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Xero is joining the AI bandwagon and is having a crack at rolling out a raft of improvements via their new agent JAX (Just Ask Xero). One of the new features is automatic bank reconciliation – Which as the name suggests will automatically categorise and match bank statement lines for you.
Gone are the days where you would manually match you “green” matches, or fill out the “Who”, “What” and “Why” under the create tab. Even historically when you had set up something as simple as a bank rule, you’d still see that transaction pop up for you to confirm that it should be that specific bank rule that applies and then be on your way. The confirmation element of that can now be skipped – along with Xero aiming to predict the allocation of transactions and just doing it.
Importantly, you must first turn on ‘auto reconciliation’ for each bank account if it is available. So don’t freak out just yet, you still have to confirm. The good news being is that you can easily review what JAX has done. And as with all things AI - The more you correct it, the more it learns.
Here’s Xero’s official take:
Manual tasks like data entry and bank reconciliation take up valuable time and introduce the possibility of errors that can impact reporting and compliance. That’s why JAX is built specifically for the complex world of finance you navigate every day. Coupled with the robust security you expect from Xero, this specialised intelligence empowers small businesses and advisors to work smarter, together.
If you’re looking at learning more start with their official fact sheet here. But we before we go all in, let’s take a moment to consider the pros and cons of Xero’s newest features.
The Pros of Automatic Bank Reconciliation in Xero
If you’ve historically just clicked ‘ok’ a million times, this can genuinely be a huge time saver. Especially if your bookkeeping is fairly straightforward. There’s a good chance this could work pretty seamlessly.
Plus you’ll find it has the functionality to review what it’s automatically completed. We know Xero will continue to roll out improvements to this process and correct issues over time. It’s not like it’s reconciled and gone out of sight forever (only for your accountant to pull you over the coals at the end of the year for all the incorrect GST claims and mis-categorisation!). You can remain as in control of the process as you like.
If implemented appropriately this could totally transform bookkeeping offerings. Giving bookkeeping teams more time to provide valuable insight rather than just reconciling a file.
The Cons of Automatic Bank Reconciliation in Xero
Firstly, yes there are cons.
The ability to turn this on and then never review it is incredibly concerning for our bookkeeping and accounting team. And while it’s supposed to save time, if we are constantly fixing errors or asking additional queries, it might have been quicker to just do it right in the first place.
And like any product release and update, things are never perfect at the start. Xero will need to listen to the feedback of the community and continuously make improvements. Unfortunately for everyone Xero has a bit of a track record of not maintaining updates to products. Where does this leave us? I’d say, watch this space for now and see if a neat idea can become a useful product across use cases.
Where Things Can Go Wrong
- Categorising expenses to the wrong account and wrong GST treatment
- Auto reconciled transactions where you later upload a receipt for (but now can’t match – so you end up having a huge list of unpaid receipts in your bills and you’ve double claimed the expense)
- Incorrect matches on sales invoices
- Not correcting transactions correctly and therefore losing the opportunity to train JAX
How does this affect your bookkeeping team?
In the bookkeeping team we’ve taken a client-by-client and account-by-account approach to rolling this out, and we’re rolling it out slowly on our smaller, less complex clients first. We’ve then developed a new internal process of reviewing the transactions auto reconciled and ensured this is now on our checklist.
It is of utmost importance that the quality of our work isn’t negatively impacted, nor that we lose efficiency in processing. This should all make things easier and quicker. Meaning we have time to make further meaningful impact for our clients beyond basic reconciliations.
If you do your own bookkeeping you’ll want to make sure that your accountant isn’t going to have to do a heap of work at year end (and then therefore cost you more money) to fix things that you didn’t check at the time. In other words, make sure you take responsibility and accountability for your data.
Good to Go Checklist
- If you turn auto reconciliation on - Make sure you are across how to review and correct the auto reconciled transactions
- Learn how to run a Profit & Loss and Balance Sheet, and then identify if there are any anomalies with the coding
- Get feedback - Ask questions from your bookkeeper or accountant to make sure any issues are addressed in a timely manner
