Accounting for Innovation

From Transactions to Transformation: How AI is Changing Bookkeeping and CAS

• Jody Padar & Matt Tait • Season 4 • Episode 2

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Welcome to the Accounting for Innovation podcast. In this episode, Jody Padar and Matt Tait explore the revolutionary impact of AI on bookkeeping and Client Accounting Services (CAS). 

Learn how AI tools are transforming transactional work, categorization, and reconciliation, reducing data entry and significantly scaling CAS without additional headcount. Listen to this discussion about the evolution of AI in accounting tech stacks, highlighting key tools like QuickBooks, Puzzle, and Ramp, and how these integrations enhance operations. Discover how AI is enabling accountants to become better advisors and shifting industry paradigms. Don't miss this insightful discussion that could change how you approach your accounting practice.

Sponsored by Syscloud (@SysCloud)
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This episode is brought to you by Decimal and the Radical CPA.

Welcome to the Accounting for Innovation podcast, where we explore cutting edge strategies and insights into the world of accounting and finance. Presented by Decimal and the Radical CPA, each episode dives deep into industry trends. Whether you're a seasoned professional or a budding entrepreneur, join us as we unpack key concepts and share practical tips to drive success.

Jody Padar:

Welcome to Accounting for Innovation, and I'm excited.'cause today we're gonna be talking about AI for bookkeeping and cas or client accounting services or client advisory services. I don't know what they're calling it these days, but anyways, um, you know, AI is here. And it's helping firms automate transactional work. It's helping to eliminate data entry and scale client accounting services without additional headcount. And I think that's huge for where client accounting services and kind of bookkeeping can go. And in this episode, we're really gonna focus on the tools that deliver categorization, um, reconciliation and communication. And the funny thing is, is I've been talking about AI and bookkeeping. For over seven years now, because I was the original like person who was involved in bot keeper way back when and. So that was like 2018 that that was talking about, and then it was cutting edge. It was really bleeding edge at that time. And oh yeah, all the tools have come so far since then across the board, whether they be embedded in things like QuickBooks or Zero. Or their new tools. And so I'm really excited that we're gonna talk about that. So with that, um, I'm gonna hand it over to Matt and just ask Matt about his thoughts on AI and bookkeeping in CAS in general, like over the last five years.'cause I know like you were one of the early adopters as well.

Matt Tait:

Yeah, and I think, you know, for us, we, we started decimal in January of 2020, and from the very beginning we have been implementing. The bleeding edge, the cutting edge, whatever, closest to the tip of that spear, uh, in technology. And, and now you're starting to see more and more of that becoming mainstream. And I think this is the best time ever to start a bookkeeping or cast practice. I think the tools make it so that you can not only accomplish the work in really great economical ways. But you can truly start to turn that bookkeeper and that accountant into the advisor. And I think this is a, a really big turning point for the industry. But the way I think about it, and Jody, this is where I'd like to start our conversation. If you are looking at what the foundation of a client relationship in bookkeeping, and it starts with the ledger. And the ledger is where the end point of all of these operational processes, it's where you pull a lot of the reporting from. But to me, the ledger is that starting point and, and you and I both know that I'm a huge fan of QuickBooks. We use QuickBooks with six, 700 clients. They are the market winner. They've been doing some amazing things with ai, but I'm also a fan of these new AI native ledgers. And puzzle is the one that, that we've had a lot of experience with, but there's also the Ritz of the worlds. There's digits, there's Everest, there are a ton out there. How do you kind of look at the ledger space? As a starting point for this conversation around cast and bookkeeping?

Jody Padar:

Well, I think it goes back to kind of what we touched on last episode about unstructured data, turning unstructured data into structured data. And when you think about the opportunity of what. Pieces of data you could pull off of anything In a new, yeah, in a new gl. That's where the opportunity is. Again, you're not locked in to just a description and just an amount, right? Like you, you really have the ability to get all of that data somewhere in a database, and then that means what can you sort through it from? What can you. What can you do with that data after the fact? And I think that's where kind of some of the exceptions to the rules come in. Where and when I say that meaning. You know, um, right now with QuickBooks, you have to put a tool on top of it to kind of sort through the transactions to pull the exceptions. Right?

