Have you heard of continuous accounting?
Little and often. It’s an approach that’s recommended for self-improvement activities such as exercise and learning. It’s also recommended for keeping on top of chores such as gardening and housework.
You can apply it at work too – for example, it’s the theory that sits behind the concept of continuous accounting. And in the same way we all know it makes much more sense to go for a brisk walk once a day than try to fit in a lengthy hike once a week, so continuous accounting offers a multitude of advantages. The good news is that a continuous accounting system is much easier to embed into your routine.
The end-of-period accounting model
Let’s take a moment to consider the traditional set-up. It’s a process designed to accommodate standalone ERP systems and is built around reporting requirements. At the end of the period, all data is gathered and entered ready for reporting and analysis.
It’s a set-up that has several problems.
There’s a productivity issue. Whether it’s a few days or a few weeks, at the end of a period, everyone’s attention turns to an administrative task and all other work takes a back seat.
There’s an accuracy issue. Entering information by hand is notoriously at risk of error and inaccuracy and the risk increases when you’re entering multiple transactions at a time.
Perhaps most importantly, there’s a visibility issue. When you enter information in arrears, the reports you are able to produce are always out-of-date. The problem becomes worse the nearer you get to the end of the next reporting period when you are confined to looking at data that is weeks, months or even a year behind your current situation.
“You’re looking at data that shows you as you were, not as you are.”
The continuous accounting model
In a continuous accounting model, transactions enter the system as they come in – a continually rolling process. It’s an approach that offers several benefits.
Productivity improves because transactions are processed little and often. It puts an end to the end-of-period scramble and smooths out the spikes in activity.
Visibility improves dramatically too. You are able to access real-time information so you are always looking at figures that show you how the business is performing now not then. It puts you in a much stronger position.
Why continuous accounting now?
It’s easy to see the benefits of continuous accounting but it’s a system that would have been harder to achieve until recently. Tools such as finance automation have transformed the landscape. When implemented, such systems tend to make continuous accounting the norm rather than the exception.
Expense, travel and invoice transactions enter the system automatically with little data entry needed. In the first instance, this means that the administrative workload is reduced if not eliminated entirely and errors are minimised. In fact, research has shown that an integrated automated expense, travel and invoice solution saves the average finance employee 500 hours a year – that’s around ten hours a week.
When data enters the system in real time and there are many more hours available, the benefits are clear. The information you have access to is up-to-date and therefore more useful. Plus, your team have more time to analyse the data and provide more meaningful insights. Over half of SMEs that have implemented an automated solution say that improved analytics has been an important benefit.
The impossible has become possible
Technology advances facilitate approaches such as continuous accounting. Not only do they make life easier, they also mean the finance team can add more value to their organisation than ever before. To find out more about how automation and continuous accounting could empower you and your team, get in touch.