Continuous accounting is a paradigm shift for finance professionals responsible for closing the books and producing financial statements. “The way we’ve always done it” is to wait until period end, work long hours, and get the end of the period reporting done. This traditional way of doing things is based on repeating what’s been done period after period in the past. The reports are getting done so if it ain’t broke, don’t fix it. Change is hard.

The concept of continuous accounting is to not wait until the end of the period to execute the multiple tasks that need to happen to close the books. With the advancements in technology over the past years, it is now possible to execute tasks required for the close throughout the period. Similar to the concept of a soft close, continuous accounting provides better visibility into financial results throughout the period—live and in real time.

This does not replace the need for a hard close. The annual report sent to stockholders shouldn’t change each time the reader opens it. The core essence of financial reports is a snapshot at a specific period of time. However, being able to have better insight sooner into what that snapshot is likely to be can provide great value.

Thinking Outside the Bottleneck – What Can be Done before Period End?

Certain accounting needs to happen during the end of the period, but much can be accomplished earlier than typically executed. Intercompany reconciliation is an example of a task that can be now run throughout the period. Historically, corporate processes would be the bottleneck as subsidiaries would need to wait until period end for them to collect and run matching reports, which were then returned to the subsidiaries that would then reconcile among themselves, make corrections, resubmit, and then run the matching reports again.

With the technology that’s available today, subsidiaries can see their intercompany activity along with their intercompany trading partner’s activity throughout the period. This approach eliminates the need to wait until the end of the period to ensure they are in balance. This is just one example of tasks that can be distributed throughout the period, including account balance reconciliation and attesting, certain accruals, review of equity accounts that are expected not to change, and certain allocations.

The period-end closed is not going away anytime soon. The concept of a real-time consolidation during the period will not provide a complete picture as there is much activity that still happens. But it can start to provide a picture of what is going to come.

Continuous Accounting – Requirements and Benefits

Change is hard, and this type of change requires technology change as well as process change. It’s a different way of doing things, but the benefits outweigh the pain of change.

Lightening the workload at a period-end close speeds the close and contributes to better work/life balance. Additionally, the finance department can provide more accurate visibility into the financial position earlier in the period, enabling better operational decisions that impact the business sooner.

The period-end close and reporting is required, speeding that close is desired, and continuous accounting is inspired and admired.

Learn More

Learn more about this approach and why it’s important for your business. Watch our SAP CFO Strategic Webinar available On Demand ,  “Continuous Accounting- What It Is and Why It’s Important for You.”

This post was originally published in the SAP D!gitalist magazine and has been republished with permission.