General Ledger (GL) coding is a fundamental aspect of accounting that involves assigning unique alphanumeric codes to financial transactions. These codes help categorize transactions into various ledger accounts, such as revenues, expenses, etc. Businesses can implement cost category coding to better understand category spend and to simplify research into spending habits. Coding can be generalized or detailed, depending on the need. By organizing financial data systematically, GL coding ensures accurate financial reporting and efficient tracking of a company’s financial status.
Businesses can take the process a step further by automating GL coding with respect to invoice processing workflows. When an invoice arrives, all related line items are coded according to the business’s GL, and the invoice data is normalized for easier sorting and increased accuracy. This coded information is then transmitted to the business’s back-office system.
In a perfect system, a product only needs to be manually coded once. After that, it is added to your digital product catalog. When the item is purchased again, machine learning is used to automatically code and categorize the item for you. By incorporating this automation, businesses build their own product catalog and can take advantage of multiple benefits.
Benefits of GL Coding Automation
Increased Accuracy
Automating GL coding significantly reduces the risk of human error in financial records. Each transaction is accurately categorized, ensuring precise inventory tracking and avoiding costly mistakes. This accuracy is crucial for maintaining the integrity of financial data.
Time Efficiency
Manual GL coding can be tedious and time-consuming, especially for businesses with a high volume of transactions. Automation speeds up this process, allowing accounting teams to focus on more strategic tasks, such as financial analysis and planning.
Enhanced Audit Compliance
Properly coded transactions help ensure compliance with regulatory standards in the event of an audit. Automation maintains consistent and reliable financial data, reducing the risk of non-compliance and potential penalties. Clean, GL-coded data is easier to verify than unorganized data, accelerating forensic research in times of need. This is particularly important for businesses operating in highly regulated industries, like alcohol.
Prompt Financial Insights
Automated GL coding provides timely insights into spending patterns by establishing organized invoice data management. This enables businesses to make informed decisions, optimize budgets, and identify cost-saving opportunities to protect margins faster. With accurate and timely financial information, companies can better manage their resources.
Cost Savings
By reducing manual labor and minimizing errors, businesses can save on operational costs. Additionally, accurate financial data can help support vendor negotiations and cash flow management. These cost savings can be reinvested into other areas of the business.
How GL Coding Automation Helps With Business Purchases
Automated Invoice Processing
GL coding automation can handle PO-backed and non-PO-backed invoices, ensuring they are correctly categorized and processed without manual intervention. This reduces the workload on accounts payable teams and speeds up the invoice processing cycle.
Better Spend Management
With accurate and timely data, businesses can monitor their spending more effectively. Automated GL coding ensures that purchases align with budget constraints and financial goals. This data provides a clearer view into inventory spend by category for better controls around overspending and overordering.
Enhanced Vendor Relationships
Timely and accurate payments supported by AP automation implementation can improve relationships with vendors. By ensuring that invoices are processed and paid on time, businesses can negotiate better terms and potentially secure discounts. Strong vendor relationships are essential for maintaining a reliable supply chain.
Improve Invoice Processing by Automating GL Coding for All Invoices
Automating GL coding offers numerous benefits, from increased accuracy and time efficiency to enhanced compliance and cost savings. For businesses, especially those with significant purchasing activities, GL coding automation can optimize AP workflows, improve financial insights, and strengthen supply chain relationships. Embracing this technology is a strategic move towards achieving greater financial control and operational efficiency.
Fintech’s PaymentSource® Premium offers invoice automation for all business transactions, including alcohol purchases. PaymentSource supports GL coding automation to ease the burden of accounting teams handling a large volume of invoices. It provides detailed, normalized invoice data delivered to back-office systems for better tracking and management. Businesses can use preset categories for GL coding or create new options to optimize category management.
Try PaymentSource today to see how it can improve your business’s AP systems and processes.
