Philippe was the head of the IT department in a prominent accountancy company when he thought up the concept of his automated record keeping platform TOCO. In this article, he shares his views on the future of accounting and the role AI will play in it.
Let’s begin at pure accounting. Modern accounting systems are becoming smarter. After booking an invoice by the same supplier 3 times, let’s say, they know what is expected to be done with future invoices and they suggest how to book them. The accountant just needs to validate the suggestion.
Even better would be the digital invoice that books itself, and the digital invoice not yet part of an algorithm that flags itself as ‘to be checked’. We’re not there yet, but the data is available. Only, what I call ‘the data democracy’ is not yet at full speed. It’s a term I coined for the cross use of data between the entrepreneur, their accountant and both of their softwares.
Personally, I don’t use the term AI lightly. In my opinion, it’s been overused and it creates high expectations for little leverage. Machine learning is more appropriate for this sector. The types of software recognize patterns, reproduce them and offer solutions or predictions to match.
Both the accountant and the entrepreneur reap the benefits of machine learning. Take cash planning for the entrepreneur, for instance. As soon as they link their bank account to their financial records through PSD2, the machine starts working. Their current bank balance is known, the pattern of how smoothly customers pay is as well, and the accounting system teaches us what fixed overheads or VAT the entrepreneur owes. You can learn everything from one bank account within the system.
A simple example to show how data can really help the entrepreneur. If the data is present, again, it starts with the delivery of financial records by the entrepreneur. Too often I see entrepreneurs around me controlling their finances based on bank balance alone. Pure lunacy.
An accountant using machine learning can quickly detect anomalies. Whomever kept accounts at some point knows that finding and fixing mistakes can be time consuming. But it’s more than that. An accountant using machine learning can scout trends throughout their customer base. About the sector in which they are active, their region or fiscal identity. The first accountant to implement this is the first truly on the way to delivering accurate and quick advice.
Do you expect AI and possible automation to lower or raise accounting system prices for SME’s?
A very good question. Digitising is expensive for accountants, while the customer expects everything to take care of itself, become free or cost less. There is no way to maintain that imbalance.
Compare it to the banks, where you used to mail a money transfer form through the mail box at your bank and a bank teller would carry it out for you for free. Today, you do it yourself online. Only now, you do pay for the service. Digitization is of course a way to make processes simpler and cheaper, but we need to maintain a certain balance.
An unusual phenomenon in accountancy is charging for digitization. Many accountants handle it rigidly and publicize literally any form of digitization on the client’s invoice. Unusual. When I visit the hairdresser, they don’t mention how many times they pressed the shampoo pump or how long it took the dryer to dry the towel used on me.
I’m painting a caricature, of course. But I don’t believe accountants should continue this practice. Transparency is important, don’t get me wrong, but as an entrepreneur I want service. And if the accountant delivers great service and an equally great experience, that’s worth a lot to me. Just put your price on the invoice and be done with it.
The important thing is that I, as a customer and entrepreneur, enjoy the benefits of all of the accountant’s tools. The entrepreneur should be the first to digitize, which will truly accelerate the accountant’s way of working. At TOCO we have a mantra for accountants: give your clients what they need and you will get what you want.
Which aspect of financial record keeping do you think will gain the entrepreneur the most when automated?
Go digital now! Go for it yourself and stop waiting. Take the initiative. Think about my example of mailing money transfers at the bank’s mailbox. We stopped doing that in 1999, but we’re still treating our accountants that same way in 2020. Stop that and deliver documents digitally.
Optimize your process and talk to your accountant, instigate the change yourself. Ask yourself why you have a second set of books. Not a secret Belgian-type second set of records (laughs) as you might suspect. But why are you running a second set of books to, for instance, follow up on payments? Why are you keeping checklists?
As an entrepreneur you have access to a lot of data. You have a client list, you make proposals, order forms, you deliver, write invoices, receive payments, have insurances, deeds… but all of that data is spread over several different systems or, worse, in a binder in your file cabinet or a folder on your pc. I call them silos. Vertical buckets with a lot of valuable data that hasn’t been linked.
What entrepreneur, for instance, knows by heart when their insurance policy needs to be refreshed? Digitize these documents. You will know when exactly they need to be renewed, how much needs to be paid and why.