Going digital... from simplest to most sophisticated
Here are some tools you can use to go paperless and digitalize your company and important documents. You may find that you’ll want to use more than one of them since they all have different pros and cons.
If you are a business owner, you’ll want to make sure you don’t miss the more sophisticated options below.
Simplest – request digital copies.
Many service and product providers are now able to email you a copy of your receipts, invoices, and statements. Your financial institution has likely already encouraged you to ditch the paper statements and simply download your statements from their online banking platform.
Go digital from the start.
This approach is great for anyone and should be in everybody’s toolbox.
Simpler – Take a picture with your phone.
There is not much explanation required of how this works, though there are a few best practices we would like to point out.
Beware of blurry photos or low-resolution images which you can’t read. Those are useless from a digitalization perspective. Make sure the resolution is high enough to read the document's details.
Don’t lose your documents in the middle of all your other photos. Create an album (or more) in which you save those documents, easily find them, and keep them organized.
Rename your photo so that you know what document they refer to, especially for multiple page documents.
Photos take up more memory space than the other options below. Try to take the photo with as little background as possible. You can also crop them afterward.
Overall, this option is best when you have a low volume of documents to digitalize. This is a great approach, for instance, for your dozen or so tax documents if you are a retiree, an employed person, or a student.
Pros:
You have the tools close by already.
It’s free.
Cons:
Can take more time to ensure the photos are legible and save in the correct place than other options below.
Cannot combine multi-page documents into one file.
If you need to digitalize more than 20 documents per year, please consider the next option.
Simple – use a scanning app on your phone
There are a multitude of ‘PDF Scan’ apps that will turn your phone camera into a scanner. Some of them may even be free. We will mention a few that we use ourselves:
Office Lens is included with any Microsoft 365 subscription and integrates with your OneDrive account.
Adobe Scan is included with an Adobe account.
Genius Scan has a free version that will let you email the documents you scanned or export them to another app; they also offer a $3/m upgrade that will let you integrate it with your favorite cloud storage, among other features.
PDF Scan apps offer significant improvements over simple photos, including:
Automatic high resolution.
Perspective correction for angled or bent documents.
Batch mode for multi-page or similar nature documents (e.g., all charitable tax receipts for 2023).
Automatic enhancement and easy editing of scans.
Space-efficient Save to PDF option.
OCR (optical character recognition) functionality for extracting text and immediate use (e.g., tagging a scan as a business card and adding information to contacts).
Smart document renaming facilitated by OCR, suggesting keywords from the document (e.g., headings, top of page) as a name.
This is a great option when you have moderate volume of documents to digitalize at one time, (say up to 50), multi-page documents (e.g. investment statements) or you have 10 or more documents to digitalize per month on a consistent basis. It can be a good fit for self-employed service providers with limited costs, people with more sophisticated investments (and the larger volume of related documentation), or with large volume of medical and/or charitable donation receipts.
Pros:
You still have the required tool close by.
In some cases, it can still be free.
Document resolution is 99.9% good.
Saved as PDF, utilizing less space than photos.
Can automate where documents are saved to, and partially automate how they are named and organized.
Cons
It still requires you to take a “photo” of each document, or page of a document separately, which is not the most efficient if you have a high volume of documents (see next steps below).
For business owners, this does not integrate directly with your accounting software.
Sophisticated – high speed scanner
A high-speed scanner has a feeder for multiple sheets, generally in the 50 to 60 range, and can scan both sides of those 50-60 documents in one fell swoop in about a minute.
We have found that for these to work best, you will need to group documents by size: letter size scanned together, half-page documents in their own turn, etc. Beware of your greatest foe, the staples.
At Reach CPA, we have been happy with our ScanSnap series over the years as they have been exceptionally reliable. The ScanSnap iX1600 is the current model we recommend. It retails for $550 at Costco and boasts wireless scanning, including reliable software to help organize documents once scanned.
This is a must if you have a high volume of documents to scan on a regular basis. Thinking of you, business owners, especially if you combine this with the next item on our list.
Pros:
Scans lots of documents fast.
Document resolution is excellent at 100%.
Saved to PDF, requiring less space than photos.
Frequently includes accompanying software for efficiently organizing scanned documents.
Cons
Prior organization and sorting are necessary before beginning scanning; documents need to be grouped by size, and all staples must be removed.
Initial cost is a one-time investment of a few hundred dollars.
Most Sophisticated – Document Management software
Alright, this is not so much a tool to digitalize your documents, as one to organize them once they are digitalized.
A document management software is a software to which you will send your digital documents – emails, scans, photos, etc. That software will then “read” your documents to extract the vendor’s name, date, amount, taxes, currency, etc. to the best of its ability (we expect about 95% accuracy) and make all that information ready to post to your accounting software automatically.
Moreover, it also keeps a copy of the document, saved by the name of the vendor, and allows you to easily search and filter your expenses.
Since our firm works primarily with Xero for accounting software, we use Hubdoc as our main document management software (which is included with the Xero subscription).
Hubdoc lets our clients upload documents via their web portal, by forwarding emails to a unique @hubdoc.com email address, or by taking photos with the Hubdoc app on their phones. From there, you (or our team if you prefer outsourcing this to us) can confirm the accuracy of the information extracted and publish it to the accounting software. For common vendors you know will be accurate, you can set Hubdoc to automatically publish the transactions to the accounting software.
Other contenders out there with similar features include Dext and AutoEntry, though they don’t offer free versions.
Key takeaways
If you are a business, you should seriously consider combining the digitalization tools mentioned above with a document management system which integrates with your accounting software. You will save hours, be more organized, and be able to delegate or collaborate on bookkeeping more easily.