Real-Time Financial and Accounting Reporting for Agile Operations

Real-Time Financial and Accounting Reporting for Agile Operations
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How long does it take your company to close its books at the end of each month? How does that compare to other companies? The close of books can range from three to 45 days, according to a Reddit thread in which AICPA-certified CPAs and ACCAs shared their month-end accounting standards 

Ditch expense reports forever

Instead of processing reports, your finance team could be sharing budgets and managing spend in real time.

 

According to a survey of 2,300 companies by APQC, it takes companies an average of 6.4 business days to close their books at the end of each month. This means that most companies don’t fully understand 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. 

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.

What is real-time accounting reporting?

Real-time accounting reporting is the process of reviewing and approving company purchases as they are made.

Explaining what real-time financial reporting 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 financial policies, they pay for these expenses with a corporate credit 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.

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.

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 startup'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 automated spending limits and create pre-approvals for particular purchases. For example, you can set real-time 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. Budget owners can set limitations on which vendors they can make purchases with to avoid misuse of funds.

With these kinds of real-time reporting 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.

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 finance teams to know what these purchases add up to until they’ve finished their expense management process 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 real-time financial reporting, there are no expense reports to complete. Employees save time CFOs and accounting teams also save hours each month reconciling spending and cutting checks for reimbursements.

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.

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. The month-end close is a tedious process for accountants. They 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. 

Completing the balance sheet depends on other employees submitting expense reports to the finance team.

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 real-time financial reporting drastically cuts down on the number of days between the end of the month and when the books are closed.

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.

Real-time reporting makes agile operations possible, removing bureaucratic bottlenecks. With real-time financial data at their disposal, companies reduce time spent on closing the books at the end of the month. With this financial information available days before it usually would be available, leaders can make better business decisions, sooner.

Lola.com is the spend management solution that keeps you on budget.


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.