The Evolution and Impact of Artificial Intelligence
Artificial Intelligence (AI) has transitioned from a niche area of academic research to an essential tool that is transforming how businesses operate. For accountants and other business professionals, AI represents a powerful ally in streamlining operations, improving accuracy, and enhancing decision-making processes.

Understanding AI in Business
AI refers to the ability of machines to perform tasks that typically require human intelligence. This includes understanding language, recognizing patterns, solving problems, and making decisions. Over the past few years, AI has become more accessible and practical, particularly with the rise of tools like ChatGPT and other AI assistants. These tools can automate repetitive tasks, provide quick answers to queries, and even generate insightful reports, all of which are invaluable in the business world.

The Role of AI in Business Operations
AI is not a futuristic concept; it is already making a significant impact in various business operations. For instance, AI can assist in:
• Financial Analysis and Reporting: AI tools can sift through large datasets to identify patterns and generate detailed reports, helping businesses make informed financial decisions.
• Risk Management: AI systems can analyze historical data to predict potential risks and recommend mitigation strategies, thereby enhancing the overall risk management framework.
• Customer Service: AI chatbots can handle customer inquiries round-the-clock, providing timely and accurate responses that improve customer satisfaction.

The Practical Benefits of AI for Accounting
For business professionals, the integration of AI can bring several tangible benefits:
• Efficiency and Automation: AI can handle routine tasks such as data entry, invoice processing, and reconciliation. This frees up time for professionals to focus on more strategic activities, like financial planning and analysis.
• Accuracy and Consistency: AI systems reduce the risk of human error in data processing and calculations, ensuring that records are accurate and consistent. This is crucial for maintaining compliance and preparing precise financial statements.
• Enhanced Decision-Making: AI can analyze vast amounts of data quickly, uncovering trends and insights that might not be immediately obvious. This supports better decision-making and strategic planning.
• Improved Client Interaction: AI-powered chatbots can provide instant support to clients, answering common questions and performing basic tasks. This enhances the client experience and allows human staff to handle more complex inquiries.

Challenges and Considerations
While AI offers numerous benefits, its implementation comes with challenges, particularly in sensitive fields like healthcare. In these areas, AI must be used with caution due to privacy concerns, the need for regulatory compliance, and the critical importance of accuracy. Businesses must ensure that their AI systems are secure, reliable, and compliant with all relevant regulations.

Transformative AI Solutions
Part of the suite of AI-driven software solutions that RothTech has developed caters specifically to the needs of modern businesses. Here’s a closer look at how these technologies work and some of the benefits they deliver:

1. Advanced User Support with AI Chatbots
Our chatbots utilize Retrieval-Augmented Generation (RAG) models, which combine the best of retrieval-based and generative AI systems. Here’s how it works: when a customer query comes in, the RAG model first retrieves relevant information from a vast database of knowledge. This knowledge is usually kept private by organizations using the tool, so “ordinary” AI models like ChatGPT have no access to it. It then uses this information to generate a response that is not only accurate but contextually aware. This process enhances the chatbot’s ability to conduct complex, multi-turn conversations and provide responses that feel natural and intuitive, thereby improving customer service interactions and efficiency. In addition, this type of chatbot can recognize user’s intents and perform actions ranging from simple API calls to orchestrated and complex workflows.

2. Revolutionizing Knowledge Management
Our knowledge exchange platform transforms how information is curated, accessed, and utilized within an organization. It acts much like an AI-driven mentor that is available round-the-clock. It can ingest data from a variety of sources, including internal reports, emails, databases, and even external publications, to build a comprehensive knowledge base. Real-time analytics on user queries and the system’s responses help identify gaps in information and areas for improvement, ensuring that every team member has the most accurate and relevant information at their fingertips. If needed, this system can seamlessly transfer control to a human operator, resulting in enhanced user experience.

3. AI-Driven Recruitment: Enhancing HR Efficiency
Using deep learning, we employ HR systems which are able to analyze a multitude of data points from job descriptions and resumes to match candidates with job opportunities. This AI-driven approach not only expedites the hiring process but also improves the quality of matches, which can enhance workforce stability and satisfaction.