Matt Tait:

Right.

Jody Padar:

A a and when you look at some of these AI native ledgers, those tools are already built in the foundation. And I think that's, that, that's where like the cool stuff happens, right? It's where. Where is the bookkeeping gonna come? Where instead of categorizing 400 transactions, you're only categorizing 10. And now let's put another tool on top of that, that of those 10, it's like double checking those 10 and really popping out only the three or four more. Right? So I think it's kind of in the, it's in the do and the review work. Oh yeah. And that's where it gets that, that's where it gets exciting because like I'll say V one of AI was like, okay, let's just categorize the last, let's say 20 transactions of the 400. And now when you're looking at like the, the evolution of the tools now, it's like, well, gee can like. If you have all this other context that it can see, can you get it down to three or four transactions instead of 20? I don't know, but I think that's where it's going, right? And, and then all the reporting that comes right out of it, right? Like that you don't have to tag things, uh, because the, I mean. Yes, they get tagged, but they get tagged, tagged automagically as opposed to you having to put that tag on it so that then when you wanna go pull the report, you have to go make sure that everything was tagged correctly. What happens in these AI native ledgers is the tags are automatically like created. And I, again, I think that's, that's stuff that people don't understand until they've actually been in an AI native ledger and you're like, wow, I don't have to put in all this extra detail.'cause it just comes with it.

Matt Tait:

Well, it pulls it in and and that's where when you, when you get, and we can branch out from the ledger too, when you have an AI tool integrated with an AI tool, great example is we've got clients that are on puzzle and it's integrated with ramp. Then all of a sudden you have all of this information that RAMP has in paying the bills and categorizing expenses that is pulled into puzzle. And it can pull it into QuickBooks too. But what puzzle does is it provides extra context and information. Mm-hmm. Whereas in QuickBooks, it just pulls it in and it puts it there. Bigger benefit than not having it. And so that's where QuickBooks is really good, but with, uh, a puzzle, it can further contextualize the information. And so what it's doing is it's doing a lot of the work that we've all had to do in the past. Well, not me, I'm, I'm incapable, but you've done it. But to me, this is where AI is truly helping. The thing that I find is I. Really important here is the understanding that the AI can be 80% accurate, maybe 85, sometimes 90, depending on the client, but it tells you where it's not. And so it gives you the idea of, Hey, I know I'm right on these. Eight out of 10, I need you to look at these two. So instead of you as a bookkeeper or accountant having to look at 10, you just have to look at two. If you think about that, you now can handle five more clients because if you have the time and capacity to handle 10 looks, all of a sudden you only need two per client. You have five clients. And this is a big change in capacity and also the thinking through of where people are working and how they can focus on relationships versus the execution and output of work. And that's another thing that AI is doing, and these ledgers and these integration with other AI tools is giving us a lot of that ability.

Jody Padar:

Well, and I think you have to come back to the fact that. We as accountants have to get comfortable with accepting the fact that the computer is getting it right. And I think a lot of times, um, you were so quick to judge the AI and say the AI did it wrong. Right? Well, guess what, Sally sitting in the cube next to you could have done it wrong as well. Right. And how many times do yes. Entries get missed or buried somewhere, and they're never caught until audit, or not even audit like two years later, you're just going to look up something and you're like, why is this transaction sitting here? And you can't tell me as an accountant. Well, I mean, I know you're not an accountant, but as an accountant to our listeners out there who haven't found a transaction, buried in some gia uh, buried in some ledger somewhere, and they think, oh, how did that end up here? I reviewed that file and I missed it. Yet they're so quick to like, like dog on the AI for being wrong when the AI is still probably 95% more accurate than a human who would do that same work. And I think that's a mindset shift that we have to get past. Well, and let me, let me jump

Matt Tait:

in here because I mentioned earlier the AI tells you when it's wrong. Do you know what people are really bad at?

