Li Fitzmaurice, the co-founder and marketing manager of EzzyBills, strongly argues that the code-free accounting is not coming soon. Instead, the trend in accounting will be ‘more’ instead of ‘less.’ Accounting professionals will need to provide more business intelligence to their clients by including detailed transactions.
“Technologies have transformed accounting in many ways. ‘Technology’ used to mean machinery. Now, for accounting professionals, ‘technology’ means paper-free accounting, cloud accounting, invoice and expense data automation, all-connected accounting and as some people predict, code-free accounting.” - Dr Li Fitzmaurice
What is code-free accounting?
First, what are codes? Codes are the general ledger (GL) codes in a narrow sense.
GL Codes are used in accounting to track business tractions by groups.
The grouping serves multiple purposes, e.g. for tax return, for producing accounting reports, for tracking expense types or product/service line performance, for tracking performance of different office locations, or to answer many other important business questions.
Generally, each group is assigned with a code name and a digital number. The code name tends to be a common set of terminologies, such as ‘Cost of Goods Sold,’ so that accounting professionals can talk in the same language. Digital numbers, precise and unique, are used along with code names.
Code-free accounting will have no GL codes. This is on the surface. Behind it is perhaps a single invisible code base to fit for all businesses.
In a broader sense, code-free accounting may mean the disappearance of many other accounting codes such as tracking codes, item codes, job numbers etc. In code-free accounting, the system will use Artificial Intelligence (AI) to group transactions implicitly, just the way you wish.
Will code-free accounting come to us soon?
No, it will not.
It is not that we doubt AI technologies; the complex nature of businesses and tax regulations make it difficult for accounting to be precise without account codes.
Accountants tend to use a similar set of GL codes for all businesses, but with variations for each business. This reflect that all businesses are similar, yet different in some ways, such as in different industries, or businesses with unique circumstances.
Codes in accounting are not going to disappear; we cannot ignore the natural variations in businesses and force them through a single code base.
We are using more codes in accounting than ever before. Xero has account codes, tracking codes, project codes, and inventory codes. On top of all that, tax codes! We are creating more codes to track transactions from more angles than ever before.
Codes may often appear in accounting software as word phrases, not a set of meaningless numbers and letters. Yet, they are still codes, just longer, much descriptive ones.
“When I was a little girl, the government said that everything would be automated in the near future: push a button and food will be served at your table. Beautiful!
I was told by the government that this would happen by the year 2000. The year 2000 came and went and still no such magic button exists. Deep down, I believe code free accounting is just another ‘button pushed for dinner,’ another myth that will not happen.” - Dr Li Fitzmaurice
AI-enabled accounting software can automate the coding processes. EzzyBills is successfully Doing Just So
The GL coding process exhibits patterns because of repetition. This is what makes it possible to automate. At EzzyBills, we use machine learning to capture patterns and automate the coding for you. EzzyBills learns from you and mimics what you do. The root for EzzyBills’ success is the automatic capture of full details (in which lie the coding patterns) from invoices and receipts.
When using EzzyBills, your Xero data will contain numerous details, with the full flavour, colour and shades of your business. See an example in Figure 1.
Many other software providers are also trying to achieve the same level of coding automation, without success. Their key obstacle is the lack of data - transactional data with great details.
EzzyBills has won the hearts of businesses and accounting professionals through its cutting-edge technology that captures line details from invoices and receipts.
Businesses will increasingly ask their accountants to get more information out of accounting.
To get out more, you will need to put more into the system
To gather more intelligence from accounting, more transactional details are required as an input.
• Line details in bills and sales can tell a fresh food store how much profit they are receiving from different food categories (see an example in Figure 1).
• Good stock management can be best achieved by tracking sale and purchase details.
• Line details are required to run a price check.
Technology and AI-aided automation has made accounting services more productive. Businesses are aware of this, and they will demand higher-level services, such as more business intelligence provided as a part of accounting. Business expenses on accounting will remain steady in the future; more money in accounting will be spent on the details-fuelled advisory services, and less on the traditional service of data entry, number crunching, compliance and bank reconciliation.
Accounting professionals shall seize the golden opportunity and be part of the change that is happening.
“The earliest users of EzzyBills were primarily individual businesses. They searched and found EzzyBills. Then they informed their accountants about EzzyBills. Now, it is the other way around. EzzyBills’ accountant and bookkeeper partners are now the main driver of our growth. Our partners see EzzyBills as a tool for them to provide more substantial accounting services to their clients. They realise that the future of accounting is in the details.” - Dr Li Fitzmaurice