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In simple words, pre-accounting is what happens before accountants actually sit down to prepare financial reports every month. It is the process of organizing, coding, then submitting key financial data for accounting.
Pre-accounting takes the lion's share of manual work, thereby opening up a Pandora's box to manual errors and potential fraud.
This is because the largest share of receipts and invoices come from employees. In all honesty, an employee doesn’t look at a receipt for compliance like an accountant does. The risk of non-compliance can start at the invoicing or spending stage and can potentially skew the entire process ahead. This is why pre-accounting is a critical process in accounting.
Role of T&E management in pre-accounting
Employee-initiated expenses fall into the travel and expense management process, where they are segregated, coded, and organized appropriately. Here’s a list of common problems stakeholders face involving expense reporting and expense policy compliance:
Employees are tasked with:
- Remembering company travel and expense policies
- Keeping track of all business expenses
- Storing and safekeeping of all expense receipts
- Filing and submitting complete expense reports on time
Approvers/Finance teams are tasked with:
- Verifying every claim and receipt for compliance
- Ensuring no fraudulent or non-compliant claim is processed
- Keep detailed records of all actions taken on expense claims
- Process employee expense reimbursements on time
- Organizing and safekeeping all expense reports and receipts for future audits
Further, if corporate credit cards come into the picture, that’s a whole different story. Manually matching, verifying, and reconciling the many, many credit card transactions is no joke!
Since travel and expense management is such a time and labor-intensive process, the chance of data entry errors, non-compliance, expense report fraud, and inaccurate financial reporting is very high. This is where automation really saves!
Why should you consider expense management automation?
An expense management software automates every step of the expense management process. It also eliminates the need for manual data entry and expense report verification. This saves all the stakeholders time, money, and frustration.
An expense management software is also incredibly valuable to an accountant - the person responsible for ensuring corporate and regulatory compliance. Here’s why.
Benefits of using an expense management system
Automates pre-compliance for all employee expenses
An Expense management software comes with robust business rules engines. Once you’ve fed company t&e policies into it, the software checks every employee expense for policy compliance. In the case of policy violations, the system raises flags and notifies any important stakeholders automatically. It also records all actions taken on it in a detailed digital audit trail attached to every individual expense.
In other words, an expense management software takes every action necessary to check for and ensure compliance, hence automating pre-accounting for all employee expenses. The single most unproductive task an accountant has to do - automated!
Automates credit card reconciliation
Corporate credit cards are a great way to gain more control over employee spending. Besides, they offer Finance teams more visibility into where the spending is happening without depending on employees to submit reports. That said, Finance teams still have to verify credit card statements with transactions and audit them for compliance.
An expense management software integrates with multiple credit card vendors to get direct transaction feeds. Then, it matches expenses, receipts, and transactions automatically. This eliminates the need for any manual intervention. Once done, reconciliation becomes a one-click deal for accountants, leaving them more time to focus on strategizing for the future.
Integrates with accounting software
An expense management software comes with integrations that allow it to talk to other software like QuickBooks, NetSuite, HRMS, or the travel desk. This makes it easy for Finance teams and accountants to move employee, expense, category, report, and receipt data around securely.
An expense management software enables you to directly export all employee expense reports to appropriate categories and users in your accounting software. Additionally, it allows admins to directly upload attachments from the expense management software while creating checks, journal entries, bills, or credit card purchases.
Since the softwares handle data migration amongst themselves, this eliminates human intervention and automates receipt management. This ensures that all pre-accounting data essential for the primary accounting process is complete, accurate, and compliant.
Focus on financial planning while ensuring automated compliance
Bottom line, an expense management software takes over all the heavy lifting when it comes to expense reporting. Be it manual data entry, expense report verification, or even payment processing, an expense software has you covered.
Knowing the company is in a constant state of audit-readiness, employees can focus on strategic goals instead of spending billable hours on completely automatable tasks. Additionally, real-time visibility into spends enables Finance teams and accountants to identify opportunities and risks well in advance to plan accordingly.
Pre-accounting automation is no longer a wishlist item; it is the need of the hour.
Author Bio: Yashwanth is the Co-Founder and CEO of Fyle. He has a passion for product/market development and solving problems that have a large scale business impact. Yashwanth has an extensive background in customer/user experience and has excelled in both enterprise & solution sales working for global MNCs & early to mid-stage venture-backed startups across the world. He started Fyle along with his co-founder in 2016 with the goal of building a new standard for expense management that's fit for this generation.