Artificial Intelligence (AI) is the buzzword in business these days…
Will AI replace human accountants?
The short answer – no.
Why?
Because AI cannot flag errors, recode, interpret data correctly all the time, nor communicate with emotional understanding.
By the way, did you know that there are three different types of AI?
They are:
Machine learning – this is where software recognizes patterns in data.
Predictive AI – this is where the software uses those learned patterns to suggest actions to users.
Generative AI – where software uses learned patterns to create new content, i.e. writing text and creating images.
AI in accounting is largely of the Predictive type. It is used to extract data from source documents, and to suggest actions (in coding and matching transactions).
Let us explore how AI is used in the suite of software we use for our clients at ControllershipPLUS.
Source Document Extraction
Here in our front-end software called HubDoc AI goes to work in extracting the core details from supplier bills, in addition to other source documents.
Within seconds of a supplier bill being uploaded or emailed to HubDoc the key details are extracted automatically:
Vender name.
Date due.
Total amount.
Taxes, including GST, PST, and HST.
HubDoc, based on predictive AI will suggest the account code to code the expense to. It will suggest this based on the past coding of that supplier.
For instance, Telus, a large telecom provider in Canada will usually be coded to “telephone” expense, if that is where you coded it in the past.
However, if the Telus bill is not for a telephone expense, rather it is for cell phones purchased, it may need to be coded somewhere else, like a capital account, “Telephone equipment.”
Human intervention is needed at this point because although predictive AI is good at extraction and making suggestions, it is not smart enough to know what to do with a new situation!
A highly intelligent accounting technician is needed to review and watch for exceptions and recode the suggested coding by AI.
In accounting, our human technicians are definitely much smarter than the AI.
Where predictive AI shines here is in the time saving of mind-numbing data entry tasks.
Okay, let us head on over to Xero next, where these extracted documents have been sent to within these now coded transactions….
Xero – Here AI Makes Suggestions
Inside Xero, the predictive AI matches transactions fed into it directly from the bank feeds.
It suggests which transactions likely match what went through your bank accounts.
The risk here in relying on AI is that the AI is not that smart. It only can suggest a match. If there are multiple transactions with the same dollar amount if you blindly accept the suggestion from AI, you may be wrong.
Here again, human intervention is required to manage and review, and not unconsciously clicking the “OKAY” button.
Xero and Accounts Receivable
Inside the bank feeds, Xero’s AI will suggest matches of deposits. This saves time in looking up the correct transactions to reconcile.
Unpaid deposits remain in aged accounts receivable.
Xero sends reminders of outstanding invoices to your customers and clients. I am not sure how this can rightly be called AI as it is just a routine, fixed scheduling task. Nevertheless, it does save time for the accounting technician.
Bills approved for payment now are sent over to Plooto…
AI and Plooto
The key features of AI in Plooto are:
Two-way synchronization. Bills are automatically synced to Plooto from Xero, along with all attached source documents. Once they are paid in Plooto, they are synced back to Xero and recorded as a payment against the bill just paid.
Plooto allows for customizable approval processes. These save time by reducing chasing people physically in different locations to sign cheques.
Plooto leverages AI to encrypt all date keeping everything tight and secure.
The predictive AI here is not really thinking for you in a way that you might imagine AI to be working. It does, though, save accounting technicians from doing boring, repetitive tasks.
Fathom and Smart Prediction
Our high-end reporting software, Fathom, picks up all the month-end date from Xero on a regular, automated basis.
Inside of the forecasting module of Fathom it uses what it calls Smart Prediction to predict future revenue and expenses when doing a forecast.
Again, highly intelligent accounting technicians are required to intervene and not assume that the software’s predictions are written on stone tablets!
In Summary
Predictive AI really has stripped many mundane, repetitive tasks from accounting technicians. It has freed them up to add true intelligence to the mix. To analyse and override and to ensure that transactions are coded correctly, and that cash-flow projections make sense based on our knowledge of our client’s businesses.
Enterprise software is expensive! Think SAP for Fortune 500 companies. Think NetSuite for mid-tier companies doing $100 million plus in sales.
