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The Unexpected Benefits of Real-Time Reporting in Accounting

By Jack Ablon, published on Aug 27, 2020
The Unexpected Benefits of Real-Time Reporting in Accounting

 

How long does it take your company to close its books at the end of each month? How does that compare to other companies? A glance at a Reddit thread in which AICPA-certified CPAs and ACCAs shared their month-end accounting standards shows that it can range anywhere from three to 45 (!) days.

But what does a more reliable source say? According to a survey of 2,300 companies by APQC, it takes companies 6.4 business days on average to close their books at the end of each month. This means that most companies don’t have a clue about their company’s spending from the previous month until they’re in the second week of the following month.

While closing the books is a multi-step process that’s bound to take time, it can be done much more efficiently than most companies do it now. With access to real-time financial reporting, finance teams can review company purchases as they’re being made instead of waiting until the end of the month to get started. 

Imagine if you could close the books two or three days after the month has ended, rather than weeks into the next month. This dream can be a reality thanks to real-time accounting reporting. Keep reading to learn:

  • What real-time accounting reporting is,
  • Three unexpected benefits of real-time financial reporting, and 
  • How real-time reporting makes agile growth possible

What is real-time accounting reporting?

Explaining what real-time accounting is not can help paint a clear picture of what it is. Typically, the expense reporting accounting process goes like this: 

  1. Employees make purchases on behalf of the company for things like transportation to client meetings or meals on business trips. Depending on company policy, they pay for these expenses with a corporate card or out of pocket.
  2. At the end of the month, employees create and file expense reports to show what they’ve purchased on behalf of the company and ask for reimbursements for out-of-pocket expenses.
  3. CFOs and their finance teams review expense reports to figure out how much money the company actually spent that month, and compare it to the budget

Under this accounting system, finance teams don’t know how much has been spent until it’s too late to reverse any damage. 

On the other hand, real-time accounting lets finance departments see corporate purchases as they’re being made. This innovative accounting process is typically achieved through a combination of spend management accounting software and making expense payments through virtual cards.

With real-time accounting, out-of-pocket spending is replaced by corporate card use for all, which makes the expense reporting process a thing of the past.

Three benefits of real-time financial reporting

So why is real-time financial reporting better than expense reporting? We’ve already given you a peek at one reason, but let’s go in-depth by exploring three real-time financial reporting benefits.

1. Real-time financial reporting gives you visibility into spending so that you can be proactive about cash flow

Real-time accounting lets you know how much of your company’s budget is being spent as it’s being spent. As a result, actual spending isn’t a mystery when the end of the month rolls around.

Real-time accounting tools let you set spending limits and create pre-approvals for particular purchases. For example, with special corporate cards, like Divvy, you can set budgets for projects and assign team members to those projects. Those team members get access to virtual corporate cards that they can use to make purchases for the project. You can set limitations on which vendors they can make purchases with to avoid misuse of funds.

With these kinds of accounting systems and technologies in place, your finance team can be proactive about protecting the company’s cash flow rather than putting out fires after they’ve started.

2. Real-time accounting saves time by eliminating expense reporting

Tools that make financial data available in real-time can also automate expense reports, eliminating the need for employees to create them, and for finance teams to review them. 

When employees pay out of pocket for company expenses, there’s no way for CFOs and their finance teams to know what these purchases add up to until they’ve seen expense reports at the end of the month. When everyone at the company is using a corporate card, however, you can always know who is spending how much. Much like how consumer credit and debit cards typically let customers view their transactions in real-time, modern business cards use the same technology.

With no expense reports to complete, employees save time. CFOs and their accounting teams also save hours each month that they would have spent reconciling spending and cutting checks for reimbursements.

When expense reporting is eliminated, and all company spending is moved to corporate cards, employees no longer have to front company purchases. Paying for costly expenses like flights, hotels, and conference registration out of pocket can take a toll of employees’ financial plans and credit limits.

With real-time accounting, out-of-pocket spending is replaced by corporate card use for all, which makes the expense reporting process a thing of the past.

3. With real-time financial reporting, you can close your books at any time, not just at the end of the month

The real-time accounting process lets finance teams get ahead of company spending. We all know that the month-end close is a tedious process for accountants. They have to scramble to review financial statements, reconcile accounts payable and receivable, check company bank accounts, and more. At the end of the month, the pressure is on to complete the process as quickly as possible so that companies can understand where they stand financially. 

Reviewing company spending is just one piece of this puzzle, but it can be a big hold up because completing the balance sheet depends on other employees submitting expense reports to the finance team.

However, with real-time reporting, finance teams can review, code, and verify transactions on a daily basis, instead of having to wait until the end of the month. This means they can drastically cut down on the number of days between the end of the month and when the books are closed.

The bottom line: Real-time financial reporting creates agile growth

Now you understand that real-time financial reporting can make a significant impact on finance teams. With tools like virtual credit cards and spend management accounting software that make real-time accounting possible, finance teams can gain visibility into company spending, save time by eliminating expense reports, and work on closing their books at any time, rather than at the end of the month.

Ultimately, real-time reporting makes agile operations possible. If your business wants to grow to its full potential, it needs to grow without bureaucratic bottlenecks. With real-time data at their disposal, startups and large companies can reduce time spent on closing the books at the end of the month. With company financial information available days before it usually would be available, leaders can make better business decisions, sooner.


About the Author: Jack Ablon
Jack is a Senior Growth Marketer at Lola.com, and his role includes managing our production of content and resources for finance professionals. He previously led Product Marketing at Lola, and is a Commercial Airplane Pilot.