As the world becomes more reliant on technology, the due diligence industry is set for a once in a generation transformation. Over the past decade, we have seen key technical advancements in cloud accounting, fintech, APIs, and artificial intelligence that is going to change the way due diligence engagements are conducted. Over the next two years, I believe technology will disrupt and fundamentally change this industry for the better. This post will explore the key predictions for technology that will change the game and what your firm can do to prepare for the new future of due diligence.
Prediction 1: Preparing the Cash Proof will be automated for targets on cloud-based accounting systems.
Preparing the Cash Proof is tedious and one of the most time-consuming processes in an engagement (and also prone to human error and re-work). But with the release of Audit Sight’s new Cash Proof module last quarter, it is already possible to automate this process on targets that use cloud-based accounting systems. For some customers we have seen as much as a 95% reduction in time to prepare a single cash proof. Other firms have been able to eliminate the need for offshore resources that have been doing this by hand. This automation will greatly enhance the efficiency of the team, decrease elapsed time it takes to complete engagements and allow due diligence providers to focus on value-added analysis. Imagine having the cash proof done on the first day of the engagement.
Prediction 2: AI will instantly read and summarize all documents and look for potential impacts to EBITDA.
Gone are the days when due diligence professionals had to sift through hundreds or thousands of pages of key documents or contracts. AI technologies will read and summarize all documents for potential impacts to EBITDA within seconds. This will present due diligence providers with valuable insights and enable them to present more accurate and timely analysis to their clients. AI will also be able to answer simple questions and create summaries of these documents and contracts. Erasing the days of something going undiscovered or missed.
Prediction 3: There will be a shift in how work is priced
Due diligence providers will start offering different pricing models based on the underlying accounting systems used by the client. If the target uses an outdated system, they will be charged a premium price since the due diligence process will be more manual and time-consuming. However, if the target uses a cloud-based system, the due diligence process will be more efficient.This will lead to a more strategic pricing model for firms that adopt these technologies. As a result their ability to win and deliver work will be at a rapid scale never before seen.
Prediction 4: New Technologies will allow for instant recast financials, automated EBITDA calculations, and chart of accounts reclassifications with a few clicks of a button.
The adoption of emerging technologies will eliminate the need for updating your data book and in-house models. With a few simple clicks of the button your entire Data Book will be updated.
Conclusion:
The integration of emerging technologies in the due diligence process is an exciting development for the industry. I estimate the initial adoption of AI will cut costs by 25%, reduce the number of hours required to deliver an engagement and provide more focused (value added) analysis. While these predictions may seem like science fiction, we are already seeing the early stages of this transformation take place with the release of Audit Sight’s Due Diligence Solutions last quarter. It is an exciting time to be in the due diligence industry, and those who embrace these new technologies will be the ones who thrive and succeed in the future.