At ControllershipPLUS what we have cobbled together is a stunning suite of software that links, communicates, and integrates flawlessly, efficiently, and seamlessly. Without a glitch.
Today I am going to summarize the benefits of this suite of software tools, how they integrate, and exactly what they do for you.
At the heart of it all is our favorite accounting software….
Xero, “To Do Beautiful Business”
Xero is a beautiful piece of software – built with the end user in mind. It is simple, elegant, and intuitive.
What does Xero do?
I am glad you asked!
By the way, Xero, is not an ERP (Enterprise Resource Planning) software.
What it does, beautifully, is manage your bank accounts, accounts payable, accounts receivable, and customizable reports.
You can also do Purchase Orders, basic projects tracking, simple inventory management, divisional tracking, tax reports, and short-term cash-flow management.
Now here is where it gets interesting – as we add other specialized software programs into the mix, then Xero transforms into an ERP for small to mid-sized businesses.
The first essential partner program to Xero is….
HubDoc, Your Document and Data Capture System
All of your supplier bills and even bank statements can be uploaded to HubDoc in one of three ways:
Snap a pic on your phone and upload using the app on your phone.
Upload directly from your desktop computer.
HubDoc gets to work extracting the details on the document – date, taxes, amount, supplier name.
Using artificial intelligence (AI) it then codes the transaction in the same way you did last time.
Now, one of our highly trained cloud-based accounting specialists will review each transaction to ensure that the AI coded it correctly. If not, they recode inside HubDoc.
The transaction, along with the source document is seamlessly posted to Xero, attaching the original source document to the transaction inside Xero.
This is where the handoff to the next add-on happens…
ApprovalMax, Robust Financial Controls Made Easy
All the transactions from HubDoc, posted to Xero go into a “holding tank” called “awaiting approval.”
ApprovalMax steps in and automatically pulls all these unapproved transactions and routes them to the internal approvers before they are ready to pay.
The setup matrixes inside ApprovalMax can be as simple or as complex as you need them to be.
The supplier bills get sent to users like Department Heads, frontline approvers, managers, accountants, and ultimately owners (if desired).
An audit report after the transaction has been approved gets attached to the transaction along with the source document from HubDoc.
These transactions now move to the next “holding tank” called “ready for payment” …and now the next heavy-duty add-on software kicks into gear…
Plooto, Your Business Payments Streamlined and Simplified
Plooto pulls all those bills ready for payment along with the source documents and audit report.
It then routes those bills for payment to the proper approvers and e-signers.
Your suppliers get paid automatically by deposit into their bank account.
The payment is then synced back to Xero to record against the outstanding bill.
All this happens without human intervention, aside from the approval itself.
Now, Back to Xero
Now that all your transactions are entered through HubDoc, approved through ApprovalMax, paid by Plooto, it is time to reconcile the bank.
(By the way, all your customer invoices, sent out through Xero by email, can be paid by your clients/customers using Plooto).
Reconciling the bank is easy with bank feeds inside Xero.
Xero will match transactions it pulls from the bank automatically through its feeds and all you have to do is review and click “okay.”
Now, you re ready to ensure everything is accurate and create reports. Custom reports can be setup once and used over and over again.
From Xero and our core add-on programs we re now ready to hop over to….
Fathom, All in One Reporting, Analysis and Forecasting
Fathom is our powerful high-end reporting add-on.
The end results from Xero are synced over regularly to Fathom.
From there, Key Performance Indicators, Cash-Flow Statements, Complex Forecasts, and incredibly beautiful month end reports are created.
The Fathom reports are what we review with our clients monthly and provide coaching from the numbers…
A Quick Summary
Each software described above talk seamlessly with each other.
Each has its own unique role to play. Because they are highly specialized, these software programs do things that all-in-one software can never compete with.
It is the difference between building a house with a jack-of-all-trades versus using a skilled plumber, a skilled electrician and so on.
Together these powerful add-ons transform Xero into a mini-ERP!
