ChatGPT: Analyze a financial statement and recommendations

- [Instructor] Welcome back. In this lesson, we're going to use ChatGPT, and we're going to log in to our free account in order to be able to upload a document so we can perform a financial statement analysis. Now that I'm logged in, I should be ready to upload a document. To upload a document, we're going to click on the attachments button and then click on Upload from computer. For some context, imagine you're using accounting software such as QuickBooks, Xero, FreshBooks, whichever accounting software you use, and you're going to produce a financial statement such as a profit and loss report or a balance sheet and you're going to export it into PDF, so you can then upload it into ChatGPT in order to request it to perform analysis. So in ChatGPT, we're going to click on the attachments button, we're going to click on Upload from computer, we're going to select the file that we have downloaded somewhere in our computer for the profit and loss report, click on Open. And then right before we hit send, we're actually going to give it a prompt. So the prompt is going to say, this is my last month's profit and loss report from my brand new landscaping business, please help me perform an analysis of the past performance and give me some advice on how to run my business better. So this prompt should be good enough for it to analyze the PDF document that we just uploaded, and for it to perform the analysis and also give you some advice on how to run the business better. That should be good enough, but of course, you can always enhance the prompt by adding more details and more specifics. Let's give it a shot and click on send. So ChatGPT immediately starts doing a summary. So the first thing that it does is it summarizes the total income, which is 10,000, summarizes cost to good sold, followed by gross profit, total expenses, net income, and so forth. Here's some key observations such as analyzing my main sources of income. Here's some key observations on the expense side, and then at the end you have some recommendations. Boost revenue, cost control, reduce other expenses. In ChatGPT, we can grab any of these responses and ask it to expand. For example, I'm going to select this information here such as reduce jobs and expenses and maintenance. Click on the reply button and tell it to give a contextual reply and say, expand more on these. Expand more on these. And then maybe we can say, give me some specific action items. And then hit send. And then it will give you the answer, expand it within the text that we just selected. For example, it's telling me I can negotiate with my suppliers, a couple of bullet points of how I can do that, reduce waste on job sites. A couple of tips on how I can do that. Evaluate subcontractor costs, streamline efficiency and labor. And then I can go into more detail based on any other numbers you have in your financial statement. What we can also do is we can combine this with a web search. So maybe we can click on the web search and then we can ask a question like, what are the typical job costs that a landscaping company would have in any given month? So we have the original context, and now we're doing a search because we're going to ask it to now grab the information that it just analyzed from the PDF and the chat that we've been having, but also search the web to see if there's any additional information they can find online. Before we hit the search button, all of these responses were coming from the general knowledge, so it had nothing to do with information you can find on the web today. Let's go ahead and do a search, including the web search, and see what kind of response we're going to get. You immediately are going to see that it's in the top, it indicates that it's searching the web. And at some point in the bottom, when it's done answering, it should give you some links to some websites that are used as sources. So we're going to get to that in a second, but let's take a look at the answers. So it says here that the typical expenses are labor costs and some details, fuel and vehicle expenses, equipment, maintenance and expenses, office expenses, and so forth. It is possible that this information could have come from the general knowledge, and it didn't have to do a web search. But if you click on Sources, you can actually see all of the websites that are used as a reference point for that. Now, you can click on any of those particular websites, read the actual website, see what it says, and go from there. You could also use any of those particular sources and ask it to analyze that specific source in detail. Again, you should use ChatGPT to analyze financial statements to give you a starting point, but you should never replace your own analysis and your own judgment. I strongly believe that ChatGPT will enhance your ability to perform financial analysis and to give advice to your client business owners or to your organization if you happen to work as an accounting professional inside of an organization and you're in a role to give the type of advice that you see here in ChatGPT. Give it a try. Let's do one more piece of analysis. We'll go ahead and close the sources here on the right hand side, and then we're going to use the reasoning engine and not the search engine to ask it a question that ChatGPT calls it think before responding. So when you have a question that requires some thinking, so to speak, although AI doesn't really think, but it's sort of analyzing its response and analyzing your question before giving you a full response. So we're going to ask the same question, but we're going to ask it to think a little bit and go through its reasoning engine to give you the answer. So we're going to ask, I need to draft that email to my client who owns this business to give them five points of the most salient advice I can give them as their accounting professional for them to focus on the growth of their business. So it's a little bit of a different question, but it's within the same context of the analysis of the reports that we just uploaded. We make sure that the thinking engine or the recent engine is turned on, and then we're going to hit and send. Immediately when you use the reasoning engine, you will notice that it takes a little bit longer. It's because it is sort of thinking before answering. And if you click on the title here, you actually get to read how ChatGPT thinks, so to speak, about the question before answering. So in this case, ChatGPT says, so I need to draft an email for a client. It's a landscaping business owner, giving them five key pieces of advice. I'll include points like revenue diversification, expense management, job costing optimization, and marketing improvements. Notice that these pieces of information I did not prompt. The reasoning engine expand it based on my prompt to give me a better response. So the reasoning engine enhances your prompt, so to speak. The additional thinking that it did is the key of focusing is to focus on the most essential advice to help the business grow. It seems like the user wants five actionable points, so I'll make sure they're clear and relevant to the client needs. So this piece of information here is what ChatGPT thought, so to speak, prior to giving the answer. We'll collapse that and let's read the answer. So here's the subject, Strategic Growth Recommendations for Your Landscaping Business. I hope you're doing well. After reviewing your last month's profit and loss report, I wanted to share five key recommendations to help you drive growth and enhance profitability for your business. Here they are: enhance revenue streams, and here's an answer; cost and optimization of, control and optimization of costs; invest in targeted marketing; improve operational efficiency; monitor miscellaneous expenses. I'm going to leave the reasoning engine on, so it keeps thinking a little bit deeper on that. And then I'm going to ask you to expand one more thing. As an accounting professional hired to give advice to this client, could you add a couple of bullet points under each of these key recommendations on what my role could be as their advisor and accountant during the process? So we're asking this to help us do a little bit more planning and expand upon these five points. So we'll make sure to give the reasoning engine on, click on send, and then we're going to read its reasoning prior. Let's see what it says. Okay, the user needs, let's read this. The user needs help drafting an email for the landscape to take advice, I should create five recommendations. So the same thing as before, but it says there's a template to the email to modify. You'll just add the specific bullet points as to the accountant's involvement in each recommendation, and then you see how it sort of thinks through the answer. So here we go. We got enhanced revenue streams. We have the recommendation that has been shortened now. But now as my voice, as the accounting professional, it helped me draft what my role could be. So in revenue streams, my role could be helping them analyze revenue streams, identify opportunities to cross sale, develop revenue forecasting models, exactly what an accounting professional would do. On control and optimization of costs, my role as an accountant could be to conduct a detailed variance analysis. It could be to assist in benchmarking of the expenses against industry standards. And under investing in targeted marketing, my role could be tracking analyzing, return investment on specific marketing spend. I can assist in setting up a marketing budget to monitor expenses, prepare regular performance reports. For operational efficiency, my role could be help design and monitor KPIs to assess operational efficiency. I can provide financial oversight by implementing cost accounting methods that support the effective preventative maintenance schedule and monitor miscellaneous expenses such as I will review and classify your miscellaneous expenses to make sure accurate allocation, and I can set up internal controls to provide monthly expense and reviews. So again, we're living in a world where AI plus the expert professional together are going to be enhanced to help our business owner clients to help the fellow entrepreneurs that are endeavoring in business. They're endeavoring in accounting challenges. And we feel very, very strongly that ChatGPT could be a great companion. So give that a shot.