Guide to Continuous Accounting in 2022: A Smart Approach to Better, Faster Decision-Making

16 Mar

CFOs, accounting departments, and FP&A teams are all doing heroic work leading companies through difficult times and adapting to new processes like the continuous close. The standard accounting processes most organisations employ are based on practices developed hundreds of years ago, before the Industrial Revolution, when the only tools that existed for balancing a merchant’s accounts were a quill pen and paper ledger.

And just as then, today’s accounting professionals spend an inordinate amount of their time performing repetitive, manual tasks rather than looking for ways to improve financial performance.

While today’s software can complete many of these tasks faster and with greater accuracy, many finance and accounting leaders are hesitant to implement new technology, preferring instead to stick with processes and systems they are already familiar with.

That’s unfortunate because traditional approaches to managing the accounting cycle not only drive up costs and increase the risk of errors but also delay access to critical financial data. Rather than maintaining the status quo, companies that want better, more timely financial insights must replace the traditional record-to-report process with a continuous accounting approach.

Accounting Challenges

Many finance and accounting professionals dread the arduous task of closing the books. Whether done monthly or quarterly, the process is labor-intensive, full of mundane, repetitive tasks, and takes days or weeks to complete. The significant amount of time required prevents the accounting team from providing insights that can improve the organisation’s overall performance.

Key information that accounting requires, such as inventory levels, project milestones, or the status of fixed assets, is typically spread across multiple departments and systems across the organisation. It may even include paper records. The effort required to gather and organise this data in preparation for closing the books can be maddening. Challenges typically emerge across three areas:

Collaboration

The accounting staff’s difficulty collaborating with others in the organisation to get the information it needs in a timely manner is a major source of frustration. Waiting for information to be updated by other departments, a lack of visibility into the status of recent orders and pending contracts, and frequent last-minute changes to data that has already been processed are a drag on efficiency and delay the completion of other closing tasks.

Compliance

Another challenge is making sure that accounting processes and decisions follow relevant standards (e.g. US GAAP, IFRS), industry or government regulations and tax codes for all jurisdictions in which a company does business. This also includes generating all necessary reports and collecting and paying taxes on time to avoid penalties, fines, restatements and longer, more costly audits.

Time

Finally, the sheer amount of time required to close the books can be daunting. Accounting staff spend hours at the end of a reporting period reviewing transactions, tracking down errors, and correcting journal entries to make sure the accounts balance.

Other time-consuming activities include manually calculating depreciation and accruals and ensuring that revenue is recognised correctly. Much of this work must be done outside of the accounting system, using spreadsheets, which increases the risk of errors.

Benefits of Continuous Accounting

Moving from an event-driven close process to continuous accounting has many benefits:

Visibility

Continuous accounting provides real-time visibility into daily financial performance, giving department heads and other senior leaders the insights they need to control costs, make smart investments and achieve profitability goals. This is a crucial advantage in a rapidly changing business environment.

Automation

Automating repetitive tasks, such as creating journal entries or reconciling account statements, and eliminating the need to collect and normalise data from other departments, can save dozens of hours every month. This extra time can be put

to better use. Rather than tracking down and consolidating information, finance and accounting staff can focus instead on reviewing transaction details, investigating anomalies, and analysing trends.

Accuracy

The combination of automated processes and the replacement of spreadsheets for complex calculations boosts accuracy by eliminating duplicate data entry and the potential errors caused by out-of-date spreadsheets or incorrect formulas.

Compliance

Automation also helps ensure compliance with accounting standards, government regulations, tax laws, and internal policies by consistently applying the appropriate rules and schedules to revenue recognition, depreciation, prepaid and deferred expenses, and other financial processes.

The pressures on modern-day accounting are constant and ever-changing, demanding a financial workforce and systems that are dynamic and positioned to react at all times. Often it’s the systems that hold back the personnel, lagging behind the desires of the organisation to have a grip of their financial position and supporting software. Having the ability to adapt is crucial, so having systems that flow with you and your business is key to driving success in the modern financial environment.

To learn more about the benefits of Continuous accounting, download our free guide below. Alternatively, if you are interested in discovering a system that can help you embrace the kind of reactivity your business needs to succeed in the modern financial landscape, please feel free to contact us, and we would be happy to help.

Download Your Free Business Guide