The Clever Principle

Continuous Accounting makes finance departments fit for the future

The example of financial closing, which in the past was characterized by numerous manual steps, shows how enormous the benefits of digitization can be. Whereas it was previously common for accountants to have to fight their way through a mountain of work at the end of an accounting period, the interaction of modern ERP and financial close solutions generates attractive added value.

Which financial specialist is not familiar with this situation? At the end of each month, quarter or year, financial statements and reporting are due, and with them a huge amount of overtime. An enormous number of documents, receipts and figures from the various corporate divisions and systems have to be collected, assigned and reconciled. 

Manual financial accounting

Even though it's hard to believe, even in the age of digitalization, these situations are more widespread than you might think. One could almost speak of a standard. No matter how modern the ERP systems, for example SAP S/4 Hana, are, when it comes to preparing for consolidation, employees still revert to spreadsheets or, in the worst case, even reconcile printed documents.

There is a gap between the leading ERP solution and enterprise performance management. Discrepancies in the records or Excel tables are very difficult to track down. The risk of erroneous postings or even within open items is high. In a 2019 international study commissioned by BlackLine, the Censuswide Institute found that 69 percent of finance executives surveyed believe that either they or their CEO has ever made key business decisions based on outdated or incorrect financial data. 

The principle of a continuous accounting process can help here. Continuous accounting is the magic word with which more and more companies are now preparing for the future. According to this, the selective workload of conventional financial statements is replaced by a continuous process. Postings, account reconciliations, analyses and controls no longer take place at the end of the month, quarter or year, but during the accounting period - based on daily updated data and in real time. Transactions and accounts are reconciled immediately, and discrepancies are identified in good time before the actual closing. How does it work?

This automated financial closing process is made possible by companies such as SAP and BlackLine, whose software solutions interlock in such a way that not only the postings in the ERP are automated, but also their verification - for example, during account reconciliation or transaction matching. This distributes work more efficiently, makes it easier to close the books, and increases quality and transparency. 

Transparency with financial planning

This, of course, benefits the financial accounting staff. Not only are they freed from end-of-period stress, but they can use their skills for more demanding activities. Instead of stubbornly collecting and reconciling data, they analyze and evaluate it. In this way, they contribute directly to the value creation and further development of the company - as is appropriate for their role. 

This should also please colleagues in financial planning and analysis: Whereas in the past they were often only able to complete their forecasts when the necessary data was available in the following month, continuous accounting enables them to access up-to-date figures. Whereas daily forecasts were inconceivable before the introduction of a continuous accounting process, the CFO now has a real-time overview at all times. This is added value that benefits the entire company. Because the greater the dynamics in the markets and the higher the demand for agile corporate planning, the more important valid, up-to-date financial data becomes.

Accounting as a business driver

In this sense, continuous accounting is more than just a new method for financial closing processes. And this paradigm shift is long overdue. Last year, BlackLine again commissioned the Censuswide Institute to find out to what extent a change can already be traced in the course of digitalization. The results are sobering: Globally, only 14 percent of CFOs are convinced that their finance departments have the necessary capabilities to help their company grow and adapt over the next five years.

It is therefore a competitive advantage if companies align their corporate management with the challenges of a globalized, constantly changing business world. Continuous Accounting gives CFOs the necessary accuracy in the figures and the flexibility to plan and control optimally.

It is also about constantly questioning, adapting, and improving existing processes. This creates measurable competitive advantages: greater efficiency, fewer risks and transparent key figures. All this supports faster and better decisions.