Accounting BlackLine

Continuous Accounting: The Future of Finance

Sponsored by BlackLine

Finance is shifting from traditional manual accounting processes to more flexible, agile, cloud-based solutions. Continuous Accounting shortens the close and produces real-time reporting, analysis, and awareness.

There’s cause for a lot of optimism in finance. By 2020, Accenture predicts that Finance productivity will increase by two to three times, and organizational costs will decline by 40%. They also foresee a dramatic shift in time spent on analysis, from a mere 25% today to 75% in the future. These transformative predictions are due in large part to the digitization of accounting, and the digitization of business in general.

Finance is shifting from traditional manual accounting processes to more flexible, agile, cloud-based solutions. Technologies like cloud computing, mobile, automation, and analytics are delivering dramatic improvements in efficiency, and finance organizations are getting on board, with 82% of CFO’s pointing to cloud applications as the future of their business applications.

The Trouble with Record-to-Report

The traditional record-to-report process was not built for the modern business economy. It was implemented over twenty years ago and designed to accommodate rigid systems that didn’t integrate well with general ledgers. It represents a start-stop view of how accountants approach reconciliation and close activities at the period end, manifesting problems that can have a significant impact on the business.

Record-to-report is a linear process, analogous to an assembly line. By definition, results can only be produced at the end of a given period, and on the day after the period closes steps are taken to prepare, analyze, and ultimately report results. By the time those results are in, the information is necessarily out of date.

It’s not that the process is broken. It’s simply failed to modernize. The always-on nature of business today involves globally dispersed transactions that come in around the clock, vastly increasing the number of unreconciled transactions. Record-to-report brings significant costs to organizations looking to modernize, even more to those who are reluctant to do so.

Costs of Reactive Operations

Reactive accounting operations in the form of the traditional record-to-report process risk damaging the quality, accuracy, and timeliness of results while placing incredible amounts of strain on employees. It condenses a huge amount of work into a short span of time, causing a reactive approach that leaves accounting and finance teams always playing catch-up.

The challenges are costly. Completing close activities at the end of a period leaves no extra time for in-depth analysis. When the results are in and reporting is completed, they are already out of date. As the pressure mounts to complete the close, rushed approvals and late journal entries increase the risk of error and discrepancies discovered after reporting. Long hours and overtime are fast lanes to employee burnout and ultimately expensive employee turnover.

What Is Continuous Accounting?

Automating the record-to-report process is the first essential step, but it can only take you so far. Continuous Accounting is a new approach that distributes your workload evenly, over the accounting period, shifting your focus from where you were to where you are now. It embeds automation, control and period-end tasks within daily activities so you can align your accounting schedule with the rest of business. It shortens the close, smooths out the end of period spikes and produces real-time reporting, analysis, and awareness.

Continuous Accounting provides a way forward, transforming tasks like reconciliations, intercompany processes, transaction matching and variance analysis, so they aren’t just automated: they’re real time. The faster close and efficiency benefits reduce overtime and the weekend crunches that often overload and burn out accounting talent. It turns the visibility of financial results that are traditionally reserved for the close process into a real-time picture at any point in the accounting period.

Transformational Benefits of Continuous Accounting

The ability to perform tasks in smaller chunks on a more frequent basis smooths out workloads. Being able to evaluate the integrity of information at any point in time enables continual monitoring for errors, fraud, and inefficiencies. Anytime access to the data allows teams to look at the impact of changes like currency fluctuations with up-to-date financial data. In short, Continuous Accounting more evenly distributes the workload associated with the period-end close, while enabling constant reporting, verification, and analysis.

This is done by combining a mix of people, process, and technology. Many companies have found ways to leverage technology to shorten their record-to-report close cycles with automation, but improvements are still limited by the old way of doing things.

Achieving the Point-in-Time Close

The point-in-time close is the pinnacle of Continuous Accounting. As companies continually improve and automate wherever possible, transactions will be processed constantly, regardless of time zone or source system. Those transactions will be automatically matched, reconciled, and analyzed as they happen. Irregularities are flagged, generating instant alerts so accounting teams can investigate issues as they arise.

The result is unprecedented visibility into the current state of a company’s finances. A CFO can walk into any meeting and provide real-time, up-to-the-minute financial intelligence. Imagine the impact on strategy and business decisions. Instead of just reporting on the past, Finance guides the future.

5 Steps to Continuous Accounting

Continuous Accounting is a practical approach to improving core accounting and financial close operations. Applying these five steps to period end accounting activities can modernize back office accounting:

  1. Split Batch Processes into Smaller Tasks. Identify batch activities, break them down into logical work units, and make them more manageable.
  2. Schedule Tasks as Early as Possible. Schedule smaller tasks as early in the process as possible or as required by business needs.
  3. Embed Tasks within an Everyday Workflow. Live the philosophy of Continuous Accounting by embedding tasks into daily workflows, simply making them a part of one’s day.
  4. Automate where Possible; Standardize Elsewhere. Automate tasks where technology can take over, and standardize routine process where an accountant’s nuanced approach is ideal.
  5. Monitor Metrics to Adapt & Intervene in Real Time. Monitor data, results, and benchmarks to address process gaps, anomalies, and discrepancies in real time.
Continuous Accounting is more than a change in technology. It’s a fundamental shift in philosophy. The technology takes care of processing transactions as they come in, but the people, now refocused on continual analysis of discrepancies and anomalies, are unleashed to do what drew them to this profession in the first place. Moving from record-to-report to Continuous Accounting is a practical, stepwise application yielding quantifiable benefits.

The future of finance is bright. With Continuous Accounting, the way it’s always been is about to become the way it ought to be.

Visit BlackLine to learn more about Continuous Accounting.

Read the new Ventana Research white paper, “The Value of Continuous Accounting for Business”. It’s an in-depth look at how technology and process improvements have combined to transform and modernize the way finance and accounting teams work. Read Now.

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