Tax report deadline is approaching. You have so many things to do. Tasks are pilling up. The workload is crazy. Stress levels are through the roof. Once again receipts have to be collected, sorted and books processed.
If you are doing your bookkeeping on a regular basis (as you should!), all this work is distributed to smaller chunks of your time. Instead of processing the whole year at once, you do it on a monthly basis, which makes it more manageable. Congrats, you took your first step in creating a process for your company.
Have a bookkeeper/accountant? Good for you. The problem still stays the same – you are spending time on collecting all the receipts. Even if you have a bookkeeper who will process them all for you, they still somehow need to end up in their hands. The problem goes so deep, that it even has a name - “shoebox accounting”. Yep, there have been so many businesses that have been sending all the receipts literally in a shoe box, that accounting industry coined a term for it. But that’s the extreme.
In today’s age many of the receipts/invoices are digital; hence it is easier to process them. But with so many emails it is easy to forget or skip some of them. Frankly, it is a dull job that takes away from your precious time. Get a receipt. Forward it to an accountant. Log in to Service X. Download the invoice. Forward to the accountant. Snap a photo of the receipt from that nice business dinner. Forward to the accountant. Collect. Forward. Process. Times hundred.
What if some, if not most of it can be automated? How much time would you save?
This process is a great candidate for automation. Reason for that is that bookkeeping:
- Repeats constantly
- Involves a lot of manual labor
- Some tools can help with it
Let’s start with the business process and then add software automation to it. Your software tools may vary, but the general idea is the same. Even if you have to add few additional software subscriptions, it will still be more worthwhile than doing it yourself or by someone in your team.
The Bookkeeping Business Process
1) Collecting all the invoices
There are few sources from where you can collect invoices:
- Paper receipts (restaurants etc.; we can’t get away from these)
- Digital invoices in the email (one-off purchases and recurring)
- Digital invoices downloaded from the web (sometimes you need to login into the app to get an invoice)
Now that we identified the types of invoices, next step is to create a list of all expenses you have and categorize them.
- AWS / Google Cloud Platform / Hosting - invoice in email - recurring monthly
- G Suite - invoice in email - recurring monthly
- My electricity provider - download from the web - recurring quarterly
- Mobile phone operator - download from the web - recurring monthly
- Some business purchase from Amazon - invoice in email - a one-off
- Gas provider - paper - quarterly
- and so on
2) Forwarding invoices to one place (centralize)
Shoe box? Let’s hope not. Once you collected all the invoices, they all have to be put somewhere together, to make it easier for your accountant to do the processing. Having them all in digital format makes things easier.
3) Processing invoices
From each invoice you’ll have to extract the following information:
- Name of the merchant
- Amount (and currency)
With that information, your accountant usually can put the expense in proper tax category. Sometimes, additional clarification might be needed.
4) Account reconcilliation
After you checked them, all the expenses have to end up with correct details in the accounting software and then matched up with your bank account statements.
Or don’t. Let’s automate this thing.
How to Automate bookkeeping
Here is the list of tools we will be using:
- Xpenditure - Expense management app (the hub for all expenses)
- Zapier - Links different apps together and automates the workflows (the link/glue between apps we use)
- Xero - Accounting software (the final destination)
- G Suite / Gmail - Email platform (source of receipts)
- Dropbox - file sharing and storage solution (source of receipts)
Note: you don’t have to use the same tools. Each of these tools has the alternative. What it matters is recognizing the role of each one and applying the concept to the tools you already use. For example, in addition to Dropbox, I’m also using Google Drive.
Depending on the type of invoice and frequency, there are few strategies for receipt collection.
Collecting paper receipts
When it comes to paper, there is no other way than converting physical to a digital version. For that, we’ll be using the Xpenditure app.
Snap a photo, and they will OCR the date, amount and merchant.
Digital invoices in the email
Using Gmail / G Suite makes things easier. First, add a label to an email (collect). Then forward to Xpenditure (forward to one central place).
- Find a service that’s recurring (e.g., SaaS apps)
- Create a filter in Gmail (e.g. “from:(email@example.com) has:attachment”) and apply the label “expenses.”
Every time you get a new email that matches a filter, the label will be applied, and you can forget about that invoice type.
Add a label “expenses” when needed for one-off purchases (e.g., ebook purchase).
Creating Zapier task - Gmail to Xpenditure
Now that all the emails (you can have multiple accounts) are getting tagged with “expenses” label, they have to be synced/forwarded to Xpenditure. For that, you can use Zapier.
- Trigger: Gmail - New Labeled Email - Label: “expenses.”
- Filter: Only continue if “Labels” “does not contain” “expenses processed.”
- Action: Gmail - Send Email
- Subject, Body and Attachments can be selected from Step 1
- Label: “expenses processed”
This Zapier task looks for all new emails with “expenses” label and simply forwards these to
firstname.lastname@example.org (In Xpenditure you can whitelist email addresses that can send). Also skips already processed emails (ones with the “expenses processed” label).
Once you have the workflow set up, all you have to do is to add a label to new one-off emails (processing of recurring ones is automatic).
Digital invoices downloaded from the web
Some providers won’t send you an invoice in the email. For that, you’ll have to log in to the app and download the invoice (or delegate this process to VA).
Use Dropbox. Xpenditure has a native Dropbox integration. Once you connect your Dropbox account to Xpenditure, all you have to do is save downloaded invoices to
~/Dropbox/Apps/Xpenditure/inbox folder (well, for Mac). Dropbox then automatically syncs them into Xpenditure.
Collection completed. Everything is in one central place
With this, you cover all types of invoices. In this case, Xpenditure acts as a central hub for invoices. The one central place where your accountant can check everything.
An added benefit of having an expense tracking app is that it helps you with the processing part. Date, amount and merchant will be OCR’d, which means less manual work. And the quality is ok.
Once you synced everything there, all you have to do is check for errors and categorize the invoices. Or you could create a standard operating procedure for accountant/bookkeeper/VA to do that instead of you.
When you double checked everything, it’s time for another sync. This time from your business expense tracking app to the accounting software.
All you have to do is connect Xpenditure to Xero accounting software (with few options to setup) and occasionally click “Sync” button (at least in theory - integration is a bit glitchy).
Xero enables you to sync transactions from your bank. Once you have all the expenses there, you can match them with bank statements. And that’s where the accountant does the reconciliation.
Books are up-to-date. You have a near real-time financial overview of your business (makes planning effortless!). And you freed-up more time to build your business.
What tools will you use doesn’t matter - as long as they serve the purpose of making your life easier.
To summarize, these are four steps to bookkeeping automation:
- Collect - get receipts from different sources
- Centralize - have all receipts in one place
- Process - check for errors and categorize
- Reconcile - match the books with expenses
The process takes some time to set up, but the benefit is clear. Way less time spent on admin tasks. Structure, not chaos. Ready to automate? Great. Enter the email below to get your Bookkeeping Automation Checklist.