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Small pitfalls in your tech stack slow you down

19th May 2023
Brought to you by
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Aurelia are the automation and software experts for accountants and finance leads. We want to to...
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You have your tech stack that you are proud of - an accounting tool, an OCR tool, maybe AR and payments software on top of it. The tools you have on your side, made you 80% more efficient when churning through hundreds of invoices and transactions. Now, you’re left wondering - what do you do with the remaining 20%? How, as a sole practitioner or a bookkeeper can you make marginal improvements to increase accuracy and speed? Starting with tech - in this article we will single out some small pitfalls of your tools that may slow you down.  You may notice it at first glance or maybe you don’t know if and how these can be handled. Let’s dive in.

Pitfalls of your tech stack that slow you down | Aurelia on AccountingWeb
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When small things pile up

The pitfalls we will discuss are not dealbreakers, true. Your tools still work, they still help you do your job and do it well, so why should you care? Imagine running with one stone in your pocket - you may be a bit slower than without it but it’s not a massive difference. If someone puts another one in your pocket you may notice your stride getting heavier. After one more, each step becomes painful, after another, you can't run anymore, you have to walk. Same applies to tech. While one inefficiency may not cause massive problems, most often than not you'd be dealing with more than just one. All of them together will significantly impact both your output but also the quality of your work. And then you’re left with two problems. Firstly, any mistakes caused by software issues will eat up time you could have spent on actual client work. Secondly, because you’re so busy with day-to-day work for your clients you may not even have the headspace to look into fixing those issues with your tools so it keeps piling up.

Plus, at the current stage of technology, software should be able to eliminate all manual work without shortcuts or workarounds. Other industries benefit from automating manual tasks, so why not accounting? Demand more from your tools. 

Handling VAT

Probably the most headache-inducing issue that software claims to handle but in reality, it does it only partially.

At the basic level, many OCR tools for example, fail to recognise the VAT treatment in full. Basically, they assign VAT based on the country of the supplier, but each country may have different VAT rates depending on the item's category. Imagine you have an invoice for two items - one zero-rated, the other with 20% VAT. Not only are these unlikely to be broken down, the tool may apply the same VAT to both. Miss this detail and you’ll be stuck looking for a mistake in the VAT declaration at the end of the period.

To bypass this look for tools that use more than one rule to assign VAT - not just supplier details but also the category of the item itself. If unsure how your current or potential tool is figuring out the VAT, it may be a smart idea to ask the customer support team. 

Another detail worth considering is whether or not the tool suggests the VAT rate automatically and how much you need to scroll to find the right one. The more you scroll the higher the chance you will make a wrong selection and the more time you waste.  Auto-suggestion is a must for efficiency but when it comes to international VAT it can get you into trouble as rules change often and a lot. This is one instance where AI needs human supervision. If you’re dealing with international transactions and invoices, opt for a tool that is recognised beyond the UK borders. Those vendors are more likely to stay up-to-date with changes to VAT rules as they would have an international customer-base.

Another seemingly insignificant pitfall is how tools handle CIS and reverse VAT charges. Unfortunately the vendors on the market fall short of providing a built-in solution to this. If your client base are predominantly subcontractors it may be worth looking into a tool dedicated specifically for them. Other than that, keep requesting it from your software providers. From a development point of view (first hand information, we asked our team), it requires some work but you won’t need cutting edge tech to deliver this. So there is no reason you and your clients should be underserved and risk issues with VAT calculations and tax compliance. 

Foreign currency 

We bet you’re already used to entering manual adjustments into the general ledger when dealing with foreign invoices. Again, something you are doing on autopilot now could be run on autopilot with a smart automation tool. You could use your brain power to see, for example, which countries of distribution are most profitable for your e-commerce clients. And just think about how much more manual entry you would need if you take on more clients in retail or online sellers or they grow. This means a higher volume of transactions each period.

The issue arises because banks have different exchange rates from central banks and also take exchange fees from different currency payments. Just reading it sounds mind-boggling. Some banks add insult to injury by making it hard to find out what exchange rate was used and calculate what the total fee was. 

What you need is for your tool to feed in real-time exchange rate updates, automate currency conversion and offer flexible options for users to match payments with invoices in different currencies. Good news is that we cracked it with Invoice Inbox - you can try it for free today and see for yourself!

Pre-payments and overpayments

We asked an accountant how she handles pre-payments and overpayments with her current tech stack and she winced at the mention of the topic. ‘When I go to the general ledger there are weird entries there made by the software that I must manually correct. This is because otherwise my GL is not matching the bank or is just not correct.’

Most invoice processing tools don’t allow entering pro-forma invoices and matching them and their payments with a real invoice later. Some tools will even treat it as separate invoices and duplicate the entry. Same is true for pre-payments - 99% of the time there is no easy way to match an overpayment to a future invoice. Transactions are matched once and that’s it. All that causes issues down the line on both the payable and receivable side. 

Unfortunately, like CIS and reverse charge, there is no straightforward solution to this pain point on the market. What you need is a flexible tool that allows automatic adjustments to outstanding balances and applies pre-payments and overpayments to future invoices. We encourage you to ask your existing vendor if handling those is on their product roadmap for this year. 

Processing and tracking issues

Most of you will use popular OCR tools to process invoices, assign tracking categories and match transactions. We won’t argue that these make your day-to-day significantly easier, however they are not free of the nitty-small things that become a nuisance if you really pause to think about it. 

  • Some of those tools have pre-defined categories that cannot be customised to match your clients’ chart of accounts. Choice? Switch tools or change manually in GL.
  • Reconciliation is a pain if the tools suggest transactions to match only based on vendor name. If your client has subscriptions this becomes a real annoyance. You want to see the most accurate suggestions based on vendor name, amount, date, invoice number - just like we do it in Invoice Inbox.
  • The more you need to type in manually and click between fields, scroll, the higher chance something will slip through the cracks. This is especially true for large transaction volumes. Your OCR tool should be able to pre-fill all details for you and give you a confidence score so you need to engage only if absolutely necessary. 
  • Amazon invoices are a niche problem but it keeps coming back. Leading invoice processing software cannot recognise Amazon invoices because the invoice number is too long. Technology is way past that, you deserve better.  

Final word

Your OCR, automation and cloud accounting tools make your work easier, without doubt. The problem is that the software providers got so focused on building new, big features. You got so caught up in the day to day that the small problems with how VAT, categories or currency exchange are handled, started slipping through the cracks. And the more those small tech problems pile up, the more your work will be affected. We urge you to pause from time to time and ask yourself - do I actually need this workaround? Do I need to do it manually? Speak to your account manager - ask them if they can fix it for you or if the solution is even on the roadmap. Tech is moving on so demand more from your accounting tools.