If you’re thinking about automating your bookkeeping, there are a few things you may want to know and take into consideration first. In this episode, Danielle Hayden, host and founder of Kickstart Accounting Inc., welcomes Kelsey Chester, Kickstart’s Lead Account Manager, back to the show to discuss a topic that's taken the world by storm this year: Artificial Intelligence (AI). They dive into how the popularity of AI-driven technologies are impacting bookkeeping and financial management.
They explore both the intriguing possibilities of AI and the potential risks of relying solely on it to do your business’s finances. From tools like ChatGPT to automated invoicing systems, they’re breaking down what’s hype, what’s helpful, and where human expertise still rules. Before you put your bookkeeping in AI’s hands, take a listen to this episode!
Key Takeaways:
- The Buzz Around AI: How AI tools have been incorporated into business software and you may not even know you’re using it at times.
- AI’s Role in Bookkeeping: Key tasks AI claims to streamline, including automated data entry, expense categorization, invoicing and billing, and financial analysis and tax prep.
- Why AI Alone Isn’t Enough: Real-life examples of AI mishaps in bookkeeping, including costly errors like misclassified expenses, duplicated revenue, and even invoicing chaos.
- The Importance of Expertise: Why trusting AI without knowledge of bookkeeping basics can be a recipe for disaster and why a skilled money team is still irreplaceable.
- Security Concerns: What happens to your financial data when you use AI? You may not be able to ensure sensitive information stays protected when using it.
- The Value of the Human Touch: Insights into how a dedicated team brings expertise, accountability, and personalization that AI simply can’t replicate.
Topics Discussed:
AI in Bookkeeping: Overview (00:00:19:18 - 00:00:52:00)
Potential Uses of AI in Financial Management (00:00:52:00 - 00:02:31:01)
AI’s Limitations in Bookkeeping (00:02:31:01 - 00:06:53:17)
Expense Categorization and Automation Issues (00:06:53:17 - 00:08:01:14)
AI Challenges with Invoicing and Payments (00:08:01:14 - 00:09:23:29)
The Need for Human Oversight (00:09:23:29 - 00:11:05:07)
Security Concerns with AI (00:11:05:07 - 00:12:05:09)
Complexity, Cost, and Human Trust (00:12:05:13 - 00:13:47:04)
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Episode Transcript
00;00;00;00 - 00;00;05;00
Danielle Hayden
Hello, and welcome back to Business by the Books, the podcast that teaches you how to use your financials to better manage your business. Kelsey, thank you so much for being back on the show.
00;00;05;01 - 00;00;08;18
Kelsey Chester
Thank you. It's been quite a while actually, and I'm super excited to be here.
00;00;08;21 - 00;00;12;03
Danielle Hayden
It has kind of been a while. As we were planning this, I was excited to have you back.
00;00;12;05 - 00;00;19;16
Kelsey Chester
Thank you. I believe some episodes have released fairly recently with me in them, but we recorded them actually a few months ago, so it's been a while.
00;00;19;18 - 00;00;51;27
Danielle Hayden
Yeah, yeah. This episode today, we've gone back and forth on how we wanted to approach this topic, and AI has been something that obviously has been caught by storm in the world, right? You're living under a rock if you haven't heard anyone and everyone talking about ChatGPT and the AI functionalities, and we thought it was important to talk about AI as it comes to your financials and your money team, your bookkeeping, and what we've seen as best practices throughout the years.
00;00;52;00 - 00;01;12;16
Kelsey Chester
Yeah, different softwares are incorporating AI in it, and I know there's some AI companies out there are trying to replace a human on your accounting team, money team as your bookkeeper. And we're here to kind of dive a little bit more into that. Why it's not a good thing to have only AI as part of your money team and just the role that it plays.
00;01;12;17 - 00;01;12;26
Kelsey Chester
Yeah.
00;01;12;27 - 00;01;35;24
Danielle Hayden
So I think we can all agree in everything that I've learned about AI, everybody that I've seen speak about AI, that we can't blindly use it, right? We can't put something into ChatGPT and blindly copy and paste that and use that verbatim. We know that ChatGPT and most AI functionality has some errors and issues, and I think that we're willing to accept that in context to our marketing.
