“When you say artificial intelligence, people think of Terminator. Of Robots” said Gary Turner, the UK’s managing director of Xero at last week’s roadshow.
Here at EST, we have a lot of clients to whom technology and software is at the heart of their business. However, even if that isn’t the case for you, I’m sure you’ve seen the disruption that technology is having on various industries right now. We all know that Uber is the largest taxi company but owns no taxis and that Airbnb is the largest accommodation provider but owns no hotels and so on.
But how does that relate to you and how you manage your business’ financial information?
Well it was only around ten short years ago that the bank reconciliation was a hand-written job undertaken by your accountant or bookkeeper on an A3 pad. Now you do this job yourself, on your mobile phone, with transactions which are automatically pushed into the software by your bank.
And it was only in 2010 that Michael Wood bought a company called Receipt Farm and decided that there must be an easier way to record your business expenses. The same year that a software engineer called Vaughan Rowsell decided to prove that you could have a POS system entirely in the cloud. Six years on and seeing someone take a photo of an expense using the Receipt Bank app on their mobile phone or a shop using Vend installed on an iPad which is being used as a till, isn’t perceived as science fiction but instead pretty much the norm.
With our industry changing at a rapid rate, it was interesting to hear at the Xero roadshow how artificial intelligence will be the next stage in automating your bookkeeping.
How often have you sat down to do your bookkeeping and come across an expense such as website hosting and not known where to categorise it? Is it I.T and Software as your website is an I.T. type thing after all? Or is it Advertising as your website is an integral part of your marketing? Or is it Telephone and Internet as it is the hosting bit that we’re talking about so that’s a little bit internety?
If this is you, then don’t worry. Xero
However, the fact that Xero can tell us how many items are recoded shows the level of data that they have available. It’s this data that they want to use to help you out even further. Xero knows that BT is a telephone expense because thousands of businesses code it as such every single day. The same can be said for many more expenses. So why should you have to tell Xero that BT is a telephone expense when it already knows?
That is where artificial intelligence will come in, as Xero plans on using this knowledge to remove the chart of accounts. This means that you will only have to enter that the expense was £50 to B&Q on 1 November 2016. Xero will know that this is more likely than not to be a Repairs and Renewal and automatically code it for you.
So all you need to do is enter the date, amount and supplier and Xero will do the rest. Just imagine how much time and hassle will that save you.
However, you may be thinking that this is great. With this artificial intelligence coding your bank reconciliation for you there will no longer be a need for a bookkeeper or even for your accountant. Let the robots do it.
In fact, Xero did a survey that found that 59% of business owners thought that they wouldn’t need an accountant by 2026. This may surprise you, but we agree. But just like Uber still needs taxi’s and taxi drivers and Airbnb still needs hotels, there will always be a need for accountants, but it’s true that our role and our place in the market is changing considerably. Instead of dealing with paper, we now deal with data.
But that’s a good thing because it means we can spend more time assisting and offering advice. It’s why at EST we have invested in a HR department and a commercial finance department. We are here to help you with as much as we can. And we promise to never charge you extra so we can hand write your bank reconciliation.
Here at EST we like table tennis. So much in fact, that we have a full size table tennis table in our office. It’s a chance for the team to loosen up and let off a little steam. For most of us, it’s just a bit of fun. Occasionally it does become competitive and we even keep score and have our own EST League leader board.
Could this be a similar story to yours when you first became your own boss? Maybe that was a hobby, a passion or a calling. Something that you wanted to do so much, you decided to take the plunge and go into business. But then, without realising it, you too got a leader board and suddenly things started to get a little more serious…
When you’re an employee, things are a little easier. You do some work during the month and you get paid at the end of the month. You do that same work for a year and maybe you’ll get a cost of living pay rise at the end of it. You do a little extra and perhaps you’ll get a bigger pay rise or a promotion.
Running your own business isn’t quite like that. Rewards are not so easily come by as now you have a leader board. Reach the top and amazing things can happen but fall to the bottom maybe its game over for you.
Just like any competition, sporting or otherwise, your competitors are not standing still. You may win the league one year but you’ll have to do more to win it again the following year because now your competitors know the standard. They know your strengths, your tactics and your weaknesses. In business, staying still is not an option. As the old saying goes, if you’re not moving forwards you’re going backwards.
So what can you learn from our EST Table Tennis leader board?
The two serious contenders for the coveted EST top spot are Barry and Joel. Once you have identified which one you and your business are, you can take the steps to set up your training plan to work towards your own leader board top spot.
“New Boy” Joel
Joel was a surprise to Barry’s comfortable reign. But like any enthusiastic start-up, the climb has been both a learning curve and at times, a little erratic. Joel has had to build up a knowledge of his competitors from scratch and often doing so whilst playing the game. This is something that requires a bit of pre-planning but also quick thinking, fast reflexes and luck.
If your business is a Joel, then you will want spend time preparing a cash flow forecast. Try to plot out as best as you can when you think the money will come in and whether you can afford the money that is due to go out. Assuming that you are using Xero, Float is a great little add on to help with this. If time is tight, it will create a forecast for you using an average of your last
three months figures, or you can manually enter a budget to follow. Then, as you add your sales invoices and purchases into Xero, Float automatically updates itself so you can see if or even when, money might run out.
We highly recommend taking the time to look at future cash flow. It gives you time to plan so you can go out and get more sales or look into reducing costs before the problem arises.
“Safe Hands” Barry
A constant at the top of the leader board is our Barry. Like a business that has left the start-up phase, Barry has weathered the storm. He knows how to play the game, he knows his competitors and he has the support of the crowd.
If your business is a Barry, you’re probably achieving your initial goals. Confidence has replaced that start-up nervousness and you feel comfortable. But the key is to control that confidence because every day, every month, every year, there is a Joel. The trick to being a good Barry is to keep improving.
Now that you’ve become Barry, your goal is to do enough to keep yourself at the top of the leader board. So it’s not as much about dealing with the erratic but more about fine tuning; monitoring your business performance and continuing to do what you do that little bit better each time. The Budget Manager in Xero is a great tool for this. You can set up a series of budgets, so one could filled with stretch goals and aspirations where as one could be a little more realistic. Either way, setting targets and working towards achieving them is the only way that you’ll stay on top of the game.
Stay on top of your game
So we all want to be more Barry. But Barry was Joel once and maybe Joel will be Barry tomorrow. The real question may be, which one is your business at the moment? Once you know, keep an eye on that cash flow, work on your profitability and don’t let expenditure run away from you. It’s very easy to create a bloated, slow and declining business but it’s the lean, fit and healthy ones that will win the awards.