Jody Padar:

Telling you when

Matt Tait:

they're wrong and like that. Even if, if AI is equally as accurate as the people that work for me, it at least will tell me when it's wrong, which makes it easier. You don't have to hunt for the errors as much. Whereas today you spend a lot of time hunting on errors, hunting for errors, and contextualizing the problems.

Jody Padar:

Right. So, so I, I think that's a mindset shift. And then I think the other mindset shift we have to get through is, okay, if AI is gonna do this with all of my clients, and I'm gonna have four hours back in my day, what am I gonna do with that time? And am I capable of being an advisor? And I, I wanna say that because if you are not comfortable doing it, then. As much as we tell you, automation's gonna help you, whatever, a lot of people might think, oh, but I don't know how to do that. Or, oh, I can't do that. And I would argue that AI is the tools that's gonna help you to learn how to be a better advisor. I. Faster now. So if you didn't have time or the partners in your firm don't teach you, or the, the pretty cool thing about AI is now there's tools to help us to learn how to be a better advisor faster and to learn how to make a lot of those connections that maybe you had to have years of experience to get to before, but now by using ai. It'll give you the context and you'll be able to learn it faster to get to advisory faster. Because I know from a mindset perspective, there are a ton of people out there who are thinking, well, great. If I'm not gonna do transactions, then what am I gonna do? And I, I don't know how to be an advisor. Right? And I think that's where we have to step back and say, not only is the AI gonna help with the transactions, but it's gonna help you learn how to be a better advisor faster.

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Matt Tait:

So. I'm interested, Jody, if, if somebody listening to this is thinking, gosh, I'd like to be an advisor. I'm not sure how to do it. Tactically, walk them through steps they can take to feel comfortable, maybe to learn and upskill themselves to becoming that advisor within a cast practice.

Jody Padar:

Start thinking about using either chat GPT or one of the other large models as a strategic thinking partner. Start thinking about it as your business best friend, and start asking it those kinds of questions. And you know, depending on what version you have, and I would say if you have a paid version, you're. You're okay with uploading some, and it depends on where you are in your firm too.'cause I know there are some firms who still, like, they're not allowing it at all, but you know, right. Ask it questions about a p and l statement. Right. Like you can give it a comparative p and l statement and you can start just asking questions about it. And if you don't know the question to ask about it, the best question to ask is. To say, if I were a CPA advisor, what would the, what should I be looking at on this, um, p and l and balance sheet, and what should I bring that to my client? What should I bring that to my client? Right? And so I think what's cool about it is, is if you were always afraid to ask those questions to your, to the partner or the person in your firm, you don't like. You don't have to feel stupid with ai. You can just ask it all these random questions. Right? And like, you, you don't have have to worry about not knowing,

Matt Tait:

right? I, I think that that is, that kinda curiosity, accountants can be really good at being curious. Being curious at using these new tools at testing their capabilities, I think is ultimately where people are gonna become more comfortable, learn and then start using them on a more regular basis.

Jody Padar:

Well, right. And the thing is, is like, um, if you don't know where to start, I love asking AI where to start too. Like you could always just say, Hey, like, oh yeah, I wanna upskill myself and become a better accounting advisor. Where do you suggest I start? And like, it'll, it'll give you some suggest. Yeah, just listen suggestions. So, so I think that's. That's the thing is like, um, a lot of people are, haven't really gone into play because they're afraid they're gonna break something or they don't know. And that's where you just start learning. And that's why I really like saying talk to ai like it's your business best friend. Don't think you have to learn how to prompt. Just start talking to it. See what it gives you, and then it'll help you allow it to become a better strategic partner of yours. And then you'll learn more advisory skill sets. AI is gonna do most of the transaction work. I mean, like, it truly is.