00;01;35;24 - 00;02;01;13
Danielle Hayden
So if you're using ChatGPT to help produce content, maybe for your blog or Instagram post, like I've seen it a lot around the marketing piece, if we're not willing to accept it as a golden standard in marketing, want to make sure that we're not accepting it as the golden standard in accounting as well. So to prep for this episode, I did a little bit of research with ChatGPT, and I asked it to give me some of the functionality that it felt that AI could help.
00;02;01;14 - 00;02;31;01
Danielle Hayden
So one of the questions that I asked was, how can I help business owners with their bookkeeping and taxes? And the answers are pretty standard. And what you would expect. So, automated data entry, expense categorization, invoicing and billing, financial analysis and tax preparation. That's a pretty big heavy load. And when I asked ChatGPT, right--So then I followed that question up with why wouldn't we want AI to help a small business owner with bookkeeping?
00;02;31;01 - 00;02;51;27
Danielle Hayden
And it came back with security, that there is complexity and the need for customization, cost considerations, large learning curve and adoption challenges, and trust in the human touch. So even ChatGPT recognizes the need for human touch and that there is and can be errors when using AI.
00;02;51;27 - 00;03;10;00
Kelsey Chester
It definitely did get that part right. For those that have used ChatGPT or any type of AI for content creation or for ideation, for anything. What it spits out, you should have the knowledge to check it, to say, that's not really right. I'm going to tweak that. Or I don't think that's quite what I'm looking for,
00;03;10;00 - 00;03;28;27
Kelsey Chester
I need something else. I need to edit my prompt. If you're not knowledgeable on the topic that you're putting into ChatGPT or any AI, how can you check it? How can you know that it's correct? And when you're talking about something as important as your money and taxes and your business, you have to make sure that you go to an absolute trusted source.
00;03;28;27 - 00;03;54;07
Danielle Hayden
Absolutely. So let's go through some of these things that ChatGPT had prompted for small business owners to use to help them with their bookkeeping and taxes. And let's just talk about them very specifically, because I think we've seen a lot of these stories play out. So automated data entry ChatGPT said. I can automate the process of data entry by extracting relevant information from invoices, receipts and other financial documents.
00;03;54;12 - 00;04;21;27
Danielle Hayden
This reduces the need for manual entry, saving time and minimizing the chances of human error, which is interesting. I think when I hear that, I think of the QuickBooks features that we have all have all seen and have caused havoc for our clients who have tried doing their own bookkeeping in the past. So we've we've had clients and even team members who have fallen victim to AI, and believing that this tool could tell us where to categorize these expenses.
00;04;21;28 - 00;04;24;06
Danielle Hayden
So do you want to kind of walk people through what that looks like?
00;04;24;06 - 00;04;46;27
Kelsey Chester
Yes, I actually kind of giggled when I saw this, because I didn't even realize that the suggestions that QuickBooks was putting out was actually AI. And it's funny because I used to train team members on just bookkeeping in general, and the very first thing I would say is do not trust QuickBooks. When you're looking at the bank feed and it's telling you this is the vendor and this is where it should go, do not trust it.
00;04;46;27 - 00;05;04;17
Kelsey Chester
It is actually wrong more than it is right. They really should just take their time and not do suggestions. But I always, you know, direct them the correct way on how to see where the vendor is and where it goes. But the suggestion spit out by QuickBooks is honestly mostly incorrect. So I definitely had a laugh about this one.
00;05;04;17 - 00;05;22;28
Kelsey Chester
And the thing is, is, like I said before, it takes a level of expertise to use QuickBooks. So if you see that, you may think, oh wow, QuickBooks knows exactly what this is for except and it's funny, again, when I first started using QuickBooks online, I did not realize that you could not trust QuickBooks, the suggestions, and I did the same thing.
00;05;22;28 - 00;05;33;09
Kelsey Chester
And a client asked me and she's like, I did not spend $100 at Hooters. And it was actually Home Depot. And I was like, oh my gosh, QuickBooks suggested that to me.