4. Automated Monitoring of Web Applications
Our automated systems proactively monitor the health and performance of web applications, ensuring they deliver a seamless user experience. By identifying and addressing issues before they affect users, these tools maintain high standards of application reliability and security.

5. AI in Fraud Detection and Financial Auditing
Our AI systems analyze transactional data for patterns indicative of fraud and scrutinize financial documents using natural language processing to detect inconsistencies. These capabilities enhance the security and accuracy of financial operations.

6. Streamlining Insurance Processes
AI-driven automation in insurance workflows helps manage claims, underwriting, and customer service tasks more efficiently, reducing the burden on staff and improving client satisfaction.

7. Enhanced Reporting and Business Analytics
Our tools use advanced LLMs to process both structured and unstructured data, enabling comprehensive business analysis, database querying and insight generation, which supports informed decision-making.

8. AI in Medicine
We have successfully implemented an advanced computer vision project for MRI analysis. This project aims to assist clinicians in analyzing MRI scans more accurately and efficiently by leveraging AI to interpret medical imaging nuances.

The Future of AI: Agents and Agency

As AI technology continues to evolve, the concept of AI agents — semi-autonomous systems that can perform a variety of business functions — and AI agency, where AI represents businesses in interactions, is becoming more prominent. In addition, the newest Large Language Models presented just days ago are making a big step towards much more natural human-computer interaction—for example, GPT 4o accepts as input any combination of text, audio, image, and video and generates any combination of text, audio, and image outputs. Such advances of AI development will further redefine the boundaries of what machines can do in a business context, offering new opportunities for innovation and efficiency.

As AI technology continues to evolve, its potential to redefine business operations grows exponentially, promising unprecedented innovation and efficiency. However, businesses must also navigate the associated risks, including data privacy concerns and the need for robust regulatory compliance, to fully leverage AI’s transformative power while mitigating potential downsides.

This material has been prepared for informational purposes only, and is not intended to provide or be relied upon for legal or tax advice. If you have any specific legal or tax questions regarding this content or related issues, please consult with your professional legal or tax advisor.

Private credit funds have exploded recently, with billions of dollars raised for private credit from U.S. investors in 2023 alone, following a decade of strong growth. According to PitchBook, the market grew from roughly $500 billion in 2012 to $1.75 trillion in 2022. Last year, Harbor Group International (HGI), a real estate investment and management firm, announced that its multifamily credit fund had reached a new milestone of $1.6 billion in capital commitments.

The rise in popularity of private credit funds can be attributed to a surge in businesses seeking new and alternative avenues to capital in a high interest rate environment. HGI’s fund invests in US multifamily credit opportunities, including senior mortgage loans, Freddie Mac K-series bonds, preferred equity and mezzanine debt investments, and investments in securitized multifamily mortgage products.

Private credit funds offer investors access to non-public markets and present a range of benefits not offered by traditional and public market investments, and through strong recent fundraising, have been able to enter the lending market with a focus on high‑yield deals.

While traditional banks are required to hold comparatively higher levels of capital to what they lend and are subject to rigorous regulatory scrutiny, private credit has greater flexibility in these areas. Private credit funds have also been outperforming traditional private equity ventures. In 2023, the private credit portfolios of seven listed private equity managers achieved a median gross return of 16.4%, compared to 9.8% for their private equity strategies, making private credit an attractive investment opportunity.

Private credit funds’ popularity is also due to the advantages they offer investors, especially at a time when markets are uncertain and overall dealmaking has slowed to the point where many private equity firms are struggling to get funding for leveraged buyouts. Some of these advantages include:

• Diversification – Spreading exposure across multiple sectors and credit profiles is key to mitigating portfolio risk. Private credit funds work across a diverse range of credit instruments, including senior secured loans, mezzanine, and distressed debt, to offer higher yields than other types of investments.

• Risk Mitigation – Private credit funds can take advantage of the risk mitigation strategies many companies have in place when they assess the viability of an investment. Asset managers can consider a company’s reputation, position in the market, longevity, risk mitigation and response strategies, and past financial performance when considering offering private credit. To take on the appropriate amount of risk and capture returns, long-term, fund managers must put each investment prospect through rigorous due diligence and risk management testing before committing.

