Part 3 in the Continuous Accounting Series.
As we digest the concept of continuous accounting, it is important to understand that continuous accounting does not replace a hard close. There will always be a hard close, and there will always need to be financial statements reported at the end of the period. I’ve yet to see a company require real-time annual reports that change to reflect the general ledger every time a stakeholder opens them.
However, being able to access that real-time data during a period can provide insight into an organization that can be harnessed throughout the period. Not all financial data is valuable before the period end, but much can be. It is that paradigm shift of understanding that is transforming the function of finance departments in many companies. Perhaps it can in yours.
Let’s think through the following three aspects:
- The hard close
- The fast close
- Enabling a soft close with continuous accounting
The hard close
Each period (month, quarter, year), it is usually mandatory to produce financial reports. Accuracy is of the utmost importance. It is essential for C-level executives to have absolute confidence in the numbers they report. In many situations, legal compliance is mandatory. Additionally, finance organizations need to respond to increasing external scrutiny. As world politics change and evolve, we need to comply with strict regulations by jurisdiction and industry.
The fast close
I have been closing the books myself or helping companies close their books for over 20 years. Since the beginning of my career, the goal of closing the books faster has always been top of mind. Speed and efficiency have always been key. Wherever you can automate, standardize, or centralize a closing process is a potential for improvement. Technology continues to enable this, year after year.
The soft close/continuous accounting
The diagram above illustrates how the period-end close can change with continuous accounting. In a traditional close process, you wait until the end of the period to start addressing closing processes. With continuous accounting, you spread many period-end processes throughout the period. This makes the period-end close run faster and provides better financial insight during the period. As accountants, we understand that all period-end activities cannot be executed during the period, but many can, thus providing insight earlier and the ability to work with operations to course correct sooner.
We can improve management and control of operations and allow for immediate decisions. We can highlight the service provider approach of financial departments. We can react to requirements for faster filing.
To borrow from a keynote from our partners at BlackLine, who help to complete our financial close offering:
|CONTINUOUS ACCOUNTING IS NOT||CONTINUOUS ACCOUNTING IS|
|Just a technology story or a software sales pitch||A story about timing, process design, and unleashing the power of exceptional accountants|
|Just a different way to close the books||A significant shift in the way accountants execute on the record to report (R2R) process|
|Just for big companies OR small teams
|An approach that every organization can implement|
|Just an idea or a utopian vision
|A journey of continuous improvement, with real milestones|
Continuous accounting is the future of accounting. It is happening right now.
Click here to download our latest continuous accounting white paper: Continuous Accounting Drives Strategic Transformation.