Pre-accounting: the key to smooth financial processes

The scenario is familiar: the end of the fiscal year is approaching, stress levels are rising – and suddenly, receipts from the past twelve months need to be sorted. Everything at the last minute. For many companies, this is a challenge.

Does it have to be this way? No. What if this tedious task didn’t have to be done at the last minute? What if pre-accounting not only reduced stress but also saved time and money?

With well-organized pre-accounting, the year-end rush stays relaxed – and operations remain efficient all year round.

What is pre-accounting?

In short: It is the first step in the accounting process. With pre-accounting you record, sort, review, and categorize all your financial data. The goal of pre-accounting: a complete, error-free package that can be seamlessly passed on to bookkeeping. This includes recording, sorting, reconciling, and categorizing receipts, invoices, and bookings. The entire package with all relevant information is later transferred into bookkeeping.

Pre-accounting means capturing, evaluating, and reconciling data

Pre-accounting ensures that all financial data is correctly and completely recorded. This allows your tax office or accounting department to seamlessly continue with bookkeeping. If, for example, missing or incorrect invoices are only noticed during the monthly closing, the process is delayed.

Additionally, extra costs may arise because your tax office has to manually assign unorganized invoices to incoming and outgoing payments. These issues can be avoided with proper pre-accounting. Regularly reviewing and correctly assigning receipts prevents unpleasant surprises.

Pre-accounting is not just a necessary task; it is also the basis for financial decision-making. Keeping track of receipts and invoices regularly and correctly provides a clear overview of a company’s financial status.

Tasks of pre-accounting

Pre-accounting is more than just sorting receipts and invoices. It creates order and provides clarity. Here is an overview of the key tasks:

• Recording invoices: Every invoice, delivery note, and payment receipt must be recorded, whether on paper or digitally.
• Digitizing invoices: Ideally, invoices are digitized to simplify handling and reduce paper clutter.
• Checking incoming and outgoing invoices: Are the details on the receipts correct? Do they meet legal requirements? Checking them is essential to avoid errors that could lead to legal or tax issues.
• Sorting and categorizing invoices: Receipts must be sorted into categories such as business expenses, revenue, or investments. This ensures a clear structure and facilitates reconciliation and analysis.
• Assigning invoices: Every invoice must be linked to a bank transaction, account movement, or credit card charge.
• Completing missing invoice information: If invoices lack information, it must be added, or in some cases, self-issued receipts must be created.
• Assigning entries to accounts: In some cases, incoming and outgoing payments must be assigned to an accounting account in advance.
• Preparing data for the tax office: Pre-accounting ensures that all relevant documents are correctly prepared for tax returns or financial statements.

Who needs to perform pre-accounting?

In Germany, there is no legal obligation for pre-accounting. The term has no official legal status. If you do not want to sort receipts and prepare documents for your tax office, you do not have to do it. However, at some point, this work will have to be done by you or your tax office.

Generally, there are legal requirements for bookkeeping that apply to all businesses and entrepreneurs required to maintain accounts. According to Section 238 of the German Commercial Code (HGB), this includes all traders, commercial partnerships, agricultural businesses, and freelancers.

What is legally required?

Bookkeeping obligations in Germany are regulated by the Commercial Code (Handelsgesetzbuch) and the Fiscal Code (Abgabenordnung). These apply to businesses that meet certain legal or economic criteria.

Accounting obligation under the German Commercial Code (HGB)

According to §238 HGB ("Duty to keep books"), all merchants are required to maintain double-entry bookkeeping. This includes:

• Corporations (GmbH, UG, AG, SE): Always required to keep accounts
• Partnerships (OHG, KG): If they are registered in the commercial register
• Registered merchants (e. K.): As soon as they are listed in the commercial register

Accounting obligation under the fiscal code (AO)

According to §141 AO, traders and agricultural businesses must also keep accounts if they exceed the following thresholds:

• Revenue: More than €600,000 per year
• Profit: More than €60,000 per year

Who is not required to keep accounts?