• Custom Structures – Private credit funds can be highly flexible, creating customized investment structures to generate alpha for investors. Often, private credit funds can offer value-added features that traditional banks cannot, including warrant coverage, equity kickers, revenue or profit-sharing agreements, and performance-based incentives. Investors concerned with preserving capital can opt for senior secured loans, for example, while those seeking higher returns may opt for higher risk alternatives like distressed debt.

• Conversion to Equity – Credit facilities and loans provided to companies by private credit funds often come with covenants setting out terms for the lender in case of a breach. In certain circumstances within a private credit fund, when a borrower defaults on a loan or breaches a covenant, the credit facilities can be turned into equity.

Financial firms considering private credit funds as part of their overall investment strategy should seek to establish an investment strategy, develop a sound strategic approach to the size of companies the fund will target, and establish risk management and compliance protocols.

In April 2024, the International Monetary Fund (IMF) published the second chapter of its Global Financial Stability Report, which called for greater regulation and oversight of the private credit market. Consulting regularly with legal and tax advisors can help asset managers head off risk from potential regulatory overhaul while maintaining the flexibility that makes private credit attractive. Sound management remains the key to driving return on investment by addressing potential tax implications and avoiding the fines, litigation, and reputational harm that may arise from non-compliance.

This material has been prepared for informational purposes only, and is not intended to provide or be relied upon for legal or tax advice. If you have any specific legal or tax questions regarding this content or related issues, please consult with your professional legal or tax advisor.

Healthcare entities regularly seek out merger and acquisition (M&A) opportunities to expand and diversify, but M&A becomes more expensive and less attractive when rising interest rates make the cost of borrowing prohibitive. Vacillating interest rates invite fluctuating costs of capital, disrupt valuations, and strain financing opportunities. Throw in the newly released staffing mandates and the combination of factors affects the overall volume of M&A transactions.

Interest rates and valuations generally work inversely. When interest rates climb, discount rates also rise. This brings on lower present values of future cash flows, which lowers valuations for companies. Fluctuating valuations affect the pricing of M&A transactions. Low valuations translate into potentially higher returns for investors and more M & A activity.

According to a recent report by Forbes, despite forecasts of reduced interest rates, the Federal Open Market Committee has not moved to cut them. Currently, it seems most likely that the FOMC will cut rates in September and December, according to the CME’s FedWatch tool. Lower rates will mean lower valuations and will lead to a higher volume of M&A activity.

Where do staffing mandates come in? The nursing home industry is in an uproar in reaction to the Centers for Medicare & Medicaid Services new staffing mandate that will demand that nursing homes provide residents with approximately 3.5 hours of nursing care per day, performed by both registered nurses and nurse aides. This is the first time nursing homes are looking at staffing requirements set by the federal government and they are none too pleased. The mandate has been widely opposed by the nursing home operators, claiming that it is unreasonable, and more importantly, unrealizable.

Over the next three to five years, as the mandate’s requirements are phased in, providers will be faced with threatening staffing costs. According to the American Healthcare Association (AHCA), the proposed mandate would require nursing homes to hire more than 100,000 additional nurses and nurse aides at an annual cost of $6.8 billion. This signals inevitable closures and sell-outs in the coming years. The new staffing mandates threaten the healthcare industry as a whole, especially the activity of mergers and acquisitions. The saving grace may come in the form of a marked lowering of interest rates which can more likely than not keep M&A activity active and even trigger a robust year for healthcare in general.

This material has been prepared for informational purposes only, and is not intended to provide or be relied upon for legal or tax advice. If you have any specific legal or tax questions regarding this content or related issues, please consult with your professional legal or tax advisor.

In November 1938, 1.1 million Californians voted to enact the first pension plan, known as the “Ham and Eggs” program. While this referendum failed by a few thousand votes, it was one of the many ideas floated in the tumultuous 1930s. Another famous plan was Francis Townsend’s proposal, advocating for a national sales tax that would furnish every American aged 60 or older with a $200 monthly pension payment.

Amid this era of throwing spaghetti at the pension wall, one program stuck: Social Security. As part of Roosvelt’s New deal, the plan’s inaugural check, a modest $22.54, went to Ida May Fuller on January 31, 1940. It marked the genesis of a system that has since burgeoned into a cornerstone of retirement planning.