In Conclusion
In addition to the core programs above, the marketplace for Xero add-ons offers solutions to a myriad of challenges…
For example:
If you need to collect your aged receivables better – use an add-on called Chaser.
If you need robust inventory management – consider Unleashed.
For real estate companies – take a look at Loft47.
Do you sell goods online using Shopify? – these can be linked to Xero.
There are hundreds of add-ons in the Xero marketplace.
Finally, many front-end operational software that are highly industry specific will often sync their transactions directly into Xero.
We live in a fast-paced digital world, and cheque writing has gone the way of the horse and buggy (sorry to all pen and paper lovers).
The fact is that paper cheques, sent in the mail, are significantly more insecure than paying and receiving money online. Physical cheques are stolen from mailboxes, acid washed, re-inscribed and cashed by the thief.
For our clients, we have been paying all their bills online for years. The service we use for this is called Plooto, and they are awesome!
Paying bills via wire transfer or Electronic Funds Transfer (EFT), using the big Canadian Chartered Banks is time consuming and expensive. And it is not automated. Well, okay, it is partially automated in the sense it is digital. It is just not synced to your accounting system. Plooto is.
Here are 7 reasons to make the switch from cheques and EFTs to Plooto….
Reason Number One – It is Fast
All of your bills in Xero (or QuickBooks Online) are synced to Plooto. The instant you log into Plooto, there are all your approved bills, ready to pay.
When you are an e-signer (like a cheque signer only online) you will receive an email showing you the bills that are ready to be e-signed.
You login directly by clicking a link in your email.
You will see each bill that is ready to pay, with the source document attached.
Think of it like this. It is like your bookkeeper has recorded all the bills, printed the physical cheques, and brought the cheques with source documents attached to the cheque. He or she places on your desk, and you sign away.
The difference is that you can be anywhere.
All of this processing is fast!
Reason Number Two – It Saves Time
Because Plooto processes are online and fast, it saves time…
Time is saved in a few ways:
The lack of physical movement of bills and cheques from office to office.
The fact that the payment is synced back to your accounting software and recorded as a payment against the bill being paid saves the time of the bookkeeper having to record each payment as in the old systems.
You can have multiple approvers and the flow is all digital, online. Once you approve, if you have a secondary approver, the bills will instantly go to them to e-sign. This saves a lot of time.
The source documents are all attached to each transaction, so you are no longer hunting around for the physical copies of bills.
You can pay multiple bills at one time, which saves time.
Reason Number Three – Pay Bills From Anywhere
Your bookkeeping Team can be in Vancouver. Your headquarters could be in Toronto. No problem.
Everything flows online and is accessible on your browser and through a browser app on your phone.
You can be on holidays and ensure bills get paid on time.
First and second approvers no longer need to be in the same office. They can be separated by oceans!
Reason Number Four – Multi Person Approval Workflows
You can set up a complex Approval Matrix with bookkeepers setting up the bills which in turn go to, for instance, a Department Head.
From there it can be routed automatically to the e-signers. For payments under, say, $1,000 perhaps maybe only one signature is required. If it is greater than $1,000 then 2 e-signers.
You have the power with Plooto to set up as simple or complex a Matrix as you want or need.
Reason Number Five – It Avoids Errors
Errors are avoided as follows…
Once the bill is recorded, checked, and approved in your accounting software, the source document gets attached to each transaction in Xero or QuickBooks.
This source document is attached to each transaction in Plooto, so you can look one more time before paying.
Multiple approvers means more than one set of eyes on each transaction.
The payment is synced back to Xero or QuickBooks which avoids duplicate entries.
To summarize, recording data once only, having multiple approvers looking, and source documents attached for a final look all lead to error avoidance.
Reason Number Six- It is International
Plooto can easily and seamlessly pay vendors and contractors in over 50 countries.
You do not need to call your bank manager to assist with a wire transfer and all this entails.
We have made many international payments with Plooto, and we have encountered no errors in doing these transfers. It is like paying a local supplier.
Reason Number Seven – It is Secure
Plooto uses Multi-Factor Authentication to login to its platform. The money is transferred directly form your bank account into your supplier’s account.
