A practical guide to preaccounting (plus a downloadable PDF)

Preaccounting is an essential component of every successful business. But what is preaccounting exactly, and why does it matter? 

We’ve put together a comprehensive guide to help you understand everything you need to know about preaccounting, empowering you to streamline tedious tasks and save both time and money. Let’s dive in! 

What is preaccounting?

Preaccounting is the process through which financial data is gathered, coded, and aggregated so accountants can do their jobs. Think: sorting through piles of receipts, logging billable hours, entering data into endless Excel spreadsheets, and tallying up mileage. It’s like the stage crew for a theatrical production — you might not actively think about the lights or the sound design while you watch a play, but without it, the show couldn’t go on.

In 2017, Expensify coined the term “preaccounting” to capture this monotonous (and absolutely necessary) behind-the-scenes work required to keep businesses of every size — from startups to large corporations — afloat. Since then, it’s become a recognized and essential part of the financial process industry-wide.

How does preaccounting work?

Preaccounting works by prioritizing the many small tasks that ensure accounting functions are executed seamlessly and accurately. But what are the preaccounting tasks we’re talking about? Let’s break them down below. 

• Data gathering and organization: Before accounting can begin, relevant financial data must be collected, sorted, and organized. This process involves collating invoices, categorizing receipts, sorting through bank statements, and compiling other financial documents. 

• Categorization and coding: Every financial transaction, whether it's travel expenses, office supplies, payroll, or utilities, must be categorized correctly to ensure accurate tracking. Proper coding assigns specific labels that help classify transactions accordingly, keeping everything where it needs to be.

• Validation and documentation: Ensuring the accuracy and legitimacy of financial data is essential. This step involves validating transactions, cross-referencing with supporting documents, and maintaining meticulous records.

• Entry into accounting systems: The prepared data is then exported into your accounting system (like QuickBooks, Xero, Sage Intacct, or NetSuite). This step entails recording transactions, applying appropriate debits and credits, and generating initial financial statements.

Prioritizing each of these steps at the right time is crucial for maintaining financial accuracy and transparency — and makes your accounting process a whole lot easier. With the right resources, tools, and expense management systems, preaccounting creates a smooth, efficient transition into the accounting phase.

Is preaccounting the same as accounting?

No, preaccounting and accounting are distinctly different (and equally necessary) processes. Preaccounting encompasses the groundwork, preparation, and organization of financial data often done by employees in order to set the stage for accounting tasks. Accounting then analyzes, interprets, and summarizes the financial data preaccounting provides, which is all done by finance and accounting admins. 

Benefits of prioritizing preaccounting for your business

It can be difficult to discern who’s in charge of preaccounting. While it's not technically the job of the accountant or the client, this process is essential for accountants to do their jobs — so, naturally, the accountant is the one who usually winds up responsible for getting it done. 

It’s important to empower every individual within your organization to take charge of preaccounting for themselves to get ahead of the bottlenecks that can occur without such a system in place. With tools like Expensify, anyone who incurs expenses can handle their own records effortlessly. Just snap a photo, and the system will automatically import and sync with categories from your accounting package. 

And the best part? Expensify can even auto-submit expenses for you. This approach not only simplifies the process but also ensures everyone is proactive about their expenses, leading to swift reimbursements.

While it might feel tedious, taking the time to establish a preaccounting process will help your business run more smoothly and lead to long-term benefits, including:

Enhanced financial accuracy 

Prioritizing preaccounting ensures your financial reports are error-free. Think of it as a pre-check: by ensuring your data is correct from the very beginning of your process, you dodge those pesky errors and bottlenecks later. Who doesn't want spot-on finances? 

Time savings 

Establishing a preaccounting process is a surefire way to get more hours back in your day. It gives your accounting team a head start so you can spot and squash discrepancies before they grow into time-sucking headaches.

Strategic insights

Preaccounting gives you a crystal clear view of your financial big picture. Prioritizing this process gives you clean, organized data that you can use to spot trends, forecast spend, avoid pitfalls, and grab golden opportunities, helping you make every move with confidence.  

Take a deep dive into preaccounting

While this article provides an overview of preaccounting's importance, our comprehensive guide takes a closer look into this critical process. Gain valuable insights into advanced strategies, industry best practices, and real-world case studies — plus, we uncover common preaccounting pitfalls so you can make sure your preaccounting process is always efficient.

Level up your preaccounting processes 

From the granular tasks of preaccounting to the broad spectrum of business accounting, Expensify has you covered. Whether you're juggling receipts, tracking mileage, or integrating expenses into your main accounting software, we simplify and streamline it all. Our platform isn't just about managing expenses, it's about empowering businesses like yours to achieve maximum financial efficiency — and that starts with preaccounting.

Itching to dive deeper? Download our comprehensive preaccounting guide today or learn more about other accounting lingo, like debit vs. credit accounting.