Nobody should let AI run their books yet

Thank you very much for having me. It's delighted be here on this very sunny evening in London, as you can see from this side.

So you've gone back a couple of years. That was that was a couple of roles ago. but it was quite an interesting role I was in because I came in in a business that was based in London, turning over around five million pounds, across two companies. And in the sort of four, four and a half years I was there, grew to eighteen companies, I think six different jurisdictions, hundred and twenty, hundred and thirty staff. And in that time, and then went up as far as six sixty odd million turnover. And also in that time, then we had to put in I had to put in our lead projects, we put in new finance systems, we had to open up new businesses in different jurisdictions, so we had to put projects together to get set up in Spain and Hong Kong and South Africa. So it was quite an interesting commercial role as well as just a financial role. So not only was I, you know, looking after the financial side of things, getting board packs to to board. meetings that became quite professional over time. and getting a grip on the numbers and keeping track of all the numbers in the different countries and different companies. There were also individual commercial projects, system-related projects, and ultimately the business grew so fast and to a certain point that the business owner decided to sell. So that was an experience that I hadn't really heard of before, which was getting ready to sell the business. So we went through six or eight months of a project trying to get all the bits and pieces together that the MA advisors were happy then to try and go and Roadshow and see if they could find buyers who wanted to acquire the business. And in the end, they did. They got an offer for the business, which was turned down in the end. But as a as a project for me, it was quite interesting and slightly different to what you know you would normally do in a normal, straightforward finance role. But because of this rate of growth, because it was privately owned, because they were really keen to sell and grow the business. you know, it meant I learned quite a lot and experienced quite a lot and worked a lot of late nights and weekends. but was a really, you know, enjoyable role while it while I was there.

Ye yes, yes and no. yes, it was an experience that's that stood to me, but actually after that I worked in a private equity owned marketing agency. So with private equity, what it means is that they're they're gonna sell the business. So I came into that business when they had acquired it. So it meant I went straight back to the financial role again because all they're interested in is you know building up the business, understanding the figures, working to budgets. So it became a really financial role again, but ultimately went through another exit process. So I experienced a lot of the same things but in a more organized fashion towards the end of my role there as well. And then when I Eventually set up Secura, I eventually realized that a lot of business owners didn't know anything about selling their business. Either they built their business, worked away for years and years and years, and then suddenly someone said to them, it's a good time to sell your business, or maybe someone came to them and said, I'm really interested in maybe buying your business. And that was the first time they thought about it. So having done some of that work from a very financial with a little bit of commercial knowledge and experience working on both those projects, I kind of came to realize that actually if I was having the conversations with my clients or with potential clients or growing clients, that was a conversation that they were not having with anyone else. And therefore that was good, virtuous, helpful, but also was something that I had some proper experience in and could and could help and work with some of those business owners as well.

Well I go back to my tried and trusted. They don't know what they don't know, which for most of the means they don't know anything at all about it. But obviously being business owners and being entrepreneurs, they want things to happen tomorrow or yesterday. And a lot of the times I think, it's easy. We just need to sign this document or give them some sales figures. And obviously it's a lot more complicated. There's a person on the other side who's usually more experienced than they are at buying businesses than they are at selling businesses. So they've got a whole list of things that they want to check and confirm before they hand over a check to the to the seller because they want to make sure that what they're buying is worth what they're paying. And they also want to make sure that they're going to make some money out of buying this. you know, person's business. So it's a whole raft of things they want to check. And if you don't have them ready, and if you can't answer those questions, either they won't buy it or they'll buy it at a knockdown price because they can keep pointing at things that are wrong, that's wrong, that's wrong, and they can take they can take, you know, the price down and down and down and down. And because it's a long process, it's quite a draining process for all parties, sometimes if you were maybe thinking I wouldn't mind getting out of the business because I want to get out rather than just because I want to sell, at the end of that process You might just take the number that they give you because you just go, I can't, I don't know where you want to continue. So what you want to try and do is get the number that people talk first about rather than the number they they give you once they've chopped and chopped and chopped and chopped because a lot of things they need, they can't look at, they can't review, they can't get the answers they want.

So we did talk about this beforehand, and it's one of those things that I get quite animated about. And it's through the experience I've had where I've worked in businesses and the work that I've done has clearly Helped the business grow, has has clearly made the business more resilient, has placed it in a far better position than it was beforehand. So I'm not just talking out of the top of my hat, I'm talking from experience. But I would say a good accountant, a good finance team, a good CFO, it's the backbone. It's the backbone of every successful, consistently successful business. Because although people About accountants, you're just stopping the business, you're holding me back from selling, you're not contributing anything to the business. The reality is as a business grows and as it changes, and as there's different requirements and different pressures on the business, you don't have the foundations in place, if you don't have the simple things done well, if you don't have someone who can maybe guide you away from things that you know or you've got experience aren't great for that business at that point in time. That's what a good finance professional finance team does for a business. So, although it might feel to a really sales-focused entrepreneur that you're stopping me doing these things, sometimes stopping you doing bad things is actually really positive because it lets you do some simpler, more consistent things consistently, consistently well, and actually avoid some of those problems with those pit pitfalls that that that you can fall into. So it's really important A to try and explain that and and educate the business owners to why you're not just doing it because you're, you know, trying to be difficult, you're doing it because actually there's a value to having a good platform. There's a value to not falling into certain holes. And there's a value in actually making sure you can do the the right things at the right time in the right in the right way.

