hoThe prepaid expense module in ScaleXP streamlines your prepayment tracking, providing complete journal entries that can be posted to Xero or QuickBooks in just two clicks.

This guide outlines the best practices and tips to help you get started quickly.

For more information see How to automate your prepaid expense journal:  Prepayments Journal report 

Best Practices

Here are two tips to get the most out of ScaleXP:

Include service dates: Ensure that each bill's line item description includes the relevant service dates. This can be specific dates or general terms (e.g. "annual" or "quarterly") to specify the period. Read more best practice for date specifications here.

Set up a dedicated prepaid expense account. Create a specific prepaid expense (balance sheet) account for ScaleXP. This will dramatically simplify the setup process. (See below).

You have flexibility to code bills to either the relevant expense account or one or more dedicated prepayment balance sheet accounts - or even mix both methods. See more detail on these options here. Note that the best practice described in this article assumes that you move to coding all prepaid bills to a balance sheet account, as described below.

If you are looking to create a highly efficient process, it is ideal to code prepaid expenses to the balance sheet. This is not mandatory but eliminates the need to confirm items that should be treated as a prepaid expense in ScaleXP.

Quick Start Tips

To begin using ScaleXP efficiently:

1. Create a new prepaid expense account. Set up a balance sheet account such as "Prepaid expenses ScaleXP."

2. Select a switchover date. Choose the first day of any month as your start date. It can be a past or future month, whichever is easier for you. There's no need to wait until the end of the financial year.

After the switchover date, code all new bills and associated journal entries to the new balance sheet account. Continue to track bills pre-dating the switchover via your existing spreadsheets and manual journals. Month by month, the balances in your older prepayment journals and accounts will gradually reduce to zero.

This approach eliminates the need to adjust historical journals or modify and bills already in your accounting system, making the transition process smoother.

Setting up ScaleXP takes about five minutes. Follow the steps below based on your existing bill coding practices:

If you currently code prepaid bills to the balance sheet:

1. Create the new prepayments balance sheet account in Xero or QuickBooks.
2. In Prepayment Settings, set your default Prepayments account to the new ScaleXP prepaid expense balance sheet account. Ensure no other balance sheet accounts are selected. See below.

It is critical to select only your new balance sheet account. Otherwise your journal will not be correct.

If needed, Customer Success can assist with modifications via Live Chat or email (support@scalexp.com).

3. Use the new account in Xero/QuickBooks. Ensure that after the switchover date, all bills in Xero or QuickBooks are coded to the new ScaleXP prepayments account.

4 . In ScaleXP, use "Review all prepaid bills" to see included prepaid expenses.  Ensure that the date selection range begins with your switchover date. See below.

If you currently code bills to an expense account on the Profit & Loss:

1. Create the new prepayments balance sheet account in Xero or QuickBooks.

2. In Prepayment Settings, set your default Prepayments account to the new ScaleXP prepaid expense balance sheet account. Ensure no other balance sheet accounts are selected. See below.

If you need to modify the default account and the field is locked, use Live Chat to ask Customer Success to make this change. If Live Chat is closed, you can email the team (support@scalexp.com).

It is critical to select only your new balance sheet account. Otherwise your journal will not be correct.

3. Identify prepaid bills (expenses): In ScaleXP, mark pre-switchover bills as "Excluded" from prepayments. This ensures that only bills from after the switchover date are included in ScaleXP journals.

4. Set the prepayment journals date. In ScaleXP Prepayments Journals, make sure entries are dated on or after the switchover date for accuracy.

That's it!