What Is Continuous Accounting?
The first question I’m asked when I start talking (let’s be honest, raving) about continuous accounting is exactly what you’d think it is. What is continuous accounting and why are you so excited about it?
Finance has a long history of DELAY. We can’t make decisions because we are waiting for the books to close or the numbers to be in.
Business happens every day, and financial information can feel stale or irrelevant even just days after a month is closed. Information is key to a business’s success and most successful CEOs I know come up with some metrics to know how their business is doing. More times than not, these are sales metrics or something related to their cash balance.
NOT financial metrics. Because they are too slow. They are 30 or even 60 days after things actually happen. That’s a glacial pace in the fast-paced world of high-growth entrepreneurs!
My plans for my business have changed completely in 30 days at times. So how do we make financial data more relevant? How do we use financial data to help growth for business owners? We speed up the data.
The Impact of Continuous Accounting on Your Business
Insert continuous accounting. Continuous accounting is simply a method of accounting where information is input into the financial system on a consistent, frequent basis. Depending on the size and capability of your staff, this could be weekly or even daily. Not all information will be updated on a weekly or daily basis, there are some things in the accounting world that really need to be done monthly. I will go into those, but there are SO many things that can be done way more frequently. Updates on revenue, particularly for businesses that have daily sales, and updates on expenses, which involves usually using an expense management tool that makes it easier for employees to input expense information more quickly, are a couple of those things. There are a ton of practices that help get information into the system more quickly, but someone (most likely the accountant) will need to update the information in the accounting system on a daily or weekly basis.
Think about being able to make decisions with revenue data from yesterday. Think about being able to know how well you did with a particular campaign that you ran yesterday, on a revenue basis, today?
What kind of impact does that have on your business? That’s the kind of impact we’re talking about with continuous accounting.
The same is true on the expense side. Have you ever accidentally left an ad campaign on or run up a bill that you didn’t realize you were running up until 45 days later after the books were closed? If you had seen the bills coming in from the ad company or wherever else three days into the campaign, how much money would you have saved?
This is the impact of continuous accounting. Real-time, actionable information.
Selecting an Accounting Firm for Your Small Business
I actually won’t recommend an accounting firm for a small business that only does monthly reconciliations. I want you to receive them weekly, at a minimum. I get a lot of pushback from accounting firms about this. They say it’s too difficult to do continuous accounting and that it takes too much time for their team. My argument is if you really need extra team members, you have to charge a little more. This information is too valuable and too important. My other argument is to get with the times. Continuous accounting is the future and the businesses and accounting firms that don’t take advantage of this incredible opportunity to help entrepreneurs grow their business are truly going to miss out.