Expense categorisation is one area where accounting and bookkeeping teams often spend disproportionate time on relatively low-value work. Because categorisation relies heavily on pattern recognition, it is frequently discussed as a suitable use case for cautious AI support.
For a broader overview of how general AI fits into accounting workflows, see our guide on AI tools for accountants.
In practice, however, AI is used to suggest expense categories rather than determine final accounting treatment. Human review remains essential, particularly where tax treatment, mixed use, or judgement is involved.
How AI Is Used in Expense Categorisation
Accounting firms that use AI for expense categorisation typically do so in a limited and controlled way.
Common uses include:
- Suggesting categories based on prior transactions
- Identifying recurring suppliers
- Highlighting inconsistencies across periods
- Flagging unusual or out-of-pattern expenses
These suggestions are treated as prompts, not decisions.
AI output is reviewed before any expense is posted or approved.
Example Workflow: Expense Review With AI Support
A typical safe workflow looks like this:
Step 1: Expenses imported
Expenses are imported via bank feeds, card providers, or receipt capture tools.
Step 2: AI suggests categories
Based on historical data, AI suggests likely expense categories for each transaction.
Step 3: Human review
An accountant or bookkeeper:
- Reviews suggested categories
- Confirms tax treatment
- Adjusts classifications where required
Step 4: Approval and posting
Only after review are expenses approved and posted to the ledger.
At no point does the AI approve or finalise entries.
Where AI Categorisation Commonly Fails
Expense categorisation errors most often occur where:
- New suppliers appear
- Transactions have mixed business and personal use
- Tax treatment differs from prior periods
- One-off or unusual expenses arise
These situations require judgement and context that AI cannot reliably provide.
For this reason, review controls remain critical.
Controls Firms Commonly Apply
To manage risk, firms typically apply controls such as:
- Mandatory review of all AI-suggested categories
- Exception reporting for unusual expenses
- Periodic review of categorisation rules
- Clear guidance for staff on acceptable use
These controls ensure efficiency gains do not come at the expense of accuracy or compliance.
What AI Is Not Used For
In professional practice, AI is not relied upon to:
- Determine tax deductibility
- Resolve ambiguous classifications
- Override staff judgement
- Approve expenses without review
Responsibility remains with the accounting firm and its staff.
Conclusion
AI can improve consistency and speed in expense categorisation when used conservatively. Its value lies in supporting preparation and highlighting patterns, while accountability and judgement remain firmly human-led.
When paired with clear controls and mandatory review, AI can reduce repetitive work without changing professional responsibility.
This article is for general informational purposes only and does not constitute professional advice.
Practical AI for Accountants 
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