Why Automating Bookkeeping Services Might be Good for the Profession
There’s a lot of talk in the bookkeeping industry about artificial intelligence (AI), particularly about how it may replace up to 97 percent of bookkeeping services in the next five years. As the owner of a small outsourced bookkeeping services firm, I’ve had to take a close look at this. As AI relates to bookkeeping, we’re principally talking about the automation of data entry, and this relies on technology that can accurately pull information from two main sources.
Now, I have my doubts about whether full automation can ever truly be achieved, let alone in the next five years, but I’m also optimistic that the introduction of stronger AI could revolutionize bookkeeping services in a very positive way. If you don’t believe me yet, that’s okay. Let’s start by taking a look at documents and bank data, the information gold mines that AI developers are focusing their automated extraction efforts on.
Extracting Information from Source Documents
There are a number of tech start-ups aiming to use OCR technology, or its equivalent, to develop apps that can extract information from vendor bills or transaction receipts (vendor name, vendor type, vendor location, transaction value, date and time) and then push that data into a cloud bookkeeping software, such as QuickBooks® Online.
At the time of writing this blog, I’d say the technology is roughly 85 percent accurate. These apps still make mistakes. And, even if the apps were 100 percent correct, the problem is not with the technology, but with human behaviour.
Let’s face it, humans are lazy. It’s almost impossible to get 100 percent of people to upload 100 percent of their receipts 100 percent of the time. So, even if the app is 100 percent foolproof, humans are not. Thus, it’s hard to imagine a world where it’s completely unnecessary to have a professional set of eyes double check that all of a business’s transactions are indeed accounted for.
Extracting Information from Bank Data
Other technology under development aims to connect bank data and accounting software. For example, when you go to Starbucks and pay with your credit card, you’ll see something like “Starbucks ###” on your credit card statement, along with an amount, date and time, all signalling the details of that purchase.
When the accounting software is connected to your bank, and those transaction descriptions are imported into the software, you can create rules. You can tell the accounting program to always code transactions that include the word “Starbucks” to the category “Meals and Entertainment.”
Now, there’s no denying that this technology is awesome. At Legacy Advantage, we‘re already implementing this. However, we run into challenges whenever the transactions are a bit more complicated. For example, it’s hard to do accrual accounting using this technology, or deal with import tax duties where the GST is outside the usual 5 percent. I’m very optimistic that, as the technology improves, it will save us time; however, I’m not convinced that it will be able to account for all the idiosyncrasies and complexities that arise.
The Upside of Automation in Bookkeeping
Doubts aside, if automation is possible, I welcome it. Why? Well, let’s say that all users will be 100 percent compliant, and that the technology will be 100 percent accurate. The bookkeepers and accountants that keep up with that change – who find ways to add value to an automated environment – will become even more indispensable. And, it doesn’t have to mean that 97 percent of bookkeepers and accountants are out of a job.
In truth, our associates aren’t huge fans of data entry. At Legacy Advantage, we’re constantly looking for ways to make our bookkeeping process more efficient. We’ve trained clients in how to provide us with cleaner data. We’ve experimented with hiring minimum wage interns to do data entry for us. We’ve used bank feeds and bank rules (mentioned above) to automate our data entry. Now, why would we do that?
Simple … so that rather than waste time on data entry, we can devote our energy and resources towards providing financial intelligence.
We don’t want to just inform our clients of the profits they’ve made; we want to offer our clients advice and business intelligence that will help them grow their businesses. Doing this requires that we compare our clients’ data to the industry, looking at trends, margins and ratios, and identifying areas for improvement.
Unfortunately, we currently devote less than 10 percent of our time to these highly cognitive tasks. Why? Data entry. Yep. We have to spend the other 90 percent of our time gathering and inputting accurate bookkeeping data because without accurate data, analysis is impossible. We DREAM of the day when technology will spit out the reliable data that will enable us to focus on adding value to the conversation.
This hypothetical future may be far away, or it may be just around the corner. Rather than fear it, I say embrace it. If AI successfully takes over data entry, what differentiates Legacy Advantage won’t be how well we do bookkeeping and data entry, but rather how solid our advice is and how amazing our relationships are with our clients and partners.
Don’t lament the loss of grunt work; instead, imagine the possibilities that reality may open for you and your company.