Well, one of them, which seems really simple, but you do see it, is they don't pay their taxes. Some some of them just don't view it as being important enough and they want to spend it in other ways. It will always come back to bite you, it'll cause you a huge problem. But more but more normal problems tend to be cash. Businesses run out of cash because they just they don't They don't plan enough, they don't look forward enough. Maybe they're trying to to to do certain campaigns or projects. And I haven't really put the time in to say, well, you know, what happens when I have to pay my VAT bill two or three months down the line when I'm in the middle of this campaign? What happens when I try to recruit somebody? But actually, you know, that's when I've got to pay a a a higher payroll bill. Or if someone doesn't pay me on time, maybe I've got two or three really important clients and a number of you know smaller clients. What happens if one of them has a problem or they suddenly change my payment terms from 30 days to 90 days? Which isn't unusual, where you're dealing with big corporate clients, and sometimes something simple like that can happen and their business suddenly hits a wall and maybe it's too late to try and get loans or finance. So cash is cash is a a a big one. The other one I would say though that I've seen multiple times is if you get all your bookkeeping wrong. that can really s that can really, you know, put a hole in the bottom of a business. And when I say get your accountancy wrong, I've seen it many times where you're trying to do a lot of the accountancy work, the bookkeeping, your day to day put your sales in, put your costs in, you know, update your bank accounts, put it in Xero, put in put in QuickBooks. If you're not keeping on top of that, you end up with maybe weeks not unusually six weeks, eight weeks, maybe three months worth of transactions that haven't been posted into your account system, which means you're not really seeing what your sales are, you're not seeing what your costs are, maybe you're not seeing that you're making a loss over a couple of months because it's the season when things are a little bit quieter. And maybe you're not seeing the true bank account balance. So again, it's not unusual. I've worked with a few clients who've come to me saying we've got these problems. And when I look at the books, I go, So, do you have two hundred thousand pounds in that bank account? And they say, No, no, no, I just got the bank statement. There's four thousand pounds in it. And I say, Well, your record, your books and records are saying you got three hundred thousand pounds in there. because you haven't posted three months worth of your bank transactions. And that's not unusual. It's not unusual and that can cause a real problem because then suddenly, you know, you have to pay a supplier, the taxman comes calling, maybe you a payroll run and suddenly you don't have the cash you thought you had and you don't know where where it's gone or what you need to do because there's so much bookkeeping to get you back to position where you can make a decision.

Well that's well I'm glad you asked me that because I was gonna mention it next myself. there's a big move at the moment to connect AI to account systems. So if you're in the accounting sector at the moment, it's quite it's a big talking point about connecting Claude with Xero. And what people are saying, well, I don't need an accountant now, because I'll just connect Claude to Xero, and Claude will give me a report or will talk to me and tell me about all these accountancy insights. So go back to my example. If your bank account says you've got 300,000 pounds in it and it doesn't, because you've not done your bookkeeping correctly, what is Claude going to tell you about your books and your business activity? gonna tell you you've been really successful, you've loads of cash, go and do that new marketing campaign, go and do this. But Claude won't see the fact that you've not done your bookkeeping for three months and the figure in the accounts is not correct. An accountant who looks at the books will within five minutes go, what are all these things over here that haven't been posted in? Do you not need to put them in and that doesn't seem to match your bank statement? Well you need to put your you need to put all your payments in to know how much cash you got in the bank. So that's a real risk of just using AI without really knowing what AI is doing and not understanding what you're supposed to be doing in your finance system. So it sounds great, but the reality is, you know, there's some simple basic things that I think you need to have in place, you need to tick off before you start using AI across your business without really understanding what it's doing or what it's telling you, or being able to sense check it.

Yeah, and again again I wouldn't say I wouldn't be against AI, I wouldn't be against the use of AI. I think you've just got to Tread carefully, use it on the simpler things first, build up and see what it can do next, or see what it can't do next, and then you use it use it in a sensible way rather than I don't think when people say we're not gonna need lawyers in the future, we're not gonna need accountants because AI will do everything. I think that's hype and probably nonsense. But I think over time AI will probably be in every business, it'll be maybe an add-on to all the software used at the moment where it'll do extra things in the software you've got at the moment that maybe. Never thought it could do. There may be certain things that it can streamline or automate that maybe software doesn't or can't do, but it can start to do that over time. So I certainly think it can have value, but I think we've got to put the brakes on a little bit, see what it can do, see what it can't do, see where it might save some time, and see where it won't, and then start bringing it in slowly over time. So I'm not against it, but I do laugh when people say let's connect it to Xero, let's connect it to QuickBooks and we don't need accountants, we'll just let it tell us all the insights. Because again, I go back to Things that aren't unusual that I see. You have loans in the business. You haven't put the loans in your accounts at all. They're just sitting on paper on your desk. They're not in the in in the accounts at all. Bank accounts are missing, bank accounts that are in there don't have everything posted in correctly, then you've really got information that's totally, totally wrong. And if an AI system doesn't understand the nuance, which I wouldn't have thought it does right now, maybe it will in 10 years' time, but the moment it's going to tell you all these in interesting insights based on information that's just absolutely incorrect. And that is not a good recipe for a, you know, what I'm guessing you're trying to get is a growing success. Successful, more profitable business, it'll probably kill your business. It'll certainly slow down if you've got to correct a few false false steps.

Probably the best places I'd say. I'm trying to be available to people if they do need to speak to me. So I'm on LinkedIn, Damien Connolly FCCA on LinkedIn. our website, SakuraBusiness.co the UK or Sakurabusiness.ie, depending on whether you're in the UK or Ireland. and we're on YouTube. We've got a Sakura YouTube channel as well where maybe a copy of this podcast will appear over the next couple of weeks, but it's got lots of videos, lots of insights, lots of shorts, and copies of webinars and various podcasts that I've done.