Pre-accounting is a key concept for any business. It operates upstream of traditional accounting tasks and offers your company better management, improved cash flow, and consequently, a healthier financial status.
What is pre-accounting?
Pre-accounting is the preliminary phase of the accounting process. It is a set of tasks performed before the final entry of accounting data. In other words, it's a preparatory step that precedes formal accounting and aims to collect, sort, verify, and organize documents and information that will later be processed by an accountant.
These documents include customer and supplier invoices, purchase orders, payment receipts, purchase proofs, and any other documents necessary for the company's accounting. In practice, this phase can be overseen by an accounting assistant or done using a pre-accounting software.
What you need to remember here is that pre-accounting refers to all tasks that precede the intervention of the accountant.
What are the key steps of pre-accounting?
Pre-accounting covers all supporting documents used in accounting, from purchase and sale invoices to purchase orders, not to mention delivery slips and expense reports. These documents are essential to ensure the accuracy and reliability of accounting records.
Here are the various steps to optimize your pre-accounting management:
- Collection of accounting documents: This step involves gathering all necessary documents for accounting. This includes invoices, receipts, purchase orders, and more.
- Checking and validation of accounting documents: Here, one ensures that all collected documents are complete, accurate, and in compliance with current accounting standards. Any inconsistencies or errors must be identified and corrected.
- Account reconciliation: Reconciliation aims to match transactions recorded in accounting with source documents (e.g., bank reconciliation between bank statements and cash journal).
- Preparation and validation of payments:This step ensures that all invoices are ready to be paid and the amounts are correct. After checking, payments are approved and processed.
- Account allocation: At this point, each transaction is categorized according to the appropriate account in the chart of accounts, ensuring each amount is assigned to the right category.
- Updating accounting journals: All validated transactions are then recorded in the appropriate journals, such as the revenue book, purchase register, etc.
- Export of accounting documents to accounting software: Once all the previous steps are completed, the data is exported to an accounting software for a deeper analysis or to be reviewed by an accountant.
Why is pre-accounting important for your company?
Pre-accounting plays a pivotal role in managing your business for several reasons.
Optimized accounting management: Pre-accounting helps you achieve better accounting management by simplifying tasks for your accountant. By preparing data in advance, you minimize the risk of errors and streamline the billing process, allowing your accountant to focus on more strategic tasks for your company.
Improved cash flow management: By preparing data related to invoices, purchases, and payments in advance, you get better visibility of your cash flow. This way, you can anticipate potential difficulties and optimize your financial management.
Regulatory compliance: Efficient pre-accounting ensures all your transactions are properly documented and categorized. This is vital to meet regulatory requirements and ensure your business complies with current accounting standards. It can also make potential audits smoother.
Informed decisions: Pre-accounting provides updated information about your company's finances. Access to accurate and up-to-date data enables you to make informed decisions regarding investments, hiring, and other crucial aspects of business management.
Cost reduction: By minimizing errors and avoiding redundancies, good pre-accounting can help reduce costs associated with correcting mistakes or managing unexpected financial problems. Better organization can also decrease billable hours by your accountant.
How to integrate pre-accounting into the overall business strategy?
Pre-accounting should not be seen as an isolated task but as an integral part of your company's overall strategy. The data collected and organized during pre-accounting serves not only the accountant but can also be used for strategic decision-making.
Financial planning and forecasting: Pre-accounting provides better visibility of your current and future cash flow. This allows for more accurate financial forecasting and thus more effective planning for future investments.
Risk management: By highlighting potential issues (payment delays, billing problems, etc.), pre-accounting lets you identify risks and take necessary measures to mitigate them.
Business performance: The data gathered during pre-accounting can also be used to assess your business performance, for instance by comparing forecasted and actual revenues.
Why invest in a pre-accounting software?
With the steady progression of digitization, pre-accounting is becoming increasingly essential. It optimizes processes and increases efficiency. Pre-accounting software automates many tasks, thereby reducing human errors and the time spent managing these tasks.