Small businesses and freelancers are generally not required to use double-entry bookkeeping and can instead prepare an income-expenditure statement (EÜR).

Freelancers under §18 of the German Income Tax Act (EStG) include doctors, lawyers, architects, journalists, engineers, and business consultants. However, an exception applies: If these professions establish a corporation (e.g., GmbH), bookkeeping obligations become relevant.

Now, you know the basics and have completed your pre-accounting. All invoices and receipts are available. The information is correct. You have assigned invoices to the corresponding bank transactions. What happens next?

Pre-accounting is complete – what happens next?

Once pre-accounting is complete, the next step begins: actual bookkeeping. Tax offices and accounting departments take over, evaluate data, and prepare financial statements and tax returns. The cleaner the preparation, the faster the process.

Here is an overview of key roles and tasks:

1. Pre-accounting (already done)
   • Involved: Finance team, office manager, management
   • Tasks: Collecting and sorting receipts, digitizing and categorizing receipts, maintaining cash books, settling travel expenses, preliminary account allocation (optional)
2. Financial Accounting (FIBU)
   • Involved: Accounting department, tax office, external accounting service providers
   • Tasks: Assigning transactions to the correct accounts, entering data into accounting software (e.g., DATEV), reconciling bank accounts, receivables, and payables, preparing VAT pre-declarations
3. Monthly and Quarterly Closings (Optional, Depending on Company Size)
   • Involved: Accounting, controlling
   • Tasks: Accruals and deferrals, creating internal reports (BWA – business evaluation), variance analysis, budget control
4. Annual Financial Statement
   • Involved: Tax office, auditors (for companies subject to audit)
   • Tasks: Preparing balance sheets, profit and loss statements (P&L), and appendices, determining taxable income, reconciling complex matters (e.g., fixed assets, provisions), audits for large corporations
5. Tax Returns and Filing
   • Involved: Tax office, financial authorities
   • Tasks: Submitting corporate tax, trade tax, and VAT returns, communicating with tax authorities, handling inquiries, reviewing tax assessments
6. Controlling and Analysis (Ongoing)
   • Involved: CFO, controlling, management
   • Tasks: Analyzing financial KPIs (liquidity, profitability)...

The underestimated role of pre-accounting

Pre-accounting is the silent engine behind every accurate financial statement and timely tax return. It ensures that financial data is correctly recorded, organized, and made available—forming the foundation for monthly, quarterly, and annual financial statements. But its significance extends far beyond this administrative function.

It's the backbone of key financial processes

Pre-accounting is the starting point for essential financial workflows. Its influence runs through the entire company:

• Pre-accounting: Sorting receipts (Office assistants, finance teams)
• Accounting: Recording business transactions (Accountant)
• Financial Statements: Preparing monthly, quarterly, or annual reports (Tax advisor)
• Taxes: Filing tax returns (Tax advisor)
• Analysis: Evaluating financial metrics (CFO, CEO, Controller)

Each phase builds on the previous one. A mistake in receipt sorting? It can ripple through to the annual financial statement – potentially leading to costly consequences. The takeaway: precision at the start saves time, stress, and money in the long run.

More than numbers: a tool for better decisions

Pre-accounting is not just an obligation – it’s a strategic asset. Regularly recording invoices and tracking payments provides a clear view of cash flow, outstanding receivables, and liquidity reserves.

This data forms the foundation for informed financial decisions. In short: Good pre-accounting is more than just keeping things in order. It’s a competitive advantage.

But pre-accounting can also be time-consuming. There are different ways to capture and process invoices. Traditionally, companies collected paper receipts and stored them in folders. Some still do.

This approach is inefficient and prone to errors. How can software help?

Software for pre-accounting

In Germany, DATEV has established itself as the industry-standard financial accounting software. It’s used by tax advisors, auditors, lawyers, and businesses.

A wide range of software solutions has emerged to digitize and automate all accounting processes – from pre-accounting to final reporting.

