Why 2020 could be the catalyst for continuous accounting
‘Financial period end’ is one of those phrases finance teams hear and can’t believe it’s back round again. Yet often drawn out, using manual processes that can last days and even a few weeks for some businesses, it’s not surprising that finance professionals are seemingly in a never ending cycle of crunching the numbers to ensure information about the business's financial performance is accurate and compliance is met. It means many financial professionals find themselves looking backwards for around half of their working hours - when the demands of today’s business means they need to be looking forward.
Widespread accounting practices have long been overdue for a change to make them faster, more agile and more responsive to the market conditions businesses face. From the credit crunch of 2008, to disruptive technologies and now Covid-19, rarely is it plain sailing for businesses. Finance teams are being called upon more and more by their business leaders to help them understand where the business can grow revenue, where it needs to scale up or down, how it can react to financial challenges and of course how it can protect key assets including the workforce.
The year 2020 has been like no other, certainly not this side of the millennium, and it has given a lot of finance teams a strange sense of clarity on what practices need to change - as many businesses consider reshaping and refocusing teams.
Accountants and finance professionals have long spent significant periods of time focused on manual tasks and processes - record-to-report process of accounts reconciliation, audits, data input and financial reporting - yet it’s clear the accounting cycle has to become more linear to reflect today’s business demands. Continuous accounting could be one way that finance teams make big changes to the way they work.
The benefits of continuous accounting
Continuous accounting is a method of working where finance teams spread out their workload more evenly - and often technology plays an important role in this. Instead of waiting for month end or the end of the financial period, finance professionals who practice continuous accounting incorporate many of the tasks associated with it on an ongoing basis.
Financial management software has its part to play in this. Finance teams that adopt continuous accounting methods switch to an ongoing linear process rather than one that’s a cycle. Through accounting automation, reporting is continuously tracked so that finance professionals can pull off reports for weeks, days - even consolidated down into hours to be able to more closely monitor spikes, trends and anomalies in data. With the reporting automated in the background, finance professionals can focus much more of their time on strategy and analysing the financial data the business produces. And this is where the balance between looking back and looking forward begins to tip in favour of looking ahead.
With ongoing reporting it also means finance teams are able to react quicker to financial data, which in turn can mean the business can make faster and more informed strategic decisions. This has been especially prevalent this year, as CFOs and finance teams have had to advise the business on scaling up or down and where to shift resources to areas of the business where it's needed - often with only a short time window to make a decision.
Continuous accounting can also play a key role in integration. More businesses are realising the benefits of ensuring close communication and working relationships between departments from sales and marketing to finance and HR. This isn’t just in terms of keeping each other in the loop with activity, it’s about seamlessly being connected through the business’s ERP so that data is accurate and up-to-date throughout the teams.
From a finance teams point of view this is extremely handy for being able to be in line with the day-to-day of the business. Helping teams to be able to make up-to-date, informed and accurate decisions based on continuous data rather than historical. This has a clear link to spotting opportunities and heading off financial challenges from an early starting point.
Without an up-to-date financial management system, continuous accounting that benefits the business as a whole can be tricky. Without those tools in place to ensure seamless data from department to department, you could be creating roadblocks in your business that halts the knock on effect of continuous accounting.
The catalyst
The year 2020 has been vastly different in so many ways for finance teams - has it acted as a catalyst for a shift in the way finance teams work? It’s very rare that you step back and think about if the way you do things is the right way to do them. Yet often when you do, you see clearly what changes you can make to improve performance. I believe this year will have been that realisation, where many finance teams stepped back and saw continuous accounting as a way forward. So they can spend more time looking ahead, spotting opportunities and resolving challenges, than looking back.
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