Speaker 1: In this video I'm going to show you how to use ChatGBT to augment or enhance your accounting experience and knowledge so that if you are taking on a new role at a company where the role is maybe slightly bigger than you, you can use ChatGBT to come up with detailed answers on some of the questions that come up when you're taking on a new role at a company. So I'm going to go ahead and ask very specific questions. I have five questions that I'm going to ask ChatGBT and I'm going to show you and we're going to assess together how detailed and accurate are these answers from an accounting perspective. So let's go ahead and jump right in. All right, so we're going to assume that our company is in the manufacturing space and has annual sales of about 1 million dollars. So this is kind of a small company. Okay, so we're going to ask specific questions on the setup of the accounting process for the company and you're going to want to stick around till the end because the final question is probably the most important one that you get asked when you take on a new controllership or a new accounting leadership role at a company. So let's go ahead and start with the questions and the first one is about the choice of the accounting software. So let's say you're taking on a role at a company and you're being tasked with choosing an accounting software for the business. So we're going to ask ChatGBT here, hey we have a company in the manufacturing space with 1 million dollars annual sales, what do you recommend as far as accounting software? So let's go ahead and type that in. All right, so we open up a ChatGBT window here and we're going to ask it the first question and we'll say what accounting software should I use for a manufacturing company with 1 million dollars in annual sales and why? All right, let's check the answer. So it's going to say obviously there are a few options in the market to choose from. It's going to say QuickBooks Online which is a valid option for a small business. It's going to recommend Sage. Sage also is a leading software in the small business space. NetSuite. NetSuite is obviously a more comprehensive solution which is a very valid option as well. All right, and it's going to say you know ultimately the decision on which accounting software to choose will depend on your specific business requirement budget and all this stuff. So we're going to go ahead and say you know what if we have a limited budget here. So we want to test ChatGBT and say what if we have a limited budget. So let's ask that question. So which one do you recommend based on a limited budget? All right, let's see what it says. All right, if you're looking for an accounting software with a limited budget, QuickBooks can be a good choice. QuickBooks offer various features that can cater to the needs of a manufacturing company with a million dollars in annual sales. Okay, this is actually a good response here. QuickBooks Online is pretty decent and pretty affordable. It's not the best option. So NetSuite most likely is probably better for a manufacturing company. So I'm going to go ahead and ask ChatGBT and say what if I have an unlimited budget or budget is not an issue here in this case. So let's go ahead and ask the question. So which option if I have a really big budget? Let's see what it comes up with. If you have a really big budget and looking for a more comprehensive accounting software, NetSuite ERP can be a good choice. Okay, so this is a good job from ChatGBT. NetSuite is obviously the big leader here in the manufacturing space when it comes to accounting software. So, so far so good. So we've asked ChatGBT to recommend an accounting software and it told us the options. It told us if we are on a budget, which one to use. So if you're working at a company and their mandate is that you have a limited budget, so QuickBooks Online is going to be the option for you. If you have a bigger budget, NetSuite is the option to go with. All right, so let's say that we now know what accounting software to go with. And the next thing that's going to come up is going to be the chart of accounts. So how to set up a chart of accounts? A chart of accounts is a listing of all of the accounts that are going to roll up later into the financial statements. So for example, for cash, you might have multiple accounts, one for each bank account that you have. For accounts receivable, you have one account, and then you have multiple other accounts for inventory, other assets, liabilities, and all this stuff. So we're going to ask ChatGBT how to set up a chart of accounts. It's going to guide us into the process. So let's go ahead and ask the question. I'm going to say, give me a list or a full list of accounts in a chart of accounts for a manufacturing company. All right, let's see. Here is a sample chart of accounts and it's saying assets. What types of current assets would you have? Property. Here are the different kind of property, plant, and equipment accounts. Intangible assets. Liabilities. Current and long-term liabilities. Equity. Pretty good. Revenue accounts. Expenses. OK, so far so good. But there are some accounts that I'm not seeing here. So this is probably pretty basic. So for example, for inventory, I'm not seeing work in progress or finished products. Maybe that should be a distinction for inventory. So this is probably pretty basic, bare-bones chart of accounts, which is good to start with. And then you can go ahead and customize it more in the accounting software. And if you're looking for more guidance on setting up the chart of accounts, I made a video on that in the past. I'm going to go ahead and link it up right here. But this is pretty good for a chart of accounts as a starting point. If you are out of your depth and you don't know exactly what to do, this is a good starting point for a chart of accounts. OK, so this is question number two. Let's go ahead and ask it. An important aspect for a manufacturing company is how to manage inventory. OK, so the accounting side of managing inventory is pretty important. So we're going to go ahead and ask it that question and see what kind of guidance we get out of it. So I'm going to say, what's a good accounting process for inventory for a small business? All right, so it's going to say that a good accounting process for inventory management is going to consist of a few steps, tracking of inventory level, cost of goods sold, inventory valuation. All right, this is good general guidance, but are there more specific steps here to follow? Here are some steps. All right, so it's going to talk about choosing an inventory valuation method. So that's pretty good, right? So it's going to say, you know, there are a couple of big ones, you know, first in first out, which is FIFO or last in first out or LIFO, which is a pretty big decision to make in a business. So we're going to go ahead and ask the follow up question. Should I use FIFO or LIFO? This is a pretty important one. All right, so this is the first point that it's making. It's going to say, you know, to set up the inventory accounts in accounting software, you know, create separate accounts for inventory. This is pretty good, you know, advice here. Let's see what else it comes up with. You know, obviously, a good practice is tracking inventory level to monitor your inventory levels to ensure you have adequate stock to fulfill customer orders. Okay, pretty good