Why does AI bookkeeping keep dumping everything into "other expenses"?

Hook

Boss, this scene may be familiar. You switched to an AI bookkeeping package. A month of documents, photographed, uploaded, and it reads them all in one sweep — dates right, amounts right, even the merchant names right. You are pleased. Then you open the profit and loss and eighty percent of the expenses sit on one line: "other expenses". So you say, AI is no good either. Today, plainly: the problem is not the AI and not that package. The problem is that nobody told it what your books look like.

First, give these tools their due

In fairness: today's tools — Bukku, Dext and the various receipt-scanning apps — are very good indeed at reading documents. Ten years ago we keyed everything character by character; now you photograph one and the date, amount, tax, merchant and document number come out in seconds. That is genuine capability and it is worth using. What they are not good at is the next step: which account should this go to? Because what that step needs to know is not on the document. The document only tells you how much you paid and to whom. It does not tell the software what business you are in, how your chart of accounts is arranged, or what this particular item means to you.

Three things it cannot possibly know by itself

Three specifics. First: the same invoice belongs to different accounts in different businesses. An invoice for a laptop. For a design firm, a fixed asset. For a computer shop, stock. For a three-month project, possibly a project cost. One invoice, three answers, and not a word on the document tells you which. Second: your threshold is known only to you. The forty-seventh lesson covered the capitalisation threshold — above what amount something becomes an asset and below it an expense. That figure is set by your company, and if it is not written down and not configured in the system, the software can only guess. Third: who the books are ultimately for. The forty-eighth lesson covered how the classification a tax form wants is not identical to the classification you want for managing the business. "Other expenses" is an ugly box on a tax form — when the amount is large, people naturally ask what is inside it. So: the software is not lazy, it is under-informed. It has no choice but to pick the safest answer available, which is "other expenses".

How LTT does it: down to the individual outlet

So how do we do it? Here is an example you may find excessive. McDonald's. In most people's books the contact reads "McDonald's". Not in ours. We record which one: the Bandar Gamuda Cove outlet, or the Banting one. The same with Mr DIY, down to the branch. Petrol stations make it even clearer. Your receipt may carry the Petronas logo, but the entity that actually invoiced you is the company operating that station — with its own legal name, its own number and its own location (the fifty-sixth lesson covers how to look that up). Bosses ask whether this level of detail is necessary. It is, for three reasons. One, you can see patterns. Where are the fuel card charges concentrated? Is one outlet's spending unusually high? Writing only "Petronas" shows you nothing. Two, reconciliation traces back. Three months later, when you need to find that one receipt, "which outlet, which day" is the fastest lead. Three, e-Invoice wants legal particulars — the counterparty's legal name and number, not the name on the signboard. Set it up correctly now and you will not have to go back and fix it. Detail is not fussiness; it is so you do not have to ransack the files later. The line from the forty-seventh lesson still holds: detailed enough to decide on, not detailed without end.

How to make AI genuinely help you

So the correct order runs like this. Step one: settle the chart of accounts (the fourth lesson) — not copied from somebody else, but arranged so it can read your business. Step two: build the contacts properly (the fifty-sixth lesson): legal name, old and new numbers, branch, location — built once and useful for years. Step three: teach the rules once. These packages all have rules: this merchant goes to this account. Teach it once and it recognises it thereafter. Step four: leave a person to take the last look. AI does ninety percent, but the remaining ten — new suppliers, unusually large amounts, anything with no stated purpose — still needs a human eye. Note the order carefully: AI is the last step, not the first. With the chart of accounts and the contacts not sorted out, ten different packages will all produce the same result: "other expenses".

To close

In one line: AI is not incapable of classifying, nobody has told it what your books look like. The cleverer the tool, the more valuable the setup. And setup is done once and used for years. If a large lump of your reports currently sits in "other expenses", that is not the software's problem; it is that nobody has ever laid that set of books out properly. Grab a coffee first and talk about your business. For the accounting, come to LTT. I am LTT, helping SME bosses get their accounts straight. Follow us, and see you next time.