Matt Tait:

It will eventually. So,

Jody Padar:

so how do you stay relevant? And that's by really, you know, changing your mindset and starting to learn the other tools to keep you there.

Matt Tait:

I agree. And, and I think too, it's, it's re-looking at the technology that you put in place for your clients and. As you do that, putting in the tools that also provide the ability to use AI better. You know, the integrations, the tech stack that you put in place either makes that work more capable for AI or harder. Just like it does easier, harder for people. AI is, is basically the same thing. If it has no access to data, it can't do anything with data. And so looking at putting together a tech stack and what we use at Decimal, our preferred tech stack is QuickBooks or Puzzle for a Ledger. Probably add re later this summer. Then Bill pay is ramp or bill.com expenses or ramp and Brex payroll is gusto and rippling. These are the technologies that we've really found integrate well and provide a good foundation for then layering AI on top, or they're already using AI in a way that is making the work better.

Jody Padar:

Yeah. And, and I think the other piece of it is, is like, I think there are still people who are overwhelmed with Tech Stack in general, right? Like, they don't know where to start. They don't know how to begin. And I think the idea is, is start just, well first of all, just start, but then the idea is, is like you don't have to know every, every program. You just have to start to get to know a few and then build from there, right? So like right. You know, you just rattled off I think 10 different softwares or something. And if you're just starting, that can be a little bit overwhelming. But the reality is, is you know, start with your, start with like obviously your GL and then, you know, add one or two and then keep going from there. Because I think if you've never really had a CS practice, you know, the tech stack can be a bit overwhelming.

Matt Tait:

Well, and what I would say is start with the geo, but. When you find your pain point, maybe you've got a bunch of clients and bill pay is painful. Maybe you have a bunch where payroll, maybe you have a bunch where expenses, whatever it is, whatever problem set you run into, then go find the right tools. Then the next time you have another one, go find that tools. You don't have to dive in as deeply as we have or use all of those, and I'm certainly willing to always talk about tech stack and how we use it. But I would say in general, follow the pain. Wherever you feel pain or you feel like you're doing a lot of work, see if that's where you can start to layer in better tooling that makes your life easier.

Jody Padar:

Yeah, I, I mean, I think it's really important because I think, uh, a lot of times people get overwhelmed with the tech piece. And I think the, the good part is, is when you think about AI as a whole, the cloud, we really had to know the tech. Um, yes, it was. Well, I'll say it was easy. It was easy for me. I know not everyone thinks it's, it, it, it was, it was easy. But you kind of learned how to connect all the, the digital plumbing. Right? Right. I think with ai, it's a lot more user friendly. Right. It because it's more like an iPhone where more approachable. Yeah. It just kind of works versus, You know, the cloud where a lot of it was, oh, you have to learn it. Right? And so I think though I would argue, you still have to get your hands dirty and you have to get in the tools, right? Like learn. It's not like you can just do a webinar and say, oh, I learned it.'cause I think there are too many people who think they're gonna learn AI through osmosis. You still have to touch the tool.

Matt Tait:

Oh, you, you only get ex, you get the best experience by doing. Right, not by just reading and learning. And I think, I think as we wrap up this episode, that's a great way to do it is saying, Hey, and I think you're probably gonna hear this theme throughout our season of ai, and my guess is, Jody, is you and I get into season 25, it is gonna be the get your hands dirty. Experience is the best teacher. These are new technologies, new things, new tools, and be willing to try them, be willing to test them. Set aside time every week to just playing around with stuff. That's a big thing. Develop the habits that give you the room to do it and, and I think that's how we build the tools. And with that, I think this has been a great episode. It's a good starting point for people with cast and bookkeeping on the mind to think about how do I build the practice, how do I make it easier, and where do I go from here? I.

Jody Padar:

Awesome.