2 min read
The modern continuous accounting model is a fast and cost-effective form of accounting that uses technology to improve accounting processes. The basis of continuous accounting is to ensure you do your books every day instead of at the end of an accounting period, as with the traditional accounting method.
Traditional accounting requires the accounting processes to be completed at the end of a month, quarter or year. This usually requires the accountants tasked with the job to spend long hours working it all out and making sure everything adds up.
Continuous accounting does away with this time-consuming approach by leveraging digital technologies to improve the efficiency, visibility and real-time accessibility of a company’s finances.
The continuous accounting model explained
There are three fundamental principles that describe the continuous accounting model. These principles are:
Even workload distribution
Accounting culture change.
Continuous accounting leverages new technologies to automate the many repetitive and mechanical procedures of accounting. These new technologies do not automate every accounting procedure, but it can be implemented for as many tasks as is practical for each company’s circumstances.
This procedural automation of appropriate accounting tasks creates more free time for accountants which allows them to focus on other elements such as data integrity and accuracy.
Even workload distribution
The next principle of continuous accounting also involves an even distribution of the accounting workloads throughout the days, weeks and months of the year. By optimising the accounting calendar with the various financial software now available, businesses can perform several accounting tasks on a daily or weekly basis. This saves having to do them all at the end of an accounting period such as a month or quarter.
This even workload distribution not only reduces the stress on those tasked with accounting duties, but also provides up-to-date financial information to the company’s directors. This can provide opportunities for expansion or investment, as well as help identify and address issues much quicker than the traditional accounting model can.
Accounting culture change
The last principle of continuous accounting may as well be the first due to its importance to the success of the continuous accounting model. While the first two principles are more concerned with the practical side of continuous accounting, the third principle relates to the accounting culture itself within the business or organisation.
Continuous accounting requires a dynamic environment that aims for consistent improvement. It can be quite the leap from the traditional accounting model to continuous accounting, so it is imperative that everyone is on board and understands their responsibilities.
Benefits of continuous accounting
Employing a continuous accounting model reflects a modern way of operating. Many other departments have been moving towards automation and agile methodology for years now, so it is about time that accounting caught up.
Indeed, it can quickly become one of the more agile departments at a company. It can provide much faster analysis and real-time accuracy than the traditional accounting model. The old way – and current way for many businesses – meant the books were completed at the end of set periods, by which time the results could be very out of date.
Traditional record-to-report accounting always produces a number of peaks and troughs, but by automating a lot of the processes and fulfilling multiple accounting tasks throughout the period, there is a much more consistently smooth trajectory describing a company’s financial health.
By transitioning to the continuous accounting model, modern businesses can gain all these benefits and more. It does require a commitment to the cause to ensure it takes off and becomes the natural culture of the company, but the efforts put in will certainly be rewarded.
We can help
If you’re interested in finding out more about continuous accounting, or any other aspect of your business finances, then get in touch with our financial experts at GoCardless. Find out how GoCardless can help you with ad hoc payments or recurring payments.