Xero intros machine learning system for SMB invoicing

The technology automatically suggests the appropriate account codes for an invoice based on past invoicing behavior of the business owner and their advisor.
Written by Natalie Gagliordi, Contributor

Cloud accounting software provider Xero announced a new product that it says will bring machine learning and AI to the process of small business invoicing.

The machine learning automation technology is currently without an official title, but Xero says it's designed to simplify and improve the way invoices are filed. More specifically, the technology will automatically suggest the appropriate account codes for an invoice based on past invoicing behavior of the business owner and their advisor.

While the use case is indeed specific, Xero posits that small businesses frequently mislabel invoices, which in turn creates more work for themselves and their accountants down the road.

"Before we work with a client, we always review their balance sheet to see if items are correctly allocated," said Andrew Erkins, director of technology at Xero Partner Digit Books. "They very rarely are, and so a lot of our time is spent playing catch-up, fixing errors."

Xero says early trials of the machine learning system have demonstrated significant improvements to the invoice process. After one invoice, machine learning techniques understood invoicing behavior in general better than Xero experts. By the fourth invoice, the system was accurate over 80 percent of the time and by the 50th invoice, the accuracy consistently surpassed 90 percent.

Xero claims the technology is the first example of personalized machine learning in an accounting system. Regardless, it marks an important step for the company as it tries to expand its reach in the US -- where rival Intuit commands a firm grip on the tax software market -- and make early headway around the area of machine learning.

"We expect the wider adoption of machine learning to lead to further insights and improvements that will help small businesses, their advisors and other partners fundamentally change the way they work," said Luke Gumbley, Xero Business Product Lead. "In the future, Xero will be able to use aggregated, non-identifying data to identify trends, patterns, behaviors and industry insights. This is just the beginning."

The technology will initially be available to a handful of Xero's small business customers for testing before launching in general availability by the middle of the year.

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