By the way, if they do not want to give you their banking information, as long as they have online banking, you can just email them the transfer and they login to their bank and deposit the funds themselves.
Multiple approvers make it more secure because more eyes have been on each transaction.
There is no risk of physical interception of cheques.
Plooto has banking level security and encryption running in the background.
They started in Canada in 2015 and have been a reliable and trustworthy partner of ours for many years now.
Many readers of my blog know I am on a bit of a rant about all-in-one software… I promise that today I will only spout an itsy-bitsy rant. (And it will not be until way down near the end)! Manufacturing companies comes in all shapes and sizes.
Type 1 – Full In-House Manufacturers
The first are those ones who control all aspects of their processes internally. They buy raw materials, and they produce finished goods. There is a labour component and a manufacturing overhead component. They need a production scheduling software that manages labour and raw materials. They need a production scheduler and planner. The most complex production and accounting challenges emerge from these companies.
Type 2 – Production is Partially Outsourced
The next grouping are those who outsource part of the production to an outsourced manufacturing supplier/partner. They essentially assemble the finished goods. They are less labour intensive than the first type. They would likely not need a complex production scheduler component as part of their software requirements.
Type 3 – All Production is Outsourced
The 3rd group are those that outsource pretty much all the work to a partner and buy back the finished goods. Think Canadian and USA manufacturers who outsource production to a Chinese company/Partner.
A Few Examples
Imagine a company making organic food from scratch. They process raw materials into finished goods. There is a production team in-house. There is an internal labour component built into the finished product. There are labour variances and material variances. What is a variance? It is the difference between what you expect something will cost to make a finished good and what it actually costs you. You will start with a recipe of exact amounts of each ingredient, plus the labour cost, plus an applied manufacturing overhead cost. When you start a production run of a batch of product you expect to get an exact amount of finished product from a recipe of raw materials and labour. The reality is that it will not always go the way you plan. Your production team was either more efficient or less efficient. If more efficient, you will have a positive variance. This means it cost you less to make the product than you planned for. If you are inefficient it could be for a number of reasons. Raw material costs may have been higher than planned. You may have used more quantities than planned. The same goes for the labour component.
Choosing the Right Software
When you pick software for your business you want to pick one with the right features for you. For simpler manufacturing operations – ones that do not need complex production scheduling – Unleashed Inventory software is a great choice! It allows for many features you need without the extra complexity. You can track batches (critically important for food manufacturers). You can track serial numbers – vital for computer sales, as an example. Unleashed (great name, eh?) will allow for recipe creation (technically called your Bill of Materials) as well. What is does not have is extensive production scheduling for labour and raw materials. For that you will need MRPEasy. It is an amazing software that offers in-depth production scheduling for a full-service, in-house manufacturer. Both these awesome mid-tier cloud-based software programs sync beautifully to Xero or Quickbooks Online.
In Summary
Now, for my small rant. The people that designed these awesome, extremely focused software programs for manufacturers knew their limits. They did not keep going and add elaborate accounting modules. Why not? Because accounting for them – like for you – is not their area of expertise. They smartly created a link to software that does accounting better than they ever could. Together you get the best of both. If you need help choosing which software is best for you, message me on LinkedIn. Thanks for reading…
I have written – more than once – on the attraction people have for all-in-one software.
It makes no sense. Yet it is pervasive. So, yet again, let me take another stab at this.
Look at your personal life. You have online banking. You do not send emails from your online banking, do you? Do you want to?
You go to Facebook, jump to Twitter, then LinkedIn (oh, whoops that is business). Each has separate log-ins.
Each software has a unique function. You need to do a personal budget. Facebook has a module for that. Just kidding.
Would you trust it if it did? I am not referring to security. Plain excellence. You would likely do a budget in Google sheets or Excel, right?
Three Industry Examples
Here are some business examples from 3 separate industries:
Real Estate Industry – core brokerage software could be Broker Wolf, or, more recently, Loft47. Neither has an accounting package. Broker Wolf has a sync to Quickbooks Desktop. Loft47 syncs seamlessly to Xero.
