Managing your books requires gathering, categorizing, reconciling, preparing, and finally reviewing your financial statements. Pre-accounting involves collecting invoices, organizing data, coding, and submitting the final financial information for accounting. Accounting is the language of the business. Error-free and reliable accounting gives you the benefits of smoother operations, informed decisions, saved time, a better bottom line, and increased compliance with regulations.
Why is Pre-Accounting Automation the need of the hour?
As per the report from McKinsey Global Institute, ‘A microscope on small businesses: The productivity opportunity by country,’ Micro-, small, and medium-sized enterprises (MSMEs) form the backbone of economies worldwide. They account for over 90 percent of all businesses, roughly half of the value added, and more than two-thirds of business employment. Despite being so central to the economies, small businesses are only about half as productive as large companies. While one might argue that the scale of business brings along with it the benefits of efficiencies of scale, thus making the business more productive and eventually more profitable, one cannot overlook the fact that the businesses that tend to be more productive are the ones that focus on higher value work. Engaging in high-value work builds better technology and superior human capital competencies. A new survey suggests there's a productivity blind spot among entrepreneurs with growing businesses.
The average entrepreneur spends more than a third–36%–of their workweek on small administrative tasks like invoicing, data entry, ordering office supplies, and organizing staff social events.
In a typical week, 59% log expenses, 44% create invoices, 43% do data entry, and 29% format documents.** These tasks don't only take away your attention from value-creating tasks but are traditionally also prone to human error. Even though time-consuming, pre-accounting activities such as gathering source documents and categorizing are imperative for better accounting and data integrity. Thus, carrying out these activities on your own or by outsourcing the same to a bookkeeper can riddle your small or freelancing business with high- costs, lack of real-time insights, slow labor-intensive activities, and limited scalability, among other issues.
This is where pre-accounting automation matters. Simply put, automation involves using software to handle key finance and accounting tasks automatically. Pre-accounting automation impacts the essential areas of your business, such as cost control, governance, and compliance, while doing so accurately.
Let’s see how these impact SMEs:
Scalable accounting solutions for businesses
Research shows that the time spent collating accounting data and information is 3x more than the time required for actual accounting. The reason is straightforward – manual processes, poor communication with accountants, and missing information create a time-consuming, inefficient, and costly workflow. As a business owner, you’d prefer to focus on critical tasks like analyzing & tracking key metrics relevant to the growth of the business rather than spending time on manual work and carrying out daily finance operations.
Real-time monitoring for accountants
Unlike large corporations, as a small business owner or a freelance worker, you have unique challenges when it comes to bookkeeping. You typically need to manage your own records and taxes, and freelancers often juggle multiple projects simultaneously, making it crucial to have an effective record-keeping system. In addition, there is also a requirement to be on top of expenses at all times to ensure cash-flow management, operational efficiency, and successful access to financing. Pre-accounting automation tools like Receiptor AI and Zapier help you stay up to date with your receipt management and expenses & other payables.
Automatic categorization of transactions
Categorizing your business transactions is an essential pre-accounting activity. When your business transactions are assigned to the correct categories, it helps you understand where your money is coming from and where it is spent, thus providing a clear picture of your business’s financial health. Accounting software will enable more efficient categorization. Nowadays, pre-accounting software that integrates with your accounting system allows for more efficient categorization. A pre-accounting software that utilizes AI can perceive categories based on the items purchased, significantly improving the categorization process.
Error reduction in financial reporting
Mistakes in accounts payable and invoice recording can prove extremely costly year after year. Let's not forget that as an SME, every penny saved is a penny earned, which can affect the bottom lines and eventually earnings. Effective and error-free invoice processing will reduce labor and paper processing and safeguard your business from fraud, regulatory penalties, and late payment fees.
Automated expense tracking
While most businesses view managing accounts payable as a necessary evil, the AP has significant control over your business. Without robust Accounts Payable procedures that follow best practices, companies risk losing the confidence of essential suppliers, incurring expensive fees, or simply failing to obtain crucial products or services when needed.
Automation can help businesses determine when to place supply orders, send out payments, and track invoices.
Pre-automation software like Receiptor AI simplifies tasks that were once manual, such as recording and categorizing receipts. This software harnesses AI technologies to automate the extraction of crucial data from receipts, organizing them into appropriate expense categories, thereby enhancing overall business efficiency.
By automating these processes, the software enables more accurate and real-time expense tracking, helping your business optimize performance by spotting trends, minimizing errors, and improving decision-making. Essentially, it streamlines the entire expense management process, allowing your business to run more efficiently.
From expense tracking for purchases to simply filing, processing, and confirming small operations expenses like travel and mileage reimbursements, it can take your business hundreds of hours each year. Not only is this procedure unnecessary, but it also hurts productivity and cost. As a small business owner, you may either outsource this task or do it yourself. Apart from the regular bookkeeping challenges that it might cause, it also keeps you dependent either on someone else or on the availability of your time. As a freelancer, you are more likely to use your time updating your travel expenses, which hurts your productivity.
Let's not forget expenses that are tax deductible require careful documentation. Whether you have incurred expenses for your home office or have costs incurred on account of your business seminars, to be able to deduct these as business expenses, you need to have your documentation in order. If you want to claim general sales tax as a deduction, you must also keep a record of those receipts. This is where a pre-accounting automation tool like Receiptor AI comes to your rescue. All you need to do is set up your email, and Receiptor AI will automatically extract receipts and send them to QuickBooks, Zoho, Xero, or Expensify. Gathering and categorization of your data is now easy and without manual intervention. And, what's more, you never lose a receipt, making verification of your reconciliation fool-proof.
It’s time to leverage AI and use it to carry out tedious but necessary tasks effectively and efficiently.
