountants were worried that the software would eliminate jobs. This fear was brought on by the realization that VisiCalc could do electronically in seconds what it would take an accountant hours to do by hand. In VisiCalc, all the user had to do to recalculate an end value was press the backspace button and enter a new value, as opposed to painstakingly erasing and rewriting multiple entries.
These fears turned out to be misplaced. In the years after the release of VisiCalc, the number of jobs in accounting actually grew, and accountants began to take on dynamic new tasks like developing models using the quick calculations made possible by the new software.
“Software made answering questions like these cheap and easy,” said Planet Money co-host Jacob Goldstein. “Accountants became more valuable. They weren’t just adding up numbers, they were thinking creatively about business.”
VisiCalc transforms the industry
With the introduction of VisiCalc, says Goldstein, accountants were asked to start playing the ‘What If?’ game. What if the company cut costs to the production team? What if a new senior advisor was hired? What if… etc. This kind of prediction modelling has become central to what accountants do today.
In 1984, business writer Steven Levy wrote an article for Harper’s titled A Spreadsheet Way of Knowledge about the introduction of VisiCalc. Later re-published in Wired, the article reads:
“There are corporate executives, wholesalers, retailers, and small business owners who talk about their business lives in two time periods: before and after the electronic spreadsheet.”
This way of speaking about technology, in terms of a “before” and “after” period, applies to technologies that have the capacity to create an enormous shift in operations. Artificial intelligence is just such a technology.
AI is the next VisiCalc for accountants
Blue J Legal’s AI-backed Tax Foresight is to today’s accountants what VisiCalc was to the accountants of the 1970s: a new tool that uses technology to help accountants work smarter.
Just like VisiCalc, Tax Foresight allows accountants to focus on creative tasks. Tax Foresight also shows that, rather than eliminating jobs, AI can serve as a support for professional instincts by providing accountants with easy access to research that can back up their hunches.
What is Tax Foresight and how does it work?
Tax Foresight is a product that applies AI to past tax-related judicial decisions to help accountants determine the strength of their position on issues like (and this isn’t the exhaustive list) residency, income vs. capital, director's liability, the general anti-avoidance rule (GAAR), tangible vs. intangible expenditures, assessment period, real estate, securities trading, and exempt financial services.
Tax Foresight also has an advanced search function that finds cases by specific factors, rather than by keyword or boolean searches.
The product works by asking a series of questions to collect information about the context of the user’s specific situation, such as the applicable province, timeframe, and relevant facts. After gathering the answers, the software compares this information to all relevant past cases. Once the analysis is complete, a report is produced that conveys how likely it is that the courts would rule one way or another on the issue, along with a corresponding confidence level (expressed as a percentage). Along with this report, the software also provides an explanation for the prediction. The software is kept up to date with new decisions as they are published to ensure that even the most recent cases can be analyzed. When tested against cases that the system has never seen before, Tax Foresight achieves, on average, an accuracy of 90 percent or greater.
AI and the future of accounting
A study released by Forbes earlier this year on why AI is the future of accounting predicted that by 2020 “accounting tasks - but also tax, payroll, audits, banking… - will be fully automated using AI-based technologies, which will disrupt the accounting industry in a way it never was for the last 500 years, bringing both huge opportunities and serious challenges.” The study also emphasized that the use of AI will not result in a net loss of jobs for accountants, but will instead serve to improve their accuracy by eliminating hard-to-find accounting errors. Tax Foresight’s AI does the grunt work by producing a detailed analysis of past cases related to a tax position, just as electronic spreadsheets do the grunt work of performing calculations. Just as with VisiCalc and Excel, Tax Foresight supplies professionals with information that allows them to focus on bigger, more complex problems.
As Goldstein says in the episode, “spreadsheets became the language of finance.” It is increasingly clear that the next technological breakthrough in finance with the same sort of impact is AI.
In a piece published on AccountingWEB titled “How Accountants Can Succeed Alongside AI,” CPA Gary Eastwood stresses the importance of not being fearful of AI, but instead training and preparing for adoption so that professionals can use the technology to their advantage.
It is highly doubtful that any accountant today would prefer to eschew the electronic spreadsheet and go back to the days of writing out calculations by hand. Not only would this be impractical, it would be virtually impossible because the role of the accountant has expanded far beyond what it was before the introduction of VisiCalc. With the adoption of AI into the accounting practice, the responsibilities of accountants will transform yet again. Just as VisiCalc allowed accountants to be more creative and dynamic within their roles, AI and Tax Foresight will allow the accountants of today and tomorrow to take the profession somewhere it has never been before.