Damian was a guest on the Consulting Rainmakers Podcast recently with host Mikulas Zach where they discussed whether it is a good idea for AI to do your bookkeeping!  Watch the full episode on YouTube or read below for some insights from Damian. 

If you spend any time in accounting circles at the moment, you will have heard the excitement about connecting AI tools such as Claude directly to Xero or QuickBooks. The promise is an appealing one: plug in your accounts, ask a few questions, and receive instant insights about your business without ever needing to speak to an accountant again. I understand the appeal, and I am genuinely not against AI, but I do want to share a story that might make you pause before you hand over the keys.

What happens when the books are behind?

A business owner came to me a while ago with a handful of problems they could not quite put their finger on. When I opened their accounts, the books showed several hundred thousand pounds sitting in the bank. I asked whether that sounded right, and they looked at me, a little puzzled, and said they had just checked their bank statement and there was about £4,000 in it.

The gap was simple, if alarming. Three months of bank transactions had never been posted into the accounting system, so the books were telling a story that had quietly stopped being true. This is far more common than you might think. I regularly see six, eight or even twelve weeks of transactions sitting unposted, which means the owner cannot see their real sales, their real costs, or the fact that they may have been running at a loss through a quieter season.

What would AI tell you about those same books?

Now imagine that same business had connected an AI tool to its accounting software and asked for advice. It would have looked at hundreds of thousands in the bank and, quite reasonably, concluded that things were going brilliantly. It might even have encouraged a new marketing campaign or a fresh hire.

The AI is not being foolish here. It is simply working with the information it has been given, and it has no way of knowing that three months of reality are missing. An experienced accountant, on the other hand, would spot within about five minutes that the bank balance does not match the statement and that a pile of transactions is waiting to be posted. That judgement, the ability to notice what looks wrong, is the part that cannot yet be automated.

What else do the books often get wrong?

Unposted bank transactions are only one example. I often find loans that have never been entered into the accounts at all, sitting on paper on someone's desk, as well as bank accounts that are missing entirely from the system or only partly reconciled. Any of these can leave your figures significantly wrong, and an AI reading those figures will give you confident, polished insights built on very shaky ground. At best that slows your business down while you correct the false steps, and at worst it can do real damage.

So should small businesses use AI in their finances at all?

Yes, I think AI will find its way into almost every business over time, most likely as a feature inside the software you already use, quietly streamlining and automating tasks you never imagined it could take on. The key is to tread carefully. Start with the simpler jobs, see what it does well and where it falls short, and build up from there, rather than switching it on across your whole finance function and hoping for the best.

Most importantly, make sure the foundations are in place first. AI can only be as good as the books it reads, so clean, up-to-date bookkeeping is not an old-fashioned extra in the age of AI. It is the very thing that makes AI worth having.

Not sure whether your books are as up to date as you think? Our free Bookkeeping 101 guide walks you through the essentials that keep your figures honest, so any tool you use, AI included, is working from the truth. Download Bookkeeping 101 → 

 

Frequently asked questions

Can AI replace my accountant? Not yet. AI can produce reports and summaries quickly, but it relies entirely on the accuracy of your books and cannot reliably spot missing transactions, unrecorded loans or unreconciled accounts the way an experienced accountant can.

Is it safe to connect AI to Xero or QuickBooks? It can be useful, provided your bookkeeping is current and reconciled. Start with simple tasks, check the outputs against what you know, and build up gradually.

Why does my bank balance in Xero not match my bank statement? Usually because transactions have not been posted or reconciled. Until that is fixed, every report drawn from the system, including any AI insight, will be misleading.

If you would like a second pair of experienced eyes on your numbers before you trust them to anyone, or anything, Book a Discovery Call with Damian.