Particularly, pre-accounting software has simplified many time-consuming tasks. It automates data entry, categorization, and financial record assignment before transferring the information to DATEV or other accounting systems.

Key features of (pre-)Accounting software

1. Invoicing and dunning

• Create invoices, receipts, and payment reminders directly within the software
• Automatically match incoming payments to outstanding invoices (with bank integration)
• Send reminders and dunning letters for overdue payments with minimal manual effort
• Manage accounts receivable to track customer payments

2. Payment reconciliation and accounts payable management

• Record and automatically assign outgoing payments to corresponding invoices
• Remind users of missing receipts for payments made
• Manage supplier accounts with an overview of due dates and payment terms
• Automate payments (e.g., SEPA direct debits, wire transfers)

3. Categorization and tax pre-coding

• Assign tax rates and accounting codes for different income and expense categories
• Automatically categorize transactions to ensure correct bookkeeping
• Help non-accountants navigate tax requirements
• Manage VAT, including advance returns and international tax calculations

4. Expense and travel cost management

• Employees can submit expenses via an app and request pre-approval
• Automatic reminders for missing receipts
• Complete approval history for financial teams
• Automated reimbursement processing

5. Subscription and payment management for SaaS/E-Commerce

• Manage subscription models and recurring payments
• Automatically match payment transactions with invoices
• Track overdue payments and send reminders and dunning notices
• Integrate with payment providers like Stripe, PayPal, or Klarna

6. Payroll accounting

• Automate payroll calculations, deductions, and social security contributions
• File payroll tax reports with tax authorities
• Integrate payroll with accounting systems
• Provide digital pay slips for employees

7. Inventory and stock management

• Automatically track stock movements (incoming and outgoing goods)
• Manage inventory levels and purchasing costs
• Automate reordering when minimum stock levels are reached
• Integrate with e-commerce and ERP systems

8. Document management and receipt archiving

• Digitize receipts with OCR (text recognition in scanned documents)
• Ensure audit-proof archiving for tax audits
• Automatically link documents to transactions

9. Tax compliance and reporting

• Automate VAT returns
• Simplify financial reporting by integrating with tax advisors
• Support international tax compliance (e.g., OSS for EU-wide sales)
• Ensure GDPR-compliant data management

Accounting software has evolved far beyond simple assistance – it now replaces many manual tasks and automates large parts of financial accounting. It saves time, reduces errors, and makes accounting accessible to non-experts.

re:cap for pre-accounting

We offer software that simplifies pre-accounting. It saves you hours by reducing repetitive tasks and giving you a clear overview of your book-closing process. You’ll see how many invoices are missing, which ones are reconciled, and which transactions need review. With a one-click CSV export or API connections to providers like Pleo and DATEV, you can streamline your accounting workflow.

The features include:

• Automated invoice collection and matching with transactions
• A dashboard that helps you keeping an overview on your status quo
• ZIP export to have all data in one file

Best practices for efficient pre-accounting

Stay on top of it

Regularly logging receipts keeps accounting up to date. Letting things pile up leads to chaos. A fixed monthly accounting day helps maintain order.

Structure beats searching

A clear filing system saves time and nerves. Categorize receipts consistently – e.g., operating costs, investments, or personnel expenses—so everything is easy to find later.

Think digital, not paper

Modern accounting software automates workflows – especially for digital invoices. Automated systems ensure smooth data transfers and fewer manual errors.

Avoid mistakes, prevent trouble

Incomplete or incorrect receipts can cause delays and legal issues. Accuracy pays off.

Conclusion: financial efficiency through pre-accounting

Pre-accounting is more than an administrative necessity – it’s a core function of any business. It ensures clear financial structures, minimizes errors, and guarantees that all financial data is recorded accurately and on time.

Software can significantly ease this process. It saves time, reduces manual effort, and ensures smooth collaboration with tax advisors and finance teams.

Investing in the right pre-accounting software is not just about efficiency. It’s about the long-term financial health of your business.