Remote working furthers the case for continuous accounting

Back when many of us worked in the office, a sort of shared experience for those who didn’t work in one of the departments involved in month-end close is seeing those who did. There was probably muttering about how late they would need to be there that night – and the night after that, and probably on Saturday – so that they could answer questions, perform their functions and above all, access the on-premise systems their accounts were tied to.

But when coronavirus hit, that shared office reality evaporated, fast. Something which was already challenging had layers of difficulty piled on – evidenced by even the London Stock Exchange granting delays and extensions in financial reporting deadlines.

Even though they didn’t really know what was coming, some organisations were simply better prepared. In March, organisations that could continue to access sensitive financial data outside the office walls and which had been for years laying the groundwork to automate many of the processes involved in closing the books had the tools in place to close remotely.

They were better prepared because they had worked to adopt continuous accounting processes. Continuous accounting isn’t a technology, it’s a process enabled by automating routine accounting tasks as well as the ones that require complex calculations – like depreciation or amortisation. The close cycle becomes nearly continuous because of automated reconciliation tools between AP sub-ledgers and the general ledger, automated consolidation and intercompany transfers with eliminations, as well as the automated generation of financial statements. Technology is used to process and post transactions in real time.

The end game is that booking and reconciliation processes occur continuously, not at the end of the month manually (most often in Excel). For that reason, the finance team has a real-time view into its financials – and most importantly in our current environment, its cash position.

Prior to the pandemic, increased digitisation of finance functions such as analytics and fraud detection ranked high amongst finance automation priorities for 200 U.K. finance leaders surveyed by Robert Half. But less than a third said their automation plans included accounting functions, vendor/client interfaces or financial reporting.

The coronavirus pandemic has brought renewed focus to the benefits of automating the many tasks that go into the month-end process and the obvious benefits of leveraging cloud-based technologies to do so.

Remote close hinges on being able to access financial information securely, when it comes to both data privacy and internal permissions, outside of the office. Cloud-based technologies are superior to the VPN in this regard because access is fast and consistent.

Continuous accounting leverages workflows built to ensure a consistent closing calendar and hard close period, provide documentation, enforce deadlines and provide for reviews that ensure accountability.

All data must be centralised and readily accessible by roles and permissions. For companies that sell products, that includes not only transactional data, but data on inventory levels, open and pending orders and shipping confirmations. For companies that provide services, it includes project data, such as performance obligations and project management data. Underpinning all of that is a strong culture that encourages collaboration between (and within) finance and other departments. Each person should understand how their function impacts the process as a whole and be empowered to suggest improvements.

Some of the high value areas for automation include general ledger accounting, consolidation, financial reconciliation, fixed asset accounting, tax planning and benefits administration. The benefits extend beyond being able to perform a seamless remote close and include:

Time-savings for AR and AP. Rather than tracking down and consolidating information, the accounting team can spend time on investigating anomalies and analysing trends.

Complex calculations are easier. Managing fixed asset depreciation is a manual task in many organisations. With data on all assets stored in one place, technology can be leveraged to constantly track acquisitions and disposals, and automate depreciation calculations, using the designated depreciation method and schedule for each asset. Information is processed in real-time and depreciation rules are applied consistently.

Increased accuracy. With integrated workflow, there’s no more manually rekeying information from one system to another. That reduces the risk of human data entry errors.

Increased compliance. Cloud-based systems are regularly updated to conform to the latest standards and regulations – which can change frequently. By applying the rules accurately and consistently, it’s easier for organisations to maintain compliance for the group and locally.

Increased quality of work life. When functions left to month end are folded into daily accounting operations, and the most tedious work is automated, the accounting team can focus on the exceptions, as well as identifying things that will make the process run more smoothly.

Real-time view of cash position. Financial statements give leaders a view of what happened – not what is happening with the business. When transactional and operational data is integrated and able to be accessed on demand, finance leaders can provide a real-time view of the company’s financials – including its cash position.

The pandemic has forced organisations working with legacy software – or manual processes – to reexamine their technology landscapes, as they prepare for prolonged periods where many people will choose to or be forced to work from home.

Adopting technology now that enables continuous accounting processes is one of the best preparation steps the accounting and finance team can take. It ensures that employees can safely and efficiently conduct their jobs and the business can continue to function.

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Learn more in this Guide to Continuous Accounting.