Over the decades, Social Security has garnered not only widespread acclaim but also robust political fortitude. Its popularity among seniors, with over 90% actively receiving its benefits, has rendered it a cherished institution in the eyes of voters. Consequently, politicians have been wary of wielding reformative influence, fearing the formidable backlash from this sizable voting bloc.

However, despite its popularity, the program faces an ominous specter: the impending depletion of its trust funds by 2033. Potential remedies, such as raising the retirement age or reducing benefits, evoke memories of France’s tumultuous response last year to its attempt at reforming its retirement system, which was marked by months of fervent protests. More importantly though, due to its popularity among its greatest voting bloc, senior citizens, it’s become the third rail in politics. It’s pretty much political suicide to try to make changes. One level after killing your puppy (IYKYK😉).

As a result, Social Security resembles a driverless car hurtling towards an unavoidable collision, bereft of self-driving software to steer it away from calamity.

Our goal is not to succumb to hyperbole or indulge in doomsday predictions. Instead, we advocate for a proactive approach to retirement planning. Take the reins of your financial future; make sure to save diligently and invest astutely. If Social Security remains a reliable safety net, it will merely enhance your retirement journey, serving as a supplemental boon rather than a sole lifeline.

As President J.F. Kenedy famously said at his inaugural address, “Ask not what your country can do for you; ask what you can do for your country”. By saving enough for retirement, you will be removing the government’s burden to support you in your retirement, and what is more patriotic than that?

This material has been prepared for informational purposes only, and is not intended to provide or be relied upon for legal or tax advice. If you have any specific legal or tax questions regarding this content or related issues, please consult with your professional legal or tax advisor.

Inventory is a critical component of most businesses’ Balance Sheet, but managing inventory effectively is often a challenging balancing act. A business needs to keep enough inventory on hand to meet its customers’ needs – but holding on to too much inventory can be costly. What are some smart ways to manage inventory more efficiently, without compromising revenue and customer service?

Reliable counts

Effective inventory management starts with a physical inventory count. An accurate count of inventory provides a snapshot of how much your company has on hand at any one point in time. This is easier said than done. The value of inventory is always in flux, as work is performed and items are delivered or shipped. To capture a static value as of the reporting day, companies may “freeze” business operations while counting inventory. For larger organizations with multiple locations, it may not be possible to count everything at once; so, they often break down their counts by physical location.

Accuracy is essential to calculating cost of goods sold, and to identify and remedy discrepancies between a physical count and inventory records. And there are always discrepancies. Errors made in data entry, shipping errors, inaccurately labeled products, theft, and sometimes even intentional misstatements are all common factors that can throw off an accurate inventory count.

Benchmarking studies

After a business has calculated its inventory as accurately as possible it can compare its inventory costs to those of other companies in its industry. Benchmarking is the process of measuring key business metrics and comparing them against other companies in the industry to see how the business is faring and how to improve performance. Trade associations often publish benchmarks for gross margin, net profit margin, or days in inventory, and a business should strive to meet — or beat — industry standards.

Efficiency measures

What can you do to improve your inventory metrics? The composition of your company’s cost of goods will guide you as to where to cut and what to modify. Consider the carrying costs of inventory, such as storage, insurance, obsolescence, and pilferage. You may be able to improve margins by negotiating a net lease for your warehouse, installing antitheft devices, or opting for less expensive insurance coverage.

To cut your days-in-inventory ratio, compute product-by-product margins. You might stock more products with high margins and high demand — and less of everything else. Consider returning excessive supplies of slow-moving materials or products to your suppliers, whenever possible. In today’s tight labor market, it may be difficult to reduce labor costs. But it may be possible to renegotiate prices with suppliers.

Inventorying your inventory

Management usually directs its greatest efforts into the growth of its business, which is appropriate; but this focus often puts inventory management on the back burner. This can be a costly mistake. Speak to your accounting professional for help in researching industry benchmarks and calculating inventory ratios to help minimize the guesswork in managing your inventory.

This material has been prepared for informational purposes only, and is not intended to provide or be relied upon for legal or tax advice. If you have any specific legal or tax questions regarding this content or related issues, please consult with your professional legal or tax advisor.