00;05;33;11 - 00;05;49;18
Danielle Hayden
We all fallen victim to it. So if this is you and you're shaking your head and nodding along, I get you. We get you. You're not alone. However, let's learn from it. And, Kelsey, I appreciate the fact that you said, like, didn't even realize it, it was AI, and that was a first thing out of your mouth when training new team members is not to use it.
00;05;49;18 - 00;06;20;07
Danielle Hayden
Yeah. So when we work with our clients, and I hope that this is true with any bookkeeping firm--however, in our experience it is not--we take a really unique approach where we look at your chart of accounts, we look at your income statement, and we don't actually use the canned accounts out of QuickBooks. So when you set up a new QuickBooks file, it will give you some canned generic accounts, and then it'll take those accounts that it gave you out of its toolbox and use AI to map each of your transactions to their canned accounts.
00;06;20;09 - 00;06;42;27
Danielle Hayden
When we work with our clients, the most important first step we take in onboarding is to restructure the income statement so it's set up in a way that's actually going to make sense for clients moving forward. We want them to actually be able to use their financial statements. And I think of that confuses the AI even more within QuickBooks because it doesn't know how to map it to correct accounts.
00;06;42;27 - 00;06;52;01
Danielle Hayden
I mean, we have seen every horror story possible out there. Incorrect vendor names, incorrect accounts. We've seen transfers go to--
00;06;52;06 - 00;06;53;14
Kelsey Chester
Oh my gosh. Yeah.
00;06;53;17 - 00;07;15;11
Danielle Hayden
You know, transfers going to the wrong accounts which has a huge impact. And guys we're not just saying like, oh you're bookkeeping might be wrong. You're going to overpay in taxes or understate your expenses. One client, they had all of their revenue duplicated. Right. You're overpaying in taxes by either duplicating your revenue or not taking those expenses, because QuickBooks isn't putting them to the right category.
00;07;15;11 - 00;07;18;18
Danielle Hayden
So we're not being dramatic here. This is real money being left on the table.
00;07;18;21 - 00;07;43;08
Kelsey Chester
Another area in most accounting software is where AI is used as an expense categorization. So kind of a similar thing is the automated data entry that we were talking about earlier. But you can set rules within QuickBooks. It will use AI automation to guess what that expense is for and if it's set up that way in QuickBooks, which it automatically does, you have to change the setting manually.
00;07;43;08 - 00;08;01;14
Kelsey Chester
It will then auto add that expense to the rule that it thinks applies. So you actually never even see that a mistake has been made because it automatically did it for you. So again, it really takes a level of expertise to identify when AI has been using QuickBooks and have proper checks in place to to make sure that it is correct.
00;08;01;14 - 00;08;19;24
Danielle Hayden
Yeah, we definitely seen that, especially when we've taken over for other bookkeeping firms where they had some rules applied and we didn't know about it, and so we kept on adding it to an incorrect category. But it was automatically doing it, so we had to really know how to search for that. The other big one is the invoicing and how payments are being applied to invoicing.
00;08;19;24 - 00;08;43;00
Danielle Hayden
So again, this isn't one client we saw it with guys. This is several clients that we've seen this issue where if you're invoicing through QuickBooks, QuickBooks, when you have a deposit, will automatically match the deposit to the check, and more often than not, they're incorrect. And you can then send clients reminders for bills that they've already paid.
00;08;43;00 - 00;08;48;19
Danielle Hayden
And there's nothing worse than tarnishing your client relationship because you don't have your back end clean.
00;08;48;20 - 00;09;06;19
Kelsey Chester
On the flip side of that, you can also mark an invoice as paid when they actually haven't paid. So again, money left on the table. There's actually a few factors that can throw off the AI in QuickBooks as well. So when it comes to invoicing, if you invoice clients similar amounts, QuickBooks can be like, uh, I don't know all of them.
00;09;06;21 - 00;09;23;29
Kelsey Chester
Or if you make like a batch deposit for multiple invoices, again, QuickBooks will just try to randomly match three invoices that equal that amount, but it could be the wrong three, and if you don't know to check, it could really wreak havoc on your books and tarnish your relationship with clients. It's real life scenarios here.
