Is your pre-accounting process losing you money?
Pre-accounting isn’t a word we hear every day but is a concept you are likely already familiar with. So, how do we define it?
Pre-accounting (n.) - the system through which a business’s key financial data is collected, coded, and submitted so as to enable accounting to occur.
In other words, it’s the tedious work of searching for receipts or invoices, organising them and typing all the data into a spreadsheet or software.
Usually, a business owner incurs an expense and must hold onto the receipt, get it to his/her accountant in a timely manner and be able to identify why a purchase was made. The accountant must then read the receipt, determine how to code it, enter the key data into the general ledger, and in order to remain compliant, store that single piece of paper for years.
As you can see, pre-accounting has a paper problem.
The problem with all the paper
Businesses generate a huge amount of information – expenses, sales, bank data, payroll. Keeping track of it all can be a huge task for any owner, which is why many hire a bookkeeper or accountant to help with pre-accounting.
For centuries, the pre-accounting process has been driven by paper. Paper receipts, paper invoices and paper ledgers to record it all. But in the digital world we now live in, there’s an increasing benefit for businesses and practices alike ditching the paperwork and taking the workflow digital.
With a digital pre-accounting process, the workflow is simpler and much more efficient, thanks to technology and advances in automation and AI.
A digital solution: before and after
Let’s compare what the pre-accounting process looks like for both business owners and accounting professionals before and after implementing a digital workflow.
Before: As soon as a purchase is made, you must hold onto the receipt. If you don’t lose it in the car, put it through the wash or accidentally throw it away, you have to store it somewhere safe to give to your accountant. You then have to determine how to get receipts to your accountant at the end of the month.
After: As soon as a purchase is made, you can submit the receipt or invoice digitally for processing and not have to worry about securely storing the receipt.
For accounting professionals:
Before: You wait to receive clients’ documents at the end of the month, or worse, end of the quarter and then get to work sorting, processing, and entering all the data. You then need to determine how to save the paper receipts securely - either scan each one in or store in a filing cabinet.
After: As soon as clients’ documents have been captured, you can get to work processing this information, getting the data organised and starting the genuine accounting work – all done in real-time in the most efficient way possible.
How to fix your pre-accounting process
Establishing a more efficient pre-accounting workflow is easier than you might think. If you commit to letting technology do the heavy lifting for you, you’ll be well on your way to optimised efficiency in no time. Here’s how to get started:
- Examine your current workflow and its challenges - For example, if you are spending five hours each week driving from client to client to collect their receipts and invoices, this would be a significant bottleneck in your workflow. What happens if you are sick, your car gets a flat tyre, or your client isn’t available for you to pick up the receipts?
- Identify desired outcomes - In the same example above, a desired outcome might be eliminating the need to drive from client to client and having those receipts and invoices delivered to you digitally in real time.
- Research and implement tech solutions - Technology should make your life easier, not more complicated. Don’t try to implement too many new tech tools at once. Instead, prioritise your needs based on your desired outcomes.
- Train your team and onboard clients - Change can be hard, especially if your clients aren’t tech-savvy. Be sure to get your team’s buy-in on any new technology and communicate the value of the new tech to your clients. They may be resistant to it at first, but if they understand the value it adds to their own workflow and overall business health, they’ll likely never look back.
- Track progress and monitor performance - Take time to evaluate your new workflow and monitor your progress towards your desired outcomes. After all, technology should make your life easier, not more difficult.
The implications of embracing technology are huge. As you can see, once you eliminate the paper, pre-accounting is less cumbersome for everyone involved. The key difference is the speed of digital solutions. Aside from saving you time, a digital pre-account process saves you money and gives you accurate, real-time information on how a business is performing now, not how it was performing six months ago.
If you’re an accountant or bookkeeper, this is information you can draw on to offer your clients valuable insights. If you’re a business owner, you can see your cash-position in real time. Whichever your role is, your success depends on good pre-accounting.
Molly Gunion, content marketing executive at Receipt Bank