Bookkeeping is more automated. But can you trust the numbers?

Bookkeeping is getting smarter, faster and increasingly capable of getting on with things without a human having to click "OK" 47 times 🫠

We are big fans of these changes (although to those who enjoy clicking "OK" and seeing the transaction disappear, we see you, and we understand you too 🫶).

Xero and other accounting systems can already automate a decent chunk of the work that used to require someone sitting there manually processing it. Bank transactions can reconcile themselves, bills and receipts can make their own way into the accounts, and software can learn how regular transactions are usually coded. Add AI into the mix and it's only going to accelerate.

Brilliant. Nobody went into business because they had a burning desire to spend Wednesday night manually entering receipts.

But as more of the bookkeeping process becomes automated, there is something we're becoming increasingly conscious of: automated bookkeeping doesn't necessarily mean accurate bookkeeping.

A very efficient mistake is still a mistake

The whole point of automation is that once you've set something up, you shouldn't have to keep thinking about it. Unfortunately in this arena, that's also where the risk comes in.

Software works with the information, rules and patterns it's been given.

If a transaction has been coded incorrectly in the past, circumstances have changed, something unusual comes through, or the software simply makes the wrong call, it doesn't necessarily know that something needs a second look. It can quite happily continue doing the wrong thing and much faster than a human could.

This is particularly relevant as AI becomes more involved in bookkeeping.

AI is very good at recognising patterns and making recommendations, and those capabilities are only going to improve. But bookkeeping and accounting isn't always a matter of looking at a transaction and deciding which account it most resembles. There is context behind the numbers, and sometimes that context completely changes the answer.

That's how you can end up with bookkeeping that looks beautifully tidy - everything is reconciled, there are lovely green ticks everywhere, and Xero is delighted with itself. Meanwhile, something sitting underneath it all isn't quite right.

This absolutely does not mean we should stop automating things. It means the role of the human involved in your bookkeeping needs to change alongside the technology. Instead of spending as much time processing every transaction, there should be more time available to have a human-led system of reviewing what's happening, investigate the unusual stuff and check that the overall result actually makes sense.

The numbers need to be useful, not just tidy

This matters because we're not doing bookkeeping for the joy of bookkeeping. As hard as it is to say this as an accountant, the end goal for you as a business owner isn't a perfectly reconciled Xero file that we can all stand back and admire 🥰 ...we need those numbers to help you run your business.

We've been having lots of meetings with clients lately about growth and expansion, which is one of my favourite parts of what we do. Clients are looking at taking on staff, buying equipment, pursuing new opportunities and generally making some exciting moves.

When we sit down to talk those decisions through, we inevitably come back to the numbers in the reports. Can the business afford it? What will it do to cash flow? Are margins holding up? How much breathing room is there if things don't go exactly to plan?

Having an up-to-date Profit & Loss is a great starting point, but it isn't much use if we can't trust the information sitting behind it. An expense coded to the wrong place, income treated incorrectly, duplicated transactions or something missing altogether can completely change the picture we're looking at.

And a beautiful report based on dodgy information is still a dodgy report. It just has better formatting.

Where we think bookkeeping is heading

I don't see the future of bookkeeping as humans versus AI. I think the genuinely exciting opportunity is what happens when we use both properly.

Let the technology handle more of the repetitive processing. Let it capture the receipts, suggest the coding, match the transactions and automate the workflows. There are plenty of jobs that software can do faster than us, and I may be talking out of turn here but I'm pretty sure bookkeepers and accountants have absolutely no desire to compete with a computer for the title of World's Fastest Receipt Processor.

Then use the time we've gained to do more of the work that requires judgement. Review the accounts properly. Notice when something doesn't fit. Ask why a margin has changed. Check whether cash is moving the way we'd expect. Understand what's actually happening in the business and, importantly, talk to the person running it.

For business owners, I think that's the bigger opportunity too. Better automation should mean your financial information is available sooner, but the real value comes when someone turns that information into something useful. Instead of only looking backwards at what happened, we can spend more time talking about what the numbers mean and what you're going to do next.

So yes, automate away ⚡. Use the bank rules, receipt capture, integrations and AI tools that save you time. We certainly will.

Just don't fall into the trap of assuming that because the bookkeeping is done, the numbers must be right. Someone still needs to understand your business well enough to know when something looks a bit weird and apply the judgement that software can't always provide.

Hopefully the future of bookkeeping means humans spend far less time doing the boring bits, and a lot more time helping you make sense of your numbers.

If your Xero is looking beautifully reconciled but you're still not entirely sure what those numbers are telling you, come and have a chat with us. That's the bit we actually enjoy.