What is Continuous Accounting?
Continuous Accounting is a new-age method of Accounting wherein finance executives are empowered to work on real-time intelligence. The professionals are involved in the process of financial reporting throughout the accounting period on a real-time basis. The performance of the company can be reviewed more efficiently and on repeated basis.
Let’s take a deeper look..
One of the most frenzied and stressful time in the life of a CFO of an organisation and his Finance team is the financial year close. The long hours of reconciliation, cumbersome process of accounting are too much to deal with.
But this end to end process of accounting which includes journal entries, reconciliation, and preparation of financial accounts is by far the most accurate and reliable method of financial reporting and ensuring compliance with the governing rules.
How to implement Continuous Accounting?
The foundation for continuous accounting lies in the cloud-based finance and ERP system. A fully integrated ERP system enables all teams of the organisation across geographies to access the same general ledger, a common chart of accounts and a single version of data on inventory, payroll and sales. The details can be accessed across geographies and time zone using any device over a web browser and internet.
However, the cloud-based ERP also has provisions for confidentiality and audit. No matter how automated and real-time the process is, there is a requirement of Human intervention at some point or the other.
In these situations, a cloud-based finance system can be configured to the designated team members on a regular basis throughout the month. The ERP system also provides managers with dashboard-based views which helps them to track the progress of the work, do real-time audits and plan well for the tasks remaining for the period close.
What are the advantages of Continuous Accounting?
- Increased employee engagement and reduced hiring costs
Continuous Accounting promotes equitable distribution of task and faster processing of workload as the task can be performed in smaller batches. Since, most of the work can be done in small batches, it is one of the biggest productivity boosters for the team. Moreover, because of the automated system, the manual work is less, hence lesser hiring of personnel and lesser incidence of errors.
- More improvement in process and analysis
Since the process is continuous, the audits can be performed on a daily basis, which saves too many error rectifications piling up for the last moment. As the records get cleaned on a daily basis, the data at hand for decision making becomes more reliable.
With clear indication of key performance risks, the management will become more proactive and take necessary steps to eliminate these risks.
- Integration of Finance Teams with Business Operations
Many a time businesses suffer because Finance teams and the Management do not work in sync with each other. However, good co-ordination between senior management and a department is a must for greater good of the organisation.
The cloud-based financial reporting allows the Finance Teams to see the larger picture and work as per the strategies laid out by the management. The real-time data analysis empowers the Finance & Accounting team to make better decisions.
- More focus on strategy and decision making
Due to faster processing of financial information, the CFO and his team can focus more on taking strategic decisions for the organisation at large. Business processes become agile and the management is able to make continuous improvement in the process to obtain optimal results.
For companies which operate on faster cash conversion cycle, cloud-based continuous accounting will be particularly useful.
Continuous Accounting is rewarding despite the initial challenges
Technology is transforming the way finance departments function globally and Continuous Accounting is one crucial step in this direction. This is one the best examples how disruptive technology paves way for timely, cost-effective and focussed ways of bringing improvement in business.
It is true that implementation of newer technologies like this is a challenge and involves cost, but the rewards are far more that the initial difficulties. In established organisations where executives have followed traditional record to report system for decades, shifting to a modern and automated mode is bound to be slow and difficult.
To address this, the management must conduct proper training and reskilling sessions for the personnel to get them accustomed to the new methods and ensure seamless transition.
Is there an alternative?
What if there was a smarter and quicker alternative to this record-to-report process of accounting? A faster process would enable accounts and finance executives to get timelier access to the data, thus allowing them more time to derive insights and close the financial period faster.
It is quite evident that when the CFO and his team will spend less time on the financial period close, they will have more scope in effectively utilizing this time for making strategic decisions about the company. These could include crucial factors like maintaining or scaling up cash flows, cost cutting on wasteful activities, planning more fruitful investments, launching a new product line, reallocation of resources and or tapping an emerging opportunity.
There is so much that can be done to improve the operations and performance of an organisation that it is essential to reduce the time spent on the mundane and time consuming financial reporting process.
To create a balance between accuracy, compliance and speed, Continuous Accounting comes to the rescue of the organisation. Most smart Finance teams across global companies are saying ‘yes’ to both speed and accuracy, and adopting Continuous Accounting.
Will it be wise to jeopardize a fool proof accounting process and accurate rule-based financial reporting for the sake of speed?