Continuous accounting is the modern phenomenon of applying digital technology to track and reconcile every aspect of the business’s financial activity in such a way that all manner of accounting takes place on an ongoing, virtual basis.
The timing of accounting processes more closely tracks the day-to-day activities of the business, rather than traditional fixed schedules.
All transactions are captured and journaled accurately and in real-time. Reconciliations take place continuously and automatically, and reports and statements can be produced on demand.
Business accounting encompasses a myriad of steps and processes, some basic and others complex, that take place in different contexts.
Traditional accounting involves manual and paper-based record keeping and reconciliations of those records to identify and eliminate errors.
Due to the manual and tedious nature of many of those processes, the overall process of accounting takes time. Even with the advent of computers, software, and digital spreadsheets, traditional accounting moves at its own pace.
Accounting also typically operates on a schedule, with processes done at regular intervals or periods—monthly, quarterly, and/or annually. The ending of these cycles signifies a close, meaning a finalization of the books and all records within them for the period.
Continuous accounting disrupts, or eliminates, this cyclical nature of accounting. With the advent of advanced, integrated software platforms that speak to each other digitally, businesses can perform all the necessary steps of accounting virtually without the delays resulting from human tasks.
Businesses can achieve virtual journaling, reconciling, the production of financial statements, and analysis. They can be performed at any time, all the time, not just at period close.
Continuous accounting is also conceptually very similar to the virtual close. The virtual close refers to a fully automated and completely integrated digital accounting system that enables a business to produce accurate financial statements at any time.
Continuous accounting is made possible by accounting automation. Also known as computerized accounting, accounting automation refers to the use of software applications to perform the essential functions involved in the process of maintaining a business’s financial records.
Digital processes minimize, and may even eliminate, the need for manual data entry and cumbersome spreadsheets.
Software executes fundamental tasks, such as capturing and entering data into the business ledger, reconciling discrepancies, updating records, and producing reports and financial statements.
Accounting automation and continuous accounting rely on various different technological advancements in the field of accounting software:
Artificial intelligence (AI) can execute such accounting tasks as entering and matching data from receipts and invoices to purchase entries in accounts receivable, and enforcing company policies in the expense reimbursement process.
Cloud computing supports accounting automation and continuous accounting by providing a centralized database that can be accessed over the Internet (the cloud) from anywhere. This allows for more seamless integration of different applications and data sources, and it helps integrate the work of the team.
Data entry is an essential step in the accounting process. Continuous accounting is made possible by the digitization of data entry, which allows for the computerized capture of information from various different sources, such as receipts, invoices, bills payable, and expense reports, and the inputting of this information into a central information source.
Machine learning is the process by which computers are programmed to learn much like humans by processing data and rules, or algorithms. Machine learning allows programs to improve and increase the efficiency of their processes by predicting and making decisions. Real-time integration dramatically speeds up the time it takes to enter and process information, because software programs that are working together can process and apply information almost instantaneously.
Robotic process automation (RPA) is a form of automation that performs repetitive assignments, including sorting, data insertion, form completion, and interpretation of text and data.
Continuous accounting involves a change to the business’s information technology systems, which itself is built on many steps of implementation:
A business will need to adopt an enterprise resource planning (ERP) platform. ERP describes an integrated management approach to business processes, usually involving technology in some fashion.
It often includes a suite of integrated software applications. This allows the business to manage its operations in a holistic manner by facilitating a standardized, across-the-board method for collecting, storing, managing, and interpreting the data that is generated by its many different activities.
Having an ERP platform will make it easier for the business to implement a centralized accounting process. Large businesses, in particular, will have many programs and divisions.
When their accounting programs, schedules, and data entry and reporting practices are not aligned, this creates more steps in the final stage of reconciling and funneling data into the closing reports, and it increases the incidence of errors and discrepancies.
On the other hand, having a centralized system, that all units follow in the same manner, increases uniformity and efficiency. It rapidly speeds up the process, makes the business more nimble, and enables it to operate at a more sophisticated level of accounting.
At the granular level, to support these broader objectives, all transactions in the business should be recorded following a master standard of data entry protocols.
Following the same guidelines for inputting information into the business’s accounting records will reduce errors and discrepancies, increase the quality of the data, and rapidly speed up the process.
To support this consistent data entry, the business should also digitize and electronically collect all transactional information. This includes invoices, purchase orders, and all other types of transactional documents.
This will facilitate the input of information contained on these documents into the centralized data-based system.
Finally, other changes can also be implemented. Automated workflows, online transaction portals, increased automation of manual processes, and reduction of red tape within the business all contribute to a more streamlined and holistic digital process which allows the business to conduct the virtual close.
Accounting automation is becoming more popular as businesses and organizations see the advantages of migrating their accounting systems from a manual, spreadsheet dependent or paper-based system to one that is completely digital and automated. Continuous accounting is beneficial to business in many ways.
By streamlining the accounting process, it makes businesses more competitive by reducing processing times and improving accuracy. It makes the business more efficient and reduces the burden on personnel. Staff can spend more time on higher level tasks and analysis.
By reducing the reliance on rigid accounting cycles, continuous accounting makes the business more responsive, nimble, and flexible.