Puzzle leverages AI and machine learning to automate accounting for startups

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Accounting, a critical-yet-often-cumbersome aspect of running a business, is getting a major overhaul thanks to artificial intelligence. Sasha Orloff, cofounder and CEO of Puzzle, is leading the charge to transform how startups handle their finances by leveraging bleeding-edge AI and machine learning technologies.

“Accounting is something you have to get right — it’s 100%, or [it’s] zero,” said Orloff in a recent interview with VentureBeat. “It’s like going to Mars: if you get 95% of the way to Mars, it doesn’t really matter. Accounting has to be accurate.”

Waiting for technology to catch up

As a veteran entrepreneur who has scaled multiple companies to unicorn status and raised hundreds of millions of dollars, Orloff is no stranger to the challenges founders and CFOs face when it comes to ensuring accurate and timely financial reporting. He has been contemplating a solution for a decade, waiting for technology to catch up with his vision. With the advent of advanced AI systems like ChatGPT, which passed the CPA exam last year, Orloff believes the time is ripe for disruption.

Puzzle’s AI-powered platform automates crucial accounting tasks, including transaction categorization, reconciliation, and anomaly detection. By parsing data from various sources and running it through sophisticated machine learning models, the software ensures completeness and accuracy—two essential pillars of accounting.

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Completeness and accuracy: The core of accounting

“At its core, accounting is about completeness and accuracy,” Orloff told VentureBeat. “We run different machine learning models and AI models for different competence levels. We do anomaly detection to make sure we have a complete picture of everything.”

But Puzzle’s capabilities extend beyond data completeness. The platform employs techniques like natural language processing with large language models (LLMs) to accurately categorize transactions and handle complex processes such as depreciation schedules. “We can take PDFs and statements and receipts and interpret them,” he said. “You don’t have to know anything about accounting.”

The power of AI combined with human oversight

While AI is causing a seismic shift in the industry, Orloff recognizes the importance of human oversight, particularly given the high-stakes nature of financial reporting. Puzzle’s software facilitates collaboration between AI and human experts, allowing accountants to review outputs, mark competence levels, and make corrections when necessary. The AI continuously learns and improves based on this feedback.

“No matter how good AI gets, people still want an expert to review,” acknowledged Orloff. “We tag things as AI categorized so that you can go through and human review it at the end and then mark it as competent, yes or no.”

This human-in-the-loop approach not only ensures accuracy but also provides peace of mind for startups grappling with liability concerns related to taxes, fundraising, and board reporting. “If these things are inaccurate, it’s not like they’re like, ‘Oh, well, you know, Sasha tried really hard.’ They don’t care. It has to be right,” emphasized Orloff.

Handling complex edge cases with ease

Puzzle’s AI-driven platform truly shines when it comes to handling complex edge cases and exceptions that often stump traditional accounting software. Orloff provided a relatable example: “Imagine you go to Blue Bottle in San Francisco, but your accountant is in Denver where there is no Blue Bottle. All they see is a transaction that says ‘Blue Bottle.’ They’re like, ‘I don’t know what that was.’”

With Puzzle, the system can automatically tag the cardholder, send an email asking for clarification, and based on the response, categorize the transaction while accounting for nuances like client meetings or travel. “It’s trained in our system,” he explained. “It’ll actually respond back to you and say, ‘Were you with a client? Were you by yourself? Or were you traveling?’ Because there’s different tax treatments.”

The ability to handle such edge cases with ease sets Puzzle apart from traditional accounting software. By leveraging AI’s natural language processing capabilities and its ability to learn from human feedback, Puzzle can accurately categorize even the most obscure transactions, saving valuable time and reducing the risk of errors.

Empowering startups to scale with confidence

When startups scale at breakneck speeds, having complete and accurate financials is non-negotiable for meaningful discussions about business health with investors and boards. Puzzle’s AI-driven approach streamlines the tedious and error-prone aspects of accounting, freeing up founders and CFOs to focus on growth and strategic initiatives.

“Even after all of this, we actually built an independent piece of software,” he revealed. “We have generative software that generates your financial statements completely, we have a separate piece of software that reviews it… And then we do a review, we give you a report every month saying here are all the anomalies and inconsistencies for you to go spend time on. This is best practices in accounting: you have somebody prepare it, you have somebody review it, and then you have somebody validate it.”

With Puzzle at the vanguard of AI-powered accounting innovation, the future is promising for startups aiming to scale quickly with confidence and clarity. As Orloff aptly put it, “It makes the accountant’s job much easier in the preparation work — and then they can spend more time trying to think about how to improve the business.”

The implications of Puzzle’s AI-driven platform extend far beyond the realm of accounting. By enabling startups to have a clearer, more accurate picture of their financials, Puzzle empowers founders and CFOs to make data-driven decisions that can propel their companies to new heights. With the ability to scale rapidly while maintaining financial integrity, startups using Puzzle’s platform may find themselves at a significant advantage in the competitive landscape of entrepreneurship.

As the world of business continues to evolve at an unprecedented pace, the integration of AI into critical functions like accounting will likely become increasingly commonplace. Puzzle’s innovative approach to financial reporting serves as a compelling case study for the transformative potential of AI when applied to complex, high-stakes domains. With visionaries like Sasha Orloff at the helm, the future of accounting looks not only more efficient but also more intelligent, paving the way for a new era of growth and innovation in the startup world.