If accounting is the language of business (thanks, Warren Buffett), pre-accounting is the language of preparation.
By giving pre-accounting a little time and thought, you can save time and money and grow your business with better, more data-driven decisions. Here’s what you need to know.
What is pre-accounting?
Pre-accounting is the system through which a business’s key financial data is collected, coded, and submitted so that accounting can take place. Essentially, it means getting your data ready for accounting.
Why does pre-accounting matter to small businesses?
Businesses generate a huge amount of information: expenses, sales, bank data – the list goes on. For business owners, ‘getting data ready for accounting’ means searching through receipts or invoices, organising them and typing all the data into a spreadsheet or software. It can be tedious work – and it starts as soon as a transaction takes place.
The typical journey of a business receipt
Let’s say you buy lunch out for you and your business partner. Before you leave the table, you ask for a tax receipt and stuff it into your coat pocket. Traditionally, that receipt’s journey may look something like this:
- It lives in your coat pocket for a couple of days, until you rediscover it and leave it on your desk to sort out later.
- It then gets buried under a pile of more paperwork.
- Your accountant emails asking for this month’s expenses.
- You find the receipt, crumpled and coffee-stained, and send it to your accountant along with a shoebox of additional paperwork.
- The unloved, forgotten receipt is fetched out and read by your accountant.
- They code it, enter data into the general ledger, and keep it for years in a cupboard.
While this scenario might sound familiar, it’s far from ideal. Why?
- If you hold onto a receipt for weeks or months at a time, your books will not be accurate. This lack of real-time data may impact your decision-making and weaken visibility into your finances.
- This also increases the chances of fraud within the company.
- It increases the chances of forgetting the receipt by x%, leaving valuable items.
- And that’s not to mention being incredibly time-consuming for you and your accountant. You need to manually manage and store paperwork, while your accountant will do a lot of heavy-lifting to turn that into data for a spreadsheet.
If you’re a new small business owner and need some help understanding the world of accounting, check out our helpful guide, Accounting for Small Business.
Make life easier with pre-accounting software
The good news is that pre-accounting technology can make life much easier and more efficient for both you and your accountant. And not only is there an easy solution – it may well lie in your pocket. With your mobile phone, you can use a digital capture tool such as Dext Prepare to quickly and easily take photos of your receipts and expenses.
With pre-accounting software, the journey of a business receipt looks more like this:
- You take a photo of the receipt with your smartphone, using the Dext mobile app or your camera, then upload it to Dext Prepare.
- Dext Prepare reads your receipt quickly and accurately, extracting the data your accountant needs.
- Your accountant reviews this data and publishes it to the general ledger.
- Dext Prepare stores your receipt in the cloud for seven years to help you comply with HMRC’s requirements for keeping business records.
This method of instant document capture makes pre-accounting quicker and easier than ever. It also means more accurate data for you and your accountant – so they’ll be able to give you even better help. If you or your team frequently travel or work remotely, an instant document capture tool is perfect for sending information quickly and efficiently while you’re on the move.
Instant document capture alone saves Dext Prepare’s partners an average of one hour per client per week. That’s more time for them to spend on projects sitting on the back-burner, and maybe even leave early on Fridays.
But it’s not just about saving time. Pre-accounting software like instant document capture gives you access to real-time data that can ultimately help you make better decisions and grow your business.