Pre-accounting refers to all of the mundane tasks, like collecting and collating information and assembling supporting documents, that must be done before actual accounting takes place. Behind that definition lie many tiresome hours spent collecting receipts, entering data, and reconciling statements. But although these tasks may be tedious, they’re the foundation of accounting work, and accountants rely on them to form a solid — and accurate — base of information.
As financial software and accounting automation tools become increasingly sophisticated, the nature of pre-accounting has been shifting. Innovations like credit cards with built-in data capture and syncing to the General Ledger can reduce the amount of manual reconciliation work that must be done. Without the right software, companies can spend unnecessary hours on pre-accounting tasks. Take a look at some pre-accounting tasks below and discover how the right systems can streamline, or even eliminate, them.
Consolidating and reconciling information.
In an era of cobbled-together software solutions for disparate finance and accounting tasks, pre-accounting has expanded to include cross-platform reconciliation and integration.
A consolidated platform eliminates the need for cross-platform data input and reconciliation.
For example, a spend management platform consolidates bill payments, employee reimbursements, and credit card functions to replace a messy tech-stack. This means the pre-accounting task of pulling disparate data into the GL is no longer necessary.
Software can also ease the pre-accounting task of reconciling bank statements with reporting that provides access to transaction-level information. Finally, when card information syncs directly to the GL, there is no more need for credit card reconciliations. An additional benefit of centralized data sources being reconciled in real-time is that financials are always in an audit-ready state, and it’s even possible to move towards continuous accounting.
Compiling employee expense reports is a pre-accounting task that relies on employees (who have spent money) to cooperate for completion. Software solutions are increasingly incorporating approval workflows, effective policy controls, and accounting automation to ensure that expenses are easily captured by the system as they occur, making cumbersome bulk expense reports are no longer necessary.
The collection of required documents can also be built into a consolidated spend management system to further reduce pre-accounting time.
As a transaction moves through each stage in the process, it generates a trail of supporting documents, from its approval onwards. In the event of an audit, those documents must be readily available. If, for example, an approval is buried in an email or Slack conversation, many frustrating hours are wasted trying to compile information. Airbase’s Annual Benchmark Survey of Finance Professionals found that document gathering was one of the top manual tasks performed by finance teams.
A spend management system can ensure that a vendor bill isn’t paid until a W-9 has been submitted, which reduces the pre-accounting time involved in 1099 reporting. This ability of modern systems to build controls into pre-accounting tasks creates another element enabled by automation: pre-compliance. When systems enforce compliance upfront, the finance team doesn’t have to spend time trying to resolve incidents of unnecessary or wasted spend. Employees don’t have to worry about spending outside of policy.
Receipt collection is one of the more onerous pre-accounting tasks, in part because it extends the burden beyond the finance team to employees making purchases. Creating automated rules that enforce receipt submission, and, when possible, making it easy to do on a mobile device, removes the burden for employees — and for finance teams, who must otherwise invest pre-accounting efforts into chasing after receipts.
Collecting invoices and matching them to purchase orders and receipts is another pre-accounting task that can’t be skipped and that creates extra work. Smart bill pay systems can generate purchase orders when required, electronically validate invoices, and match all required components to create a bill, then execute timely payment.
The evolution of pre-accounting.
Technology continues to reduce the number and scope of pre-accounting tasks necessary and makes those that remain easier and less onerous. When getting the books closed is dependent on completing all of these pre-accounting tasks, the benefit from eliminating and streamlining them is clear. But technology in and of itself is not the answer; it can sometimes lead to increasing the pre-accounting workload. Seeking consolidated platform solutions instead of point solutions can go even further to lift the burden of pre-accounting tasks. If you’d like to learn more about how Airbase can help, contact us for a demo.