00;09;23;29 - 00;09;44;01
Danielle Hayden
Yeah, so we're not saying this to scare you, but we want to bring your attention to it, right? We want there to be attention that in the midst of all of this buzz that we just pause to say, what can AI help us with? How can it save us time, money and energy? And we want to bring it to your attention that this is a place that we do not see it saving time or money, right?
00;09;44;01 - 00;09;59;03
Danielle Hayden
Because you're going to pay the money in taxes when you have those errors or to an accounting firm that is going to need to help you clean that up once it has gotten to a point where you realize that it's beyond your repair. So this is really just an awareness episode to counter all of the excitement in the industry.
00;09;59;03 - 00;10;07;05
Danielle Hayden
And I love it. I love having something new. I love a new challenge. I love that we're embracing this tool, but I think it's our responsibility to remind people.
00;10;07;05 - 00;10;12;03
Kelsey Chester
It can be a great thing, but where AI is today, this is not the space where you can fully trust it.
00;10;12;10 - 00;10;31;29
Danielle Hayden
Yeah, I want to go back to a few of the things that ChatGPT specifically told us that were issues, right? So we kind of debunked some of the benefits. I think the last one is financial analysis, and that AI can generate some reports and simple analysis, and that I will give QuickBooks. Right? Like, I do like the dashboard when you log in to QuickBooks.
00;10;31;29 - 00;10;42;21
Danielle Hayden
And there are some cool charts that if your bookkeeping is done correctly, when you log in, if everything is updated and everything is accurate, there could be some really cool charts on the home page of QuickBooks. Would you agree?
00;10;42;21 - 00;11;03;28
Kelsey Chester
I definitely do agree. The part where it's beneficial to have that human touch is for external factors that QuickBooks doesn't know about. So are you pivoting your business? Are you adding a revenue stream? Are you changing your marketing where it changes your projections all around? Adding team members? Any external factors that are not captured in the software it can't incorporate into the analysis.
00;11;03;28 - 00;11;05;07
Kelsey Chester
So that's a huge piece that you're missing.
00;11;05;07 - 00;11;22;17
Danielle Hayden
Yeah, and it can't tell you way to go! Like, I mean, I guess it can by showing your in the green or the red, but those pieces of interpretation, right? Like okay here's the numbers. Now, how do we actually use the numbers? So, something that has been really bothering me and I don't know if it bothers other people the way it bothers me, but the security part doesn't sit well with me.
00;11;22;17 - 00;11;44;00
Danielle Hayden
So as the robot is learning, we are all putting information into the robot, especially when we look at something like ChatGPT and it's using your proprietary information to learn, and we don't know who it’s going to spit that information back out to. And again, this is a level of awareness. If that doesn't bother you, especially in terms of your marketing, but then by all means continue to use it.
00;11;44;00 - 00;11;52;16
Danielle Hayden
I think where we definitely need to proceed with caution is putting any financial data or financial information into ChatGPT or any other AI functionality.
00;11;52;18 - 00;12;05;09
Kelsey Chester
That's a great point. We are not guaranteed what happens to the information that we input. AI is so new, we don't know how that can be used in the future. When it comes to technologies and the internet, I personally always choose to air on the side of caution.
00;12;05;13 - 00;12;26;26
Danielle Hayden
Yeah. You know, we talked a little bit about the complexity of needing to understand the income statement, understand how to customize the income statement and those accounts. I'm not sure about the cost consideration and learning curve of the adoption of AI. I think that it can be in this area pretty easy to like, if you wanted to just do your bookkeeping on the AI of QuickBooks,
00;12;26;26 - 00;12;44;17
Danielle Hayden
I actually don't think that--I think there could be a steep learning curve, but in terms of functionality and adoption, like you could just go in there and start using this AI to do your bookkeeping and just see where the chips may fall. Right? You know, I mean, I’m trying to play devil's advocate for ChatGPT and the answers it gave me.
00;12;44;20 - 00;12;48;09
Kelsey Chester
The chips may fall completely off the table, but yeah, yeah.
