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Xero wrote about their AI achievements using machine learning to predict the name and account code for your transactions when performing a bank reconciliation. Bank feeds have been a constant and regular theme in Xero’s marketing and this reinforces how they are using technology to reduce the time it takes to reconcile.
It makes sense that a bank like NAB or CBA buys MYOB because if you could automatically make sure that your finances in your MYOB or Xero software reflected exactly what your bank statements say you’d eliminate half the work that junior bookkeepers do.
When I explored this innovation list I couldn’t find Xero anywhere. What I did notice was the Coles made it on the list for compostable coffee capsules.
I then realised that there appears to be a main winners list and then a list for these different categories.
- Top innovator in agriculture, mining & utility,
- Top innovator in banking, superannuation and financial services,
- Top innovator in government, education and not-for-profit,
- Top innovator in health industries,
- Top innovator in manufacturing and consumer goods,
- Top innovator in media & marketing,
- Top innovator in property, construction & transport,
- Top innovator in professional services,
- Top innovator in retail, hospitality, tourism & entertainment,
- Top innovator in technology
I ended up finding them listed under Telstra in the Top Innovator in Technology category.
Also on that list was Weel (which was called DiviPay) and we wrote about previously and Xref (an Australian public company that has innovative Exit Survey technology. Weel is an expense management platform that plugs into Xero as an integration to help businesses manage their expenses – kind of ties in nicely with bookkeeping, don’t you think?
Machine Learning in Xero Bank Reconciliation
Reconciliation is a Beginners Certificate in Xero subject and is normally performed at the end of each month. The process of reconciliation normally involves finding stray transactions that haven’t yet been coded into your MYOB or Xero Accounting software. Sometimes they are automatic payments or payments made out of petty cash or expenses from a staff member and the bank reconciliation process often involves finding the source document (receipt) to make sure you have the current supplier (who) and account code (what).
Xero explains how they use machine learning to improve the process:
In a nutshell, our system is going to suggest the who and the what of your transaction, with the ‘who’ being the contact, and the ‘what’ being the account code. All you’ll have to do is click ‘OK’ to reconcile the transaction fully, and it’ll also be coded to an account from your chart of accounts. These predictions will be emphasised in italics to help you more easily distinguish between them and regular suggestions, which are based on your own past reconciled transactions.Xero website
What I found scariest about this article is how Xero’s machine learning algorithm gets information not just from YOUR business accounting file but the “collective wisdom of the whole Xero community”.
Although Xero are “pulling from broader logic” you will only see information that relates to YOUR Xero Accounting file.
When you understand how cloud software works you realise that company insiders can access your confidential company information and this “internet connectivity” scared a lot of accountants when cloud accounting first started appearing. Some accountants I spoke to preferred housing (or hosting, or storing) client accounting files on their own internal servers – can you possibly believe that today?!
Interestingly the Xero article I read mentioned how important data security is to Xero and pointed me to this link: https://www.xero.com/au/responsible-data-use-at-xero.html
Beginners Certificate in Xero Training Course
The Beginners Certificate in Xero Training Course includes end of month activities like bank reconciliation and reporting as well as daily transaction tasks like invoicing, purchases and payments.
The course uses case studies from real world scenarios that have been added to and improved for close to 30 years. This course involves hands-on data entry so you get practice in using the software to perform the junior bookkeeping work you would while working at an employer.
Jobseekers, Bookkeepers and Business owners have all enrolled into our Xero Training Courses and find them very valuable and useful.