Home Health Care Industry – two main scheduling software packages are – ClearCare and Alayacare. Neither has an accounting package. They do a fabulous job at scheduling, tracking patients, and billings. They do not even have a payroll module.
Technology Industry – two main software packages dominate about 90% of the global market. Autotask and Connect Wise. Neither offer an accounting package.
When an industry-centric software does offer an accounting module they tend to suck. Really suck. How bad do they suck? Really bad. No bank feeds, horrible reports, not up-to-date with tax reporting to name a few things.
Conversely, when a great accounting package starts to add modules for manufacturing, health care, and so on, it will suck too.
The accounting software has a bigger problem. Think of the sheer, stunning number of industries they would have to add as modules! Why not just let really smart software developers have access to your software through open APIs (techy abbreviation for Application Program Interface)?
Then, boom, you get the best of both worlds!
Hilarious Spoof
Here is a hilarious advert for all-in-one business software just to really drive my point home, for the, uh, 3rd time…
I have discovered an addiction people have to a concept…
The concept is all-in-one software.
First, what is all-in-one software?
It is a software suite (usually cloud-based now) that, well, simply, does it all. Basic accounting module, inventory, manufacturing, Customer Relationship Management (CRM), accounts receivable, accounts payable, and more.
Why the heck would you NOT want everything in one place?
We have clients with upwards of 8 separate pieces of software. Each with a separate login.
What? Wait a second…I can hear you say. Are you trying to convince me that 8 separate logins creates more automation than one single sign-on?
I do not believe it, you say.
I will show you how with an example with one area – accounts payable automation.
Follow the Flow
You have a business with 12 locations.
A supplier emails a bill to your document hub software. No human touch.
Software pulls out the amount, the tax, the supplier name, and even the account code.
(**NOTE** here you will likely have an experienced accounting technician checking that everything is coded to the correct account. She will make any coding changes as needed.)
Next, the software publishes it to the accounting software automatically. It attached the bill. No human touch.
Another piece of software looks into your accounting software to route the bill just emailed to the correct department head for approval.
The department head gets an email from the software with bill attached. This person approves the bill with one click.
The software takes that approval and attaches an audit report into the accounting software moving it to “bills to be paid”, along with a copy of the bill and the audit report.
Note that so far this has been one mouse click by a human.
The accounting manager goes into the bill payment software. It sees that the software has auto fetched all the “bills to be paid”, along with the copies of the bills and the approvals (audit reports).
The accounting manager approves the bills for e-signature. (One or two mouse clicks).
The CFO gets notification via email to approve a bill for payment. She clicks “approve” in email.
This audit trail of approvals and e-signatures is recorded in the software.
The software then pays the supplier into their bank account.
Lastly, it records the payment into the accounting software.
Summary of What Just Happened
Okay, what just happened?
The software took care of multiple functions where in the past data entry clerks would have done it. (And done it often very poorly).
The human steps were:
Accounting clerk checked that the document extraction software coded the bill to the correct account
The department head approves the bill for payment (one mouse click)
The Controller and owner each e-signed the payment (two mouse clicks)
The software did this:
Extracted the details on supplier bill
Posted to accounting software
Routed bill via email to department head for approval
Posted approved bill as “ready to pay”
Attached documents including audit report at each stage
Posted the bill payment to the accounting software.
How many logins were there?
The accounting technician logged into the document software
The accounting manager logged into the bill payment software to approve payments
No all-in-one software can do all of the above. Some steps, yes. Not all.
Why Does This Work So Well?
Specialization. When you go to a doctor he will always refer you to a specialist depending on what he discovers, right?
Your doctor will not send you to a nose and throat specialist if you have a sore foot.
Each doctor becomes highly focused on her speciality.
It is the same with software. We use a software called ApprovalMax to route bills to department heads for approval.
The accounting software does not do what ApprovalMax can do. The accounting software acts like a traffic cop receiving requests from the specialized software. It is the hub.
You would not trust a doctor who “does everything”. Nor should you trust a software that claims to do it all.
