Addressing the Accountant Shortage with AI: Materia’s Solution to Mundane Tasks
The accounting industry in the United States is currently facing a shortage of accountants. According to the American Institute of Certified Public Accountants, there has been a decline in the number of first-time candidates taking the CPA exam since 2006. One possible reason for this decline is the large amount of drudge work involved in the field. Accountants often have to sift through vast amounts of unstructured data to perform audits or find answers to their questions. However, one company, Materia, is aiming to alleviate this burden and revolutionize the accounting industry.
Materia, founded by Kevin Merlini, offers a solution that integrates seamlessly into existing workflow software and applications like Microsoft Excel and Teams. By breaking down the silos of unstructured data that exist in accounting firms, Materia automates and augments the tedious and mundane parts of an accounting audit. This allows accountants to focus more on high-risk areas that require special attention. Additionally, Materia provides a user-friendly search function across a firm’s data and documents, enabling accountants to quickly find answers. The company utilizes generative AI platforms such as OpenAI to process information from a firm’s documents.
The potential impact of Materia’s solution is significant. Accounting professional services have been overlooked and underserved for a long time, presenting a compelling story for the industry. Furthermore, there is increasing pressure on firms to improve efficiency due to factors such as PE acquisitions. These forces are incentivizing firms to invest in technologies that enhance efficiency and quality.
With $6.3 million in funding, Materia is emerging from stealth mode. The funding round was led by Spark Capital, with participation from Haystack Ventures, Thomson Reuters Ventures, Exponent Capital, and the Allen Institute for AI, among others. The company already has five customers, including top accounting firms in the U.S., some of which have implemented Materia across their entire auditing groups.
Kevin Merlini’s journey to launching Materia was not a direct one. Despite majoring in accounting and obtaining a master’s degree in the field, he lasted only four months as an auditor at KPMG. However, the pain points he experienced during his short accounting career stayed with him. Merlini worked in the tech industry for eight years, including a position as a product manager at Amazon and later at Meta, where he worked on large language models and their application to journalism.
Merlini’s desire to be a founder never waned, and he eventually left Meta in 2022 to explore what he could build. Recognizing the potential of AI advancements, especially in language models, Merlini realized he could address the problems that plagued the accounting industry. Incubating Materia at the Allen Institute for AI in the summer of 2022, Merlini and co-founder Lucas Adams were able to leverage the tailwinds of the AI boom as ChatGPT was rolling out.
Security and accuracy are paramount for Materia. The company has strict agreements with AI providers like OpenAI to ensure that their language models cannot learn from customer questions. Additionally, Materia transparently cites the sources of its information, allowing for verification of accuracy in audits or answers provided to accountants.
While operating in stealth mode, Materia has been offering a white-glove service to select firms. However, now that it is out of stealth, the company is targeting the top 200 accounting firms in the U.S., with plans to expand further in the future.
The opportunity presented by Materia is not only exciting for the company but also for professionals in the accounting industry. The shortage of accountants can be attributed, in part, to high attrition rates. Until recently, automation solutions like Materia were not practical or possible. With Materia’s innovative approach, the accounting industry can expect a transformation that reduces mundane tasks and enhances the overall efficiency and effectiveness of accountants.