Automatic Account Assignment & Invoice Assignment Explained Simply

A transparent overview of income and expenditure is essential for the success of a company. To achieve this, all invoices must be recorded, checked and posted. This process is known as account assignment. We have summarized everything you need to know about account assignment in this article.

What is Account Assignment? Account Assignment Simply Explained

Account assignment is an important part of internal company accounting. Every business transaction within a company is posted to G/L accounts on the basis of documents. The debit and credit accounts affected by a business transaction are recorded in the form of posting records. These posting instructions record all of your company’s income and expenditure.

Proper account assignment therefore gives you a clear overview of your company’s financial situation. It is also an integral part of the GoBD (principles for the proper keeping and storage of books, records and documents in electronic form and for data access). The data recorded is important for accountants and tax consultants and must be submitted to the tax office on a regular basis.

The account assignment also plays an important role for your VAT advance return: The tax rates are calculated based on the invoices. Incoming documents can also be evaluated according to various factors (e.g. cost center, project type, cost unit, etc.) and therefore provide valuable data for your company’s controlling.

Assigning Invoices Using an Example

Posting records are formed according to the “debit to credit, amount” pattern. Let’s assume you buy a new monitor for 300 euros and pay by bank transfer. On the debit side is now the account “Expenses for monitor”, on the credit side the account “Bank”. The posting record could therefore read “Monitor to bank, 300 euros”.

As soon as these details have been checked and posted by the accounting department as part of the account assignment, the business transaction is included in your company’s balance sheet.

Pre-Assignment of Invoices

Digitization is now firmly established in the business world. Nevertheless, some processes are still carried out manually – such as the pre-assignment of documents.

Pre-assignment is part of preparatory accounting. Important information such as posting amounts, expense and income accounts and cost centers of business transactions are noted on the documents.

The invoices are sorted chronologically and assigned to their corresponding account statements. They are then forwarded to the accounting department or tax consultant. They are responsible for checking and the actual posting.

External documents in particular should be checked for factual and mathematical correctness during the preliminary account assignment. Missing or incorrect information can quickly lead to problems with the tax office. Correct pre-assignment makes the accountant’s work easier. It is therefore crucial for a fast and smooth accounting process.

Document Types: Internal and External Documents

No posting may be made without a document, this document principle applies in accounting. A distinction is made between three types of documents:

• Internal invoice: Internal invoices that are generated within the company (e.g. employee salaries or outgoing invoices)
• External invoice: External invoices that arise outside the company (e.g. bank documents or invoices from suppliers)
• Emergency invoice: Emergency invoices are issued as a substitute for external invoices, for example for cab rides for which no invoice is received. An emergency invoice must contain the same information as normal external and internal invoices.

Whether internal or external, a invoice can only be posted correctly if it contains the following information:

According to the GoBD, invoices must be numbered consecutively by the accounting department and stored for 7 years (Austria) or 10 years (Germany) after posting.

Account Assignment and Archiving of Invoices – in 5 Steps

We have summarized the most important steps for smooth account assignment for you here.

Step 1: Preparation – enter invoices and note the date of invoice

First, the incoming invoices must be prepared. If you are still performing the account assignment manually, the invoices are given a date and invoice stamp. This allows the invoices to be sorted chronologically. With digital account assignment, this step is not necessary as the data is automatically entered by the software.

Step 2: Sort invoices by company code & note additional information

The documents are now sorted, creating so-called company codes. Sorting can also be carried out manually or automatically. Important information such as cost center, debit and credit accounts must also be noted. The information can be noted directly on the invoice as long as the content is not changed.

Step 3: Invoice verification

The invoices must be checked for correctness. This is done either during the preliminary account assignment or after the documents have already been forwarded to the accounting department. Checking the invoices is particularly important for the input tax deduction. This is because this may not be recognized in the event of incorrect or incomplete invoices.

Step 4: Assign invoices to account and post

If there are no errors, the posting can be carried out. All invoices are posted based on the posting records (debit to credit). This is the task of the accounting department or the tax consultant.

Step 5: File and archive invoices

Finally, posted invoices must be properly archived. Both analog and digital invoices must be stored for the specified period in accordance with the GoBD.

Three Benefits of Automatic Account Assignment

There are now a number of accounting programs and tools that can be used to carry out account assignment largely automatically. Manual account assignment is often prone to errors and is also very time-consuming. We have summarized for you here why it is worth switching to automatic account assignment in your company.

Benefit 1: Reduced workload for employees thanks to automatic account assignment

Depending on the size of the company, the manual processing of documents can be very time-consuming and laborious. With the help of AI tools, proposals for pre-assignment can be created independently based on invoice content and master data. Your employees then only have to decide whether to accept or reject the proposal.

The more often the AI is used, the more it “learns” and the faster and smoother the work processes can be carried out. This gives your employees more time for other important tasks.

Benefit 2: Fewer errors thanks to automatic account assignment of invoices

Like all financial processes, account assignment requires a high degree of care. On the one hand, account assignment errors can cost your company money. On the other hand, they can also lead to problems during a subsequent tax audit. Missing documents at the end of the month or year are particularly annoying. Automatic account assignment reduces the error rate in accounting to a minimum.

Benefit 3: Process optimization – improve the process with automatic account assignment

Automatic account assignment speeds up the workflow. The documents can be entered, sorted and forwarded more quickly. The chronologization of invoices in particular can take a lot of time with manual account assignment. AI tools that keep account assignment and bookkeeping up to date are helpful here.