As a startup, it’s important to adopt an efficient and modern accounting approach that supports your business growth and helps you deliver on your business goals. Continuous accounting is one such new approach that promises some relief from the burdens of more traditional methods. But is it right for your business?
Continuous accounting is an accounting approach that leverages digital technologies to improve the visibility, real-time access, and cost-effectiveness of accounting information in a fraction of the time. In simpler terms, it’s about using technology to improve accounting processes so you have access to more reliable accounting data in real-time.
Compared to traditional accounting, continuous accounting, or the continuous close, is a more radical approach. In the former, workloads peak at the end of an accounting period (month, quarter, or year), with accountants working long hours to get the books done. Continuous accounting and continuous auditing breaks this trend by ensuring you do your books every day.
To fully appreciate the novelty of continuous accounting, let’s take a look at the challenges of a traditional accounting approach.
Downsides Of Traditional Accounting
It’s time-consuming and error-prone.
Traditional accounting methods are characterized by little or no automation. This creates two issues. First, finance experts will have to wait until the end of a specified time frame, usually month-end, to complete a long list of accounting tasks. Second, a lot of repetitive tasks are carried out manually, increasing the possibility for errors and inaccurate records.
It offers limited visibility and control.
Dealing with a host of financial documents at the same time can be overwhelming. It’s difficult to keep track of bills, receipts, invoices, bank statements, scores of spreadsheets and other important items. This challenging process reduces the visibility of financial reports and results in a lack of control over financial records.
The Principles Of Continuous Accounting
These basic principles guide the practice of continuous accounting and are aimed at solving the challenges identified above.
Automation Of Repetitive Accounting Procedures
Technology is the bedrock of the continuous accounting approach. The goal is to leverage technology to automate repetitive tasks and batch execute them with high accuracy in a fraction of the time. This process automation helps free up time for finance teams to focus on activities that require more cognitive power.
Better Workload Distribution
An accounting calendar shows the period within which an organization prepares its management accounts and financial statements. With the help of technology, finance professionals can strategically distribute accounting tasks effectively, perform multiple accounting transactions on a continuous basis and work on them as soon as possible without having to wait until month-end (or an accounting cycle), ensuring steadier and more balanced workloads.
Change In Accounting Culture
Continuous accounting requires a change in culture and a willingness to make it work. Your accounting team needs to be coachable, and the leadership has to be committed to enforcing the new mindset because it's always easy to wait until the end of each month and do things the old way. It's also important that employees can see the benefit of a culture of continuous improvement, whether that’s simplified compliance or increased operational efficiency. If they work hard every day of the month and still have to work several hours at the end of the month, then implementing continuous accounting would be a harder sell.
Overall, switching to a continuous accounting model can yield the following benefits:
More balanced workloads and fewer period-end tasks
Real-time access to the latest financial data and reliable information about your business
More time to focus on other value-adding services
Improved and informed instantaneous decision-making
Limitations Of Continuous Accounting
While continuous accounting significantly decreases the amount of work to complete at the end of an accounting period, there will always be some accrual basis adjustments to be made. The goal is to ensure that those adjustments are the only tasks left as opposed to an entire laundry list of tasks that could have been handled within the month.
Switch To Continuous Accounting With Zeni
Zeni is a full-service accounting firm that uses artificial intelligence and machine learning to provide the full benefits of continuous accounting. Zeni makes it easy to transition your team to a continuous accounting model without shaking up your entire accounting culture. For a set fee per month, you have access to daily bookkeeping, 100% accurate and real-time reporting, CFO services, and more, helping you free up time for more critical tasks.
Zeni is a new age, full-service finance firm, built from the ground up using AI & ML, for startups and small businesses. Zeni’s AI and Finance Experts collaborate together to deliver 100% accurate accounting