Digital tools also provide real-time access and updating of accounting information, making decision-making easier. They also offer the possibility to work remotely, an increasingly important feature in today's context.
What are the features of pre-accounting software?
Pre-accounting software emerges as indispensable tools to optimize accounting operations, facilitating the transition between regular transactions and their integration into the formal accounting system. By automating and simplifying once laborious tasks, they represent significant time savings and error reduction. Let's explore the essential features that make these software the preferred choice of modern businesses seeking efficiency and compliance.
Automated Invoice Capture and Transfer: This function captures invoices from suppliers and automatically routes them to the client's platform, eliminating the need for manual entries or physical transfers, making the process faster and less error-prone.
Order Entry Automation: Integrated with the ERP system, the software automatically retrieves and processes purchase orders, ensuring precise correspondence between orders and invoices, simplifying reconciliation.
Updating Purchase and Bank Journals: From the invoiced data, software updates the relevant journals, ensuring all transactions are correctly recorded and tracked. This is crucial for accurate accounting and avoiding inconsistencies in records.
Simplified Accounting Entry Export: Pre-accounting software allows for a one-click export of accounting entries to other accounting systems or platforms, facilitating collaboration with accountants or other stakeholders and ensuring a smooth transition between pre-accounting and final accounting.
Accurate Transaction Label Transmission to Banks: To ensure accurate financial flow management, the software sends transaction details, such as labels, directly to banking institutions. This allows for clear concordance between banking and accounting records and facilitates bank reconciliation.
Beyond these essential features, some pre-accounting software offers additional services for even more optimized pre-accounting management:
Artificial Intelligence and Predictive Analysis: Some pre-accounting software incorporates AI capabilities, detecting anomalies or inconsistencies in data, predicting cash flow trends, or even anticipating future financial needs based on historical data.
Integration with Other Business Tools: The ability to integrate with other tools, like CRMs, payroll systems, or project management tools, adds an additional layer of flexibility and efficiency, offering a holistic view of company finances.
VAT and Tax Management: Automate calculation, declaration, and submission of VAT or other relevant taxes, ensuring the company remains compliant with local tax regulations.
Advanced Security and Encryption: Financial data is sensitive. Modern pre-accounting software often offers high levels of security, including data encryption, two-factor authentication, and regular backup protocols to ensure information protection.
Customizable Reports and Dashboards: Users can create reports tailored to their specific needs, allowing for deeper analysis and providing relevant insights into financial performance.
These additions, combined with the initial features, make pre-accounting software not only essential for efficient accounting management but also a powerful tool for strategic decision-making within the company.
Choosing your pre-accounting software correctly
To choose wisely, consider certain aspects to avoid surprises:
Accessibility: Do you prefer software installed locally on your company's systems, or are you open to a cloud or SaaS solution? Even if the features may be similar, pricing models and services often vary. SaaS software is becoming more popular in the accounting field.
Usability: Like digitization, pre-accounting requires an intuitive platform. Software with user-friendly interfaces avoids a lengthy learning phase and allows for immediate use.
Integration with your existing application ecosystem: Ensure the pre-accounting software can easily integrate with your existing IT tools. Seamless synchronization and simplified data transfer are essential for optimizing your accounting work.
Security: Handling financial data requires impeccable security. Solid measures must be in place for entering, viewing, editing, deleting, sharing, and backing up your accounting data.
In conclusion, choosing pre-accounting software is crucial for effective financial management. I hope this article will guide you in this process.
In conclusion, pre-accounting is an indispensable tool for better management of your company. It simplifies tasks for your accountant, provides better visibility into your cash flow, and saves time. To get the most out of your pre-accounting, it's essential to choose the right tools and train your accounting teams in the best pre-accounting management practices.
Flowie is a solution specially designed to address these issues and support you in managing and automating your pre-accounting.
Click here to book a demo and start taking advantage of the many benefits of optimized pre-accounting.