00;12;48;11 - 00;13;10;12
Danielle Hayden
Yeah. And lastly, it's the trust in human touch. So, you know, we love what we do. What we do here at Kickstart Accounting is so special that we get to help other business owners understand their numbers, be able to have an easy to read snapshot, and give our clients a level of trust that they know and understand that their bookkeeping is off their plate and they don't have to worry about it.
00;13;10;12 - 00;13;29;11
Danielle Hayden
And I don't think that there's that level of trust when we're doing that with AI in either bookkeeping or in our taxes. We don't have that level of trust in that tool the same way we can have a level of trust in people and of course, there is human error. However, we do our best to combat that. There's two people on every single one of our clients.
00;13;29;11 - 00;13;47;04
Danielle Hayden
We have a bookkeeper, an account manager. So the bookkeeper is doing all the day to day transactions. The account manager is doing the review, making sure everything is reconciled. So there is a human touch component to this, where we are ensuring the accuracy and our clients can have a sense of ease knowing that there's this level of quality assurance for them.
00;13;47;04 - 00;14;05;17
Kelsey Chester
That's right. We definitely have two sets of eyes on every set of financials before they go out. In addition to that, we have quarterly reviews, so full reviews of all of our clients to make sure that we have proper quality assurance in place. And we always say that anyone can send an Excel file of financial statements, okay. Anyone can give you a financial statement.
00;14;05;17 - 00;14;30;28
Kelsey Chester
Even QuickBooks itself could process all of your transactions, correct or not? Heavily debatable. But what I say is we always go a step further in everything that we do. You know, can you have a meeting with ChatGPT? You can have meeting with folks to go over, to review your financial statements together? No you can not, you know? Having your money team is extremely important and having a dedicated team to go to that is familiar with you, familiar with your business? That AI could never replace.
00;14;30;28 - 00;14;53;15
Danielle Hayden
Yeah. Our snapshot I think is really a piece to hone in on that. Anybody can download financial statements and send you that Excel file. AI really, technically can. I believe that there's a function in QuickBooks where you can have it automatically send you your income statement at the end of each week. Now, it may or may not be right, depending on what transactions were accepted or what wasn't accepted if AI did it correctly or not.
00;14;53;15 - 00;15;16;03
Danielle Hayden
But then there's no interpretation, and so the step further is the snapshot that we provide for our clients, walking them through with some charts and a really easy to read, digestible way that we're not going to be able to get from AI. So I think in summary, right, like, I don't want to beat a dead horse that AI is not the answer here, but I hope that we have given you something to think about, especially if you're somebody who's doing your bookkeeping on your own.
00;15;16;03 - 00;15;21;11
Danielle Hayden
I want to give you something to think about before considering QuickBooks next suggestion.
00;15;21;11 - 00;15;31;08
Kelsey Chester
I think that's really who this episode is for, is those of you doing it on your own and unaware of the implications that the AI within QuickBooks, or whoever you're accounting is in, can have on your books.
00;15;31;10 - 00;15;49;29
Danielle Hayden
Well, Kelsey, thank you so much for being here. If somebody wants to--you know, if you are doing your DIY bookkeeping right now and this has you on red alert right now, I encourage you to go to Kickstart Accounting Inc.com. There'll be a book a call link in the right-hand side. You can book a call where you'll talk to Kelsey, Aubrey or myself.
00;15;49;29 - 00;15;56;03
Danielle Hayden
We can go through your specific situation, talk about how we can help you get this off of your plate, and make sure that this is being done correctly.
00;15;56;06 - 00;16;00;16
Kelsey Chester
We'll see you next time. Thanks, everybody.
00;16;00;19 - 00;17;06;21
Danielle Hayden
I hope you enjoyed today's episode of Business by the Books. Don't forget to hit like and subscribe! This is the number one way we can help other entrepreneurs find this podcast, because here at Kickstart Accounting Inc., it is our mission to help entrepreneurs understand their numbers, get access to this information and grow and thrive in their business. So please help me, help other entrepreneurs understand their numbers so they can finally grow and thrive.