Real-Time Accounting 101

real-time accounting

Suppose you need information for a new investor or you need to see your Bank Manager the next day. What do you do? Send a message to your accountant to urgently update your P&L? Depending on how you manage your accounting, this could even take days. Well, not anymore. Our hero’s name is real-time accounting.

Real-Time Accounting vs. After-the-Fact Accounting

In one crucial area, real-time accounting differs from after-the-fact accounting or historical accounting: when the accounting takes place. Real-time accounting occurs in real-time, while after-the-fact accounting happens later.

After-the-fact accounting is also known as batch accounting. It’s when the accountant or bookkeeper sits down and processes all expense reports, profits, losses, etc. in a linear fashion. This takes more time, but it also allows you to verify everything accurately.

Real-time accounting involves entering data in real-time, creating reports, checking authorizations, and fixing categories. This is also easier to automate, which could save you time.

Streamlining Accounting Processes

“Accounting is about providing timely, useful information to decision-makers” (Davis 2012)

However, a study done by the Association of Accountants and Financial Professionals in Business found that 41% of the financial closing time is spent collecting, entering, and verifying information.

One reason is that organizations continue to use many different processes and tools (emails, spreadsheets, etc.). It can be time-consuming and expensive to search for, collect and process the correct data from all sources.

Real-Time Accounting Benefits

Let’s look at the main benefits of real-time accounting.

Decision-making quality

It is essential that you can keep track of all transactions in and out of your business daily. This will allow you to identify areas that are performing well and areas that need improvement. This will enable you to make the right decisions at the right time. You need accurate, up-to-date financial information to make this possible.

Time is money in today’s business world. How often do your management account details help you manage your business? Are you not receiving the information quickly enough? Is the data not as precise as you want it to be?

Real-time accounting provides the information you need as soon as a transaction has been completed. You can access your profit and loss, balance sheets, sales reports, and other information, regardless of whether you are making a sale or purchasing. This information will allow you to be proactive and not reactive to your business’s needs.

Real-time accounting and, therefore, real-time reporting can be made available instantly to management, decision-makers in the company, and accountants/controllers without waiting for the closing of the period to make critical decisions for the business.

One problem with this statement is that even if immediate transaction posting and closing occurs, adjusting entries will always need to be made. These entries will still take time.

However, with real-time accounting systems like Fiskl, there is enough critical information mass to make informed financial and business decisions without final adjustments.

Modern real-time accounting

Connects to your bank, automatically tracks and categorizes your business expenses, matches revenue with invoices, and keeps your P&L always updated.

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Your accountant can be more effective

Accounting software allows accountants to provide accurate financial advice to clients. They can analyze the profit, revenue, and expenses for any period. You can expect sound financial advice.

A savvy accountant can have a very high potential return on investment, especially when they offer real-time accounting.

Clients can benefit from advisory services:

  • Get more tax-efficient
  • Recognize and capitalize on growth opportunities
  • Minimize inefficiencies
  • Experiment with various business strategies

The role of an accountant has changed from ensuring that a business survives to helping it thrive. They now need to be proficient in data analysis. The software can help them extract business insights, but it’s up to your accountant to make the best use of it.

Better audit process

Real-time accounting systems provide a real-time audit trail, so both accountants and external auditors have access to every change to the transaction history, which is automatically tracked.

There are no surprises during the tax period

Instead of finding all the accounting information you need at the end of the period, it will be easier to organize everything and have it ready for you on the go. You won’t be surprised by any unexpected taxes because you’ll have the calculations done in real-time.

Profit and Loss—instant status update

You will find the most benefits of real-time accounting in the Income Statement, or Profit and Loss. You can see your profitability and how you’re doing at any time of the day or night by clicking a button. It allows you to compare your performance with previous periods and check the results of different channels. You can also compare them against each other. You can then make the best decisions to move your business in the right direction.

Facilitating billing and expense management

Time tracking and expense information are added as they occur, especially due to automated banking sync for the latter. This makes it possible to bill faster and review, manage, and control work more efficiently.

Another benefit of real-time accounting is event-based billing. Event-based billing means an invoice is created as soon as the work is done. This type of invoicing speeds up the billing process and allows an earlier receipt of payment.

Easily manage your daily finances

Invoicing, expense management, accounting, time, and mileage tracking all in one app.

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Easier compliance

Governments are moving to real-time automated reporting, and real-time accounting is critical to this, as transactions are processed as they occur, and the reporting data can be processed instantly at the push of a button.

The UK government’s Making Tax Digital program has helped accelerate the transition to real-time accounting software. HMRC (Her Majesty’s Revenue & Customs), the UK’s tax agency, has realized that tax returns must be submitted more efficiently. This could be due to the increase in entrepreneurship. Non-professionals often have difficulty understanding financial processes, especially tax. This can lead to errors and late submissions that can lead to penalties.

Real-time accounting systems make it possible to solve this problem. They make it easier for firms of all sizes to view, collect and submit financial reports.

Final Thought

Real-time accounting is a time-saving and efficiency-generating approach that will streamline your decision-making and bring you peace of mind. If you haven’t done so yet, it’s high time to give it a try.

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