Our move to remote working has brought about an important realisation for virtual accounting teams – traditional accounting practices are long overdue for change. Suddenly, we’re being forced to assess what works, and what doesn’t.

But in order to look forward, let’s consider where we’ve started. The standard accounting processes most businesses use today are not too dissimilar to those developed hundreds of years ago, when the only tools that existed for balancing accounts were a quill pen and paper ledger. Similarly, today’s accounting professionals still spend a large amount of time on repetitive, manual tasks rather than looking for ways to improve their organisation’s performance.

But more than ever, businesses need faster access to financial data. We need to evolve from the tension of month-end close. As accountants and CFOs aim to deliver greater value to their clients and business, now is the time to replace the traditional record-to-report process with continuous accounting.

Here’s why. 

Change isn’t near, it’s here

Closing the books has long been resource intensive. From reviewing transactions to tracking down errors and correcting journal entries to making sure accounts balance, the time and energy required is vast.

But there’s a bigger picture. ‘Traditional’ accounting practices are not only more susceptible to human error, but by the time the process is finished – sometimes weeks after the month has ended – there’s little strategic value left. With a small window to analyse results before focus turns to the next month, decision-makers can no longer act on information that isn’t real-time.

Enter COVID-19, which has already pushed many accounting teams to adopt parts of the continuous close (either consciously or unconsciously). Suddenly thrust into working remotely and attempting to deliver real-time views of the business in the midst of crisis, accounting teams have been pushed to adopt more automated processes.

Continuous close and month end

Our research shows that 81 percent of finance professionals rated operating cash flow as the top KPI being regularly updated, demonstrating the critical need to have real-time access to this information in a fast-moving landscape. Compiling large volumes of financial and non-financial information efficiently is no easy feat, and the role of technology in supporting the continuous close approach is essential and cannot be overstated.

Often, accounting’s difficulty in collaborating with others in the organisation is getting information delivered in timely manner – a major obstacle that has slowed the traditional close process. Continuous close mitigates this by automating repetitive tasks such as creating journal entries or reconciling account statements, as well as eliminating the need to collect and normalise data from other departments – which can save dozens of hours every month. This automation must be provided by a financial management or ERP system, which should also ensure compliance with accounting standards, government regulations, and tax laws by consistently applying the appropriate rules and schedules for items like revenue recognition, depreciation, lease management, and prepaid and deferred expenses.

By incorporating closing tasks into the daily routine, continuous accounting spreads the work out over the entire month and balances workloads so accounting team members do the work they are best suited to. The combination of automated processes, real-time access to information, and the replacement of spreadsheets for complex calculations boosts accuracy by eliminating duplicate data entry and the potential errors caused by massive spreadsheets, incorrect formulas, and manual processes.

Moving from an event-driven close process to continuous accounting provides firms with visibility and accuracy in less than half the time and helps to establish the strategic role of finance. In essence, the role of the team becomes that of an internal auditor, which reviews the automation setup for material errors and testing transactions to keep things in check.

Shift to business now, not ‘business as usual’

Accounting and finance teams must demonstrate the value they can bring to the organisation, and often this comes with a shift in culture. An accountant’s most critical skill is distilling data in a way that matters most to decision-makers to help them meet organisational priorities. It’s one thing to have a great idea, but quite another to be able to use continuous close to deliver financial insights to the business to be able to act swiftly.

It’s human nature to be resistant to change. Yet, this year has shown that we can adapt as quickly as we need to. To help shift the mindset of what accountants can bring in the month-end close process and beyond, they must create a culture of collaboration both within finance teams and other departments to improve processes and allow accounting staff to add more value. As a result, managers should focus on helping individual team members build and maintain strong relationships. One way to do this is by making sure each person – and the group as a whole – sees how their work contributes to the achievement of broader finance and accounting objectives.

The mindset around a continuous close should not solely focus on doing it faster, but rather designing a process for monitoring critical business information and accessing the data in real-time to deliver both short and long-term business value.