Part 4 of the Continuous Accounting blog series. You can access the full series here.
We talk a lot about the transformational approach we call Continuous Accounting.
By now, you likely know what Continuous Accounting is, and you know that it begins with continuous process improvement. You may also already know that it has the power to elevate your impact on the organization and engage your teams.
Continuous Accounting is a game changer for every accountant and equips you to break the cycle of barely surviving at work to thriving — especially during the financial close. It’s time to talk about how to make this real at your organization.
The Trouble with Traditional R2R
The traditional record-to-report process does not align with the pace of the broader business. As a result, it also doesn’t provide the real-time visibility that is needed for effective decision making.
Waiting until the end of the month to substantiate the balances creates a dreaded frenzy during the time when accuracy is most vital. When the books are finally closed and the reporting is complete, you’re well into the next month—and the opportunity to be a strategic partner to the business is behind you.
This is why automation is so essential.
The Aptitude of Automation
When manual processes are automated, accounting and finance teams spend fewer hours on transactional activities. This allows you to start reimagining your processes and thinking about the tasks that can be done throughout the month.
It’s important to take the time to define your current processes: how would you like to work, and what would that look like? If all of the technology you needed to do your job well was available, how would that benefit you?
Exploring the possibilities will help you break free from the way it’s always been done and begin to shift to a Continuous Accounting mindset. And this will equip you to reap the full benefits as your manual processes are automated.
How to Make It Real
Accounting process automation improves the speed, accuracy, and reliability of the reconciliation to adjustment process by automating your routine and high-volume transactional processes.
Let’s dive into three of these processes, and explore how automation will help you improve each one with a Continuous Accounting approach.
Most manual reconciliations are done during the close at the end of the month, when the amortization and journal entries are complete. For some accounts this is fine, but key accounts or those with a high volume of transactions might require more regular analysis.
For example, if a large account fluctuates by 50 million dollars today, you’re going to want to know about it today – not at the end of a month.
When you automate the account reconciliations process, you have the capability to import your balances and reconcile them daily. This provides routine visibility and reduces risk because you’re dealing with a smaller subset to evaluate.
This is Continuous Accounting. The most important accounts can be reconciled throughout the month, even daily if needed. And with the manual work of the reconciliation process automated, there is more time to focus on analysis, risk mitigation, and exception handling.
When you’re dealing with manual journal entries, you’re also dealing with inevitable human error. As the pressure mounts to complete the close, rushed approvals and late journal entries lead to mistakes. And because of the mountain of work that you’re responsible for completing (manually) on a normal day, correcting and adjusting entries must wait until period-end.
Automating your manual, repetitive processes gives you a greater level of control and accuracy from the moment a journal entry is keyed in. An automated journal entry management solution enables you to schedule recurring journals earlier in the month, and monitor reconciliations throughout the period instead of waiting until month-end.
This helps you improve both controls and efficiency, saving you even more time to allocate to value-adding activities.
An automated matching process is at the heart of Continuous Accounting. When accountants are manually matching and reconciling thousands of transactions, there is little time for anything else. It’s so easy to get stuck in the process, trying to figure out why a particular transaction isn’t matching, as the minutes tick by.
But when you can import your data as it comes in, you can also automatically match and reconcile transactions. This frees accountants to focus only on researching discrepancies, and provides the best possible outcome for your analysis. With all of your data in the system and current, you have visibility into the numbers and can develop a holistic understanding of the data as a result.
An automated matching solution becomes the processing engine that performs that manual work and makes it possible for you to predict your workload. It is far more manageable to deal with a thousand transactions continuously, over the course of the month, instead of one day at the end of the month.
You will also have the time you need to think more critically about your accounts. Instead of being buried by manual work, you can finally zoom out and shift your mindset to the bigger picture analysis layer.
5 Steps to Continuous Accounting
Continuous Accounting is not an abstract concept, but a practical approach to improving core accounting and financial close operations. Apply these five steps to accounting activities currently left for the period end.
- Split Batch Processes into Smaller Tasks
Identify batch activities, break them down into logical work units, and make them more manageable.
- Schedule Tasks as Early as Possible
Schedule those smaller tasks as early in the process as possible or as business needs might require.
- Embed Tasks within an Everyday Workflow
Live the philosophy of Continuous Accounting by embedding tasks into daily workflows, simply making them a part of your day.
- Automate where Possible; Standardize Elsewhere
Automate tasks where technology can take over, and standardize routine process where an accountant’s nuanced approach is ideal.
- Monitor Metrics to Adapt & Intervene in Real Time
Monitor data, results, and benchmarks to address process gaps, anomalies, and discrepancies as they happen, in real time.