Historically, bookkeeping has always been a very labour intensive activity involving considerable manual data input. Originally this involved writing entries in ledgers by hand and latterly this was replaced by typing data into accounting software packages. However, things are changing rapidly which is driving increases in the productivity of bookkeepers and eliminating unnecessary data input errors.
Most businesses have embraced online banking which in itself has greatly improved efficiency. With the exception of paying in cash and cheques, most banking activities can be undertaken from the business premises or on the move using a mobile device. An additional benefit of online banking is the ability to connect your accounting software to an online banking feed; more on this shortly.
When you first configure your accounting software, unless you are very close to the start of the accounting year then a phase of 'catch up' will be needed to bring the accounts up to date. A simple but effective way of doing this is to bulk load banking transactions from the start of the accounting year using comma separated files (csv files). These are usually available through your online business banking interface for download to your workstation or laptop. A straight forward process maps the csv file format to the accounting package and the bank transactions are quickly uploaded to your chosen accounting software where they are available for review.
At first, the accounting software will not have learned to which account each transaction should be allocated, but it will soon recognise a payment to A.B. Garages as Fuel or a payment to Pens & Paper Ltd as Stationery, etc. Even if an association has not been made, it is quick to select the required account and assign the transaction. It is even quicker to just click 'Match' once the association is made. Either which way, it is far quicker than manually entering the transaction details from scratch. You may also have raised an invoice for a customer and when the payment arrives, usually the accounting software will recognise the customer account and the invoice amount allowing a match to be made.
Once catch up is complete, bank transactions can be loaded into the accounting software automatically via a bank feed. Your online banking details are used to establish a connection and land transactions in the same review area as used for csv file uploads. The associations made during the file uploads continue to be used and evolve further as more records are processed. In addition to current account bank feeds, automatic feeds can be established for credit card accounts as well. The transactions generated for credit card spending can be used to automatically create expense records in your accounting software. When the balance on your credit card is paid off from the current account, a transaction mirroring this within the accounting package is created as well.
Data Capture Applications
Generating transactions automatically from a bank feed is great for debit card transactions, direct debits and standing orders. It does not however help with cash transactions and invoices received or deal with the delay experienced between making a debit card payment and receiving the transaction on the bank feed (if prompt recording of the transaction is important). Nor does it address the need for archiving your receipts as evidence of purchase. Fortunately, technology can solve these issues.
There are a number of applications on the market now such as AutoEntry, Receipt Bank and Datamolino which make the capture of data from receipts and invoices easy. They work by uploading images of the data source such as a till receipt to a central server on the internet where the image is processed and key information extracted. Providing the quality of the image is good, then the accuracy of this process is surprisingly high. The image can be uploaded via different means:
- Smartphone app - The app is used to take a photo of the receipt or invoice which is then uploaded to your application account.
- Browser upload - A pdf file for example (perhaps created by scanning a receipt or invoice) is uploaded to your application account.
- Email - An image file is sent to a dedicated email address associated with your account. It may be that you yourself send the email or perhaps you encourage your customers to send their invoices directly to the nominated email address.
Whichever method is used, the end result is available for you to review after which it can be loaded directly into your accounting software; a process that takes only a matter of seconds. If your processes are mature and you are confident in your transaction/account associations, it is possible to fully automate your feed from mobile phone app to arriving in your accounting software (though this is too ambitious for most people).
Invoices automatically generate a bill transaction and receipts generate an expense transaction; all automatically generated transactions include an attachment with the original receipt or invoice image. This process removes all manual data input within the accounting software and efficiency can be further enhanced by batching several images together. When the associated transaction is received on the bank feed, it matches the bill/expense that already exists and can be accepted immediately. This summary greatly simplifies the sophistication of the process and does not discuss the various additional facilities that are provided with the Data Capture Applications.
This short review demonstrates the enormous potential for eliminating manual data entry which is slow and error prone while maintaining your accounts. Furthermore, since digital images of the source documents are saved with the transactions, the need to archive bulky paper receipts is removed and the likelihood of loosing receipts eliminated. Where suppliers can be pursued to send digital invoices then paper can be eliminated altogether and the accounts maintained in near real time.