Current Progressive Dairy digital edition
Advertisement

Automated bookkeeping will impact you and your accountant

Mark Fetzer for Progressive Dairyman Published on 24 August 2018

When someone mentions A.I., minds in the dairy business immediately think about artificial insemination. However, this article will focus on a different type of A.I.

Regardless of our personal views on the issue, artificial intelligence (A.I.) technology is here to stay and should not be ignored. Maintaining a competitive advantage in any industry requires we continually look for and implement changes that will increase efficiency and decrease operating expenses. A.I. arguably is, and will continue to be, at the forefront of efficiency innovation.

advertisement

advertisement

One area where A.I. is affecting automation and operational efficiency is bookkeeping. In this article, I will be providing a general overview of the A.I. technology used in bookkeeping platforms, discussing the benefits of implementing automated bookkeeping technology and how A.I. should change your relationship with your accountant. The bottom line is: It is time to embrace the possibilities of A.I. and what it can do for your business.

Technology overview

The A.I. currently in use in the accounting industry should be enthusiastically welcomed. It is designed to automate the mundane and redundant tasks that occupy much of the time or resources of business owners which could be spent on higher-value activities. Just as the advent of automated milking machines and electronic monitoring devices have improved dairy operation, accounting A.I. promises similar results.

There are currently two A.I. technologies of note in use in the accounting industry. These are bank feed technology and optical character recognition (OCR).

Bank feed technology is not new and is likely currently being used by your business. This technology connects to a bank account through “read-only” access. It permits downloading of transactional history, check images and statements automatically rather than requiring a visit to the institution’s website to initiate a download.

To illustrate, QuickBooks users have the ability to connect bank accounts and have transaction information pulled directly into QuickBooks to be accepted and categorized. Also, rules may be written so reoccurring transactions are automatically classified.

advertisement

OCR scans and analyzes printed text or numbers and converts it to a form a computer can recognize and process. This eliminates the need to retype the material in order to include it in your accounting software. Although extremely efficient, this process is far from perfect. At this stage of A.I. evolution, accountants typically verify the imported information and ensure the OCR operated correctly, fixing any mistakes they may find.

Even with this secondary human review, the cost is a fraction of employing a bookkeeper or having an accountant be the bookkeeper. However, please remember the adage, “Garbage in equals garbage out.”

The higher the quality of information submitted to the system, the more effective and efficient the process will be. For example, if a check is written without a description, or the document is in an unusual font, then a human must intervene to ensure accurate recording of the information. While many OCR systems can handle a wide variety of fonts, it performs best when a font is one widely used.

These technologies are merely two forms currently used by A.I. Technology firms continue to innovate in order to improve the function, accuracy and efficiency of these technologies as well as develop additional technologies to perform more complex tax and accounting functions. If embraced and used correctly, A.I. technology will be a game-changer for small businesses.

Benefits of implementing technology

Replacing or supplementing the human element of bookkeeping with A.I. will eliminate most of the mistakes made during data entry, provide more time for higher-value activities, provide reports on a timely basis and allow advisers to provide better advice based on operations.

Whether an accountant or a member of the business performs the data entry duties for a business, that task is prone to error and disproportionately costs more than other higher-value activities. Unfortunately, inaccuracy in bookkeeping and data entry ends up costing the business much more when tax returns are prepared due to time spent correcting mistakes before the return can begin.

advertisement

A.I. virtually eliminates data entry errors through internal checks, subsequently reducing both bookkeeping and tax return preparation costs as well as streamlining financial statement preparation.

Every quarter our firm prepares financial statements for our dairy clients. Preparation of financial statements is expensive and time-consuming; however, financial institutions require these on a quarterly basis as part of loan covenants.

Bookly (Bookly.co), a leader in automated bookkeeping platforms, has a real-time financial statement creation and viewing option. Were our clients on this platform, or one similar to it, the cost to prepare financial statements would decrease exponentially, and turnaround time would improve significantly.

Another benefit is: A business may know its cash position at any point in time. This insight will be invaluable when making financial decisions and consulting with an adviser.

Tax planning and tax return preparation are not the activities of choice for many accountants. True fulfillment comes when clients seek advice regarding streamlining business operations, analyzing an expansion or a sale, or other projects that improve the business and increase profits.

Unfortunately, this is often more the exception than the rule, especially when the client’s budget is spent on tax returns and tax planning. With reliable and usable information available in real-time, more time should be spent with clients learning their business needs and goals and devising ways and means to accomplish them. With A.I., this is all possible. It is incredibly exciting to think of the prospect of being a true business adviser rather than primarily a tax return preparer.

While A.I. will inevitably shift priorities of accounting firms from tax and audit work to advising, it promises to provide business owners with more discretionary time and operating capital. Without the time and financial constraints associated with the repetitive tasks required for business operation, a business owner can shift that time and those resources to higher-value activities.

Zach Olson, CEO of Bookly, recently stated: “[Our] focus has been to reimagine how cutting-edge technology can improve the lives of business owners – no matter their area of expertise. It is almost impossible to quantify what extra time would be worth to a business owner. Whether that time is spent developing a new product or service line, investing in new equipment, spending more time with family or another activity of interest, A.I. has the potential to make it possible.”

How A.I. should change your relationship with your accountant

Innovation drives growth and distinguishes the leaders from the followers. Often, it is asked whether the accounting industry fears the advent of A.I.

The answer has been and should continue to be a resounding “no.” A.I. promotes innovation and efficiency, and should change your relationship with your accountant for the better by reducing the amount of time spent on traditional accounting functions and increasing the time spent advising on business operations.

It is not unreasonable to anticipate A.I. replacing the bookkeeping, accounting and tax functions performed by an accountant. Therefore, choose an accountant who has the capability to become more of a financial adviser. This is not to say the accountant should be completely removed from the traditional accounting processes.

They will still play a very important role in reviewing the information created by A.I. to ensure compliance with tax code and optimization in accordance with client-specific situations and scenarios. However, these tasks should take a mere fraction of the time now spent. These saved funds should then be funneled into consulting and advising services to improve your business operations.

Actionable data is the catalyst for innovation. Some may think their accountant and financial adviser are the same person, but this is not always the case. An accountant analyzes financial information in order to build a picture of what happened to a business in the past. A financial adviser needs to be able to read your history, extrapolate trends and formulate a financial strategy for future operation and growth. Actively seek to build this type of relationship with your accountant.

While it may be disconcerting to rely on A.I. to perform financial functions, the benefits far outweigh the potential downsides. When fully understood how beneficial automated bookkeeping can be for your business by freeing capital and human resources for more valuable work, making the switch to a reputable automated system should not be difficult. Consider evaluating automated bookkeeping as you would evaluate any other new technology you have implemented in your operations.  end mark

Mark Fetzer
  • Mark Fetzer

  • Tax Consultant
  • Cooper Norman
  • Email Mark Fetzer

LATEST BLOG

LATEST NEWS