How the Continuous Close Can Keep Your Accounting Ahead of the Curve

Every business should always be looking for opportunities to raise efficiency and make the best possible use of its time and resources.

These are particularly important priorities for finance and accounting teams, where smooth, reliable performance is crucial to the operation of the organization as a whole.

With this in mind, it's wise to consider the various methods and tactics available that can help your finance function be more effective and deliver greater value for the business. One such practice is continuous close, which can deliver clear benefits for the company, but could also require a significant shift in how people do their jobs.

What is continuous close?

Continuous close - sometimes called continuous accounting or rolling close - is a departure from the traditional accounting method of closing the books at the end of each month. It involves keeping accounts up to date on a daily basis, relying on integrated systems and automation to speed up routine tasks and make financial entries in real time.

One example of how robotic process automation can play a crucial role in this practice is through the instant processing of invoices as soon as they arrive in your inbox. Using technology to manage this task automatically - as opposed to having people do it manually - will help you keep your accounts payable fully up to date and correct.

The ultimate goal of the continuous close methodology is to ensure your books give an accurate representation of your financial position at all times, so you don't have to wait until the end of the month to get a clear picture of where you stand.

If you manage to reach this point, you can run a profit and loss calculation at any time and get a good idea of the company's current financial health.

The benefits of continuous close

Every business is different, and the exact advantages you can expect to gain from continuous accounting will depend on your unique needs and circumstances.

But the most common benefits of this practice include:

Accuracy

Trying to balance the books at the end of the month, only to find the numbers you're working with are outdated or inaccurate, is a common problem for accountants. Continuous close relies on technology - which reduces the risk of human error - and helps you maintain a high level of accuracy by reconciling accounts on a daily basis.

Time savings

With traditional month-end accounting tasks taken off their hands, the people on your finance team can concentrate on more worthwhile and valuable activities, such as analyzing the numbers in real time and putting them in the context of the company's current plans, goals and challenges. As well as supporting better business performance, this helps to deliver a more fulfilling professional experience for your employees.

Regulatory compliance

Keeping your finances and accounts in check is important not only from a commercial perspective, but from a compliance standpoint as well. Real-time balancing of your books enables a high level of visibility over your financial situation for auditors and industry authorities, which is particularly important in regulated sectors.

Well-informed decision-making

Every big decision you make as a company should be taken in the context of your financial circumstances, so it's a big benefit to have a clear and reliable picture of where you stand - particularly with regards to cash flow - before committing to any additional spending or investment. This is a big advantage of continuous close for the 86% of firms that have said they gain very little insight from their financial analytics.

3 challenges of continuous close

The benefits that can be gained from continuous close are undeniably attractive, but you also need to consider potential challenges and obstacles you might need to overcome to get the best out of this practice.

1. Moving on from legacy software

If you've used the month-end accounting process for many years, there's a high likelihood that you use software and tools that were specifically designed for this job. These legacy systems might not be well-suited to continuous accounting, so you'll face a decision between continuing to use traditional methods of closing the books or upgrading to more modern technologies.

2. Combining continuous close with the payroll

For the majority of businesses, paying employees is a monthly commitment that also represents one of their largest costs. The process of reporting payroll on a monthly basis can be difficult to combine with the continuous close method, which focuses on daily reconciliation of your accounts. Again, technology can be an important part of the solution here, with some automated systems providing the option to make daily accruals that reflect your monthly payroll costs.

3. Navigating change

Like any significant shift in business processes or practices, making the transition to continuous close will require the managers and team leaders in your business to support employees through the change.

Thomas Sutter of Oracle NetSuite's Finance Centre of Excellence noted it's "human nature" to be resistant to change, but also pointed out that recent events like the COVID-19 pandemic have shown that companies can adapt quickly when they need to.