advice. Let's see what else we got. Yeah, obviously, you have to record inventory transactions for your financial statements to be complete. So you got to record inventory transactions such as purchases, sales returns. So this is pretty good. So chat GPT so far has actually been pretty comprehensive. You know, the good thing is that this is here. If there is one aspect of the inventory management you're not aware of, you can use this as a checklist and just check it off. All right, I set up a process for tracking purchases. Boom, I set up a process for tracking sales. Boom. So this is pretty good and comprehensive. Number five is to conduct regular inventory counts. This is pretty good. So you can catch any kind of missing inventory or expired inventory. This is pretty good. And then reconcile the inventory accounts. This is pretty good advice. Generate inventory reports of month end. This makes a lot of sense. Okay, so far so good. I mean, some of this stuff is pretty general. And some of it is pretty good as a full checklist to go ahead and check it off as you're starting a new role in setting up the accounting process at a company. All right. So I wanted to ask chat GPT on the choice between FIFO and LIFO. First in, first out, or loss in, first out, and inventory pricing or inventory valuation. So let's go ahead and ask that question. All right. So how to choose a method of valuation for inventory such as first in, first out, or loss in, first out. All right. So it's going to say that choosing it depends on some business needs and accounting practices. That makes sense. Cost flow assumptions of FIFO assumes it's going to define it for you. So FIFO assumes that the first item purchased are the first item sold. So, you know, this is just overall high level what it means. Tax regulation is going to say, you know, some tax jurisdictions may require you to use specific inventory valuation method. For example, the IRS in the US allows businesses to use LIFO for tax purposes. But you may need to obtain permission to use this method. So this is pretty good advice. All right. Accounting software compatibility. Obviously, you have to make sure your accounting software can support the method that you're going to choose. Complexity. Business needs. All right. So this is pretty decent advice. It could be a very good starting point in deciding whether to use FIFO or LIFO for your valuation of inventory. All right. The next big item in our list is going to be billing and invoices. How to set up billing and invoices for a manufacturing company. So let's go ahead and ask that question. How to manage invoicing for a manufacturing company with one million dollars in annual sales? All right. So it's going to say to establish the manufacturing or the invoicing process for the manufacturing company. One, establish an invoicing process. You know, clear and consistent invoicing process that includes the required information, such as customer name, address, contact information, all that stuff. Number two is to use invoicing software. You know, we talked about that in the first bullet point, which accounting software to use. Set payment terms. This is something that's pretty obvious. You have to have pretty clear payment terms with your customers. Monitor your accounts receivable. Makes sense. Monitor accounts receivable regularly to ensure that your customers are paying on time. Automate the payment process. Automate payment to streamline your basic process. Record payments received. That makes sense. Reconcile your accounts. We reconcile accounts regularly, which means mostly at month end to ensure that your invoicing and payment are correct and up to date. So this is pretty good advice. You know, it's pretty general so far, but I'm going to go ahead and ask it more specifically how to create invoices. I want to quiz ChatGBT whether or not it knows how to create invoices, say in QuickBooks Online. All right. So let's go ahead and ask this very specific question. What are the steps to generate an invoice in QuickBooks Online? Okay. All right. So log into your QuickBooks Online account. Go to click on new button on the top left corner of the screen. All right. So this is very specific stuff. So let's go ahead and open up QuickBooks Online and see if this stuff works. All right. All right. So we're here in QuickBooks Online and it's saying to go to the top left of the screen and click on new and then under customer select invoice. All right. So far so good. And then from there, it's saying to add the customer. So I'm going to add customer right here from my drop down menu. All right. So actually it knows what it's talking about and then it's asking me to enter the quantity of the product or the product name and then the quantity. So it actually knows what to do here. So this is actually pretty good guidance when it comes to creating an invoice in QuickBooks Online. So this actually has been pretty good. I can get pretty detailed instructions on how to create an invoice in QuickBooks Online. So if you're taking on a new role and you don't know what to do, you can do this here and look it up in ChatGBT. This is similar to Googling stuff. You can Google this same question as well, but I find that ChatGBT is pretty specific on what the answer is more than Googling. You would have to click on multiple links to figure out where the right answer is. Okay. So far so good. So far we did four things and now is the final thing that I'm going to do, which is how to close the books and how to close the financial period. So I'm going to ask ChatGBT how to close the books at month end. Let's go ahead and try it out. I'm going to say, what are the steps to close the financial period for a manufacturing company? All right. So it came up with a few steps here on closing the books, reconciling all accounts. Obviously, reconciling the accounts helps you catch any missing transactions from your books. So if you reconcile, for example, your cash account to the bank statement on month end, that's when you catch any transactions that are missing from the books and records. So that's pretty good. Review and adjust the entries. So review all general entries and make any necessary adjustments to ensure the accounts are accurate. So far so good. And if you're actually looking for a more comprehensive guide on closing the books, I'm going to leave a link to a video up here on a video I made a while back on how to close the financial period. Review accounts receivable and accounts payable. That makes sense. Create financial statements. So this is pretty good. And I suspect that any of these points here, they're pretty general. For example, reviewing accounts receivable and accounts payable. This is pretty general. But what you can do is even ask ChadGBT how to review accounts receivable and accounts payable. And I'm pretty sure it's going to give you some more specific guidance on what to look for when you review these things. So far so good. These are the five questions that are necessary when you're starting a new role as to understand how to set up the accounting system for the company. You can go ahead and play with ChadGBT yourself and find out some answers to some specific questions you might have. So if you like the video, give it a big thumbs up. And if you know someone who might benefit from listening to it, go ahead and share it with them. And I'll see you in the next one. Transcribed by https://otter.ai