I’ve recently been evaluating business document management software for the specific purposes of keeping accounting records and have come across a feature that I thought was useful but am now starting to question. That feature is the ability to export data from document managent software, like Shoeboxed, Receipt Bank, or Neat into your accounting software, like QuickBooks or Xero.
The reason I question the utility of this data export is because of the way online accounting software can import much of a receipt’s information using data from a bank statement (whether it be a digital download or a direct connection between the software and a bank).
Data that can be pulled from a bank statement includes:
- Name (vendor / customer / employee)
- Date
- Amount
- Bank or credit card account
The above information is almost all that is necessary to enter a transaction into your online accounting software. There are still a few pieces of the puzzle that are missing. That’s where the ability for some online accounting software to remember past transactions as well as allow you to create rules to categorize future transactions comes in handy. These memorization / categorization features can add additional data such as:
- Account to categorize the transaction to
- Taxes
This means much of the data that document management software could extract can already be done by online accounting software. So, why would you need your document management software to extract data from your receipts when your online accounting software can already do it?
That’s an open question that I don’t know the answer to.
What I do know is that there’s a con to both your online accounting software and business document management software entering your bookkeeping transactions; at some point both software will fail to enter the correct information.
For online accounting software, this will be because the automatic categorizations, whether through algorithms that remember past transactions or user-created rules, won’t get it right 100% of the time. For business document management software, this will be because of computer or human error (some services use a combination of OCR – optical character recognition, algorithms, and human checkers to extract data).
Because online accounting software is pulling more than half of the transaction data directly from a bank, that portion is going to be almost 100% accurate. On the other hand, business document management software has the extra benefit of a human checker, but it’s a human who doesn’t intimately know the business whose receipts he/she is checking.
In any case, verification of the transactions will need to be done by someone with knowledge of the company’s books. The question then becomes, is this verification better done at the online accounting software stage or the business document management stage? Given that the online accounting software has the added benefit of near 100% accuracy for more than half the transaction details (name, date, amount, bank / credit card account), I’m going to have to say that verification of data is best done in online accounting software.
What I do think would be very useful is for those digital bookkeeping documents to be automatically matched to transactions in online accounting software. This would make the verification process much simpler, since you could see both the image of the receipt as well as the data entered from a bank statement. You’d have all the pieces of the puzzle in one place (provided the receipt had all the proper information). If this receipt could then be attached to the transaction, so that it can be pulled up in the case of an audit, that would be the icing on the cake.
So, if you know of any online accounting software that has the ability (whether natively or through a third-party app) to automatically match, extract data from, and attach digital documents, I’d love to know. That would be sweet.
