Continuous accounting is gaining momentum, with some proponents saying the strategy will soon become standard operating procedure. SAP users who want to make the transition to continuous accounting can do so quite easily using standard out-of-the-box SAP functionality.
Limited staff and tight deadlines can make it difficult to close accounts at the end of the month. Many companies are therefore turning to continuous accounting to smooth the workload and achieve faster closings. Business Planning and Consolidation is an SAP tool that could potentially help with ongoing accounting.
Here is an overview of the concept of continuous accounting and how users can achieve it with SAP products.
What is continuous accounting?
In a traditional end-of-period scenario, a company’s finance department stops processing prior month transactions, reconciles accounts, creates adjusting entries, runs currency revaluations, calculates eliminations, and creates consolidated statements. . Theoretically, all of this work begins right after the last day of each month and continues until the work is complete.
With continuous accounting, a finance department spreads this work over time and attempts to complete as much work as possible before the actual period end date. By running simulations based on current month’s data, the finance department can validate transactions and balances in advance and start building a picture of financial results without waiting for all the information.
For example, most companies treat intercompany balances the same way. As money and resources move from one social entity to another, balances are due to or from each company. These intercompany receivables and payables should be netted at zero across all companies under the corporate umbrella. If not, further research and adjustments are required.
Financial services typically process intercompany transactions and reconcile these balances in batches. This can be a lot of work, and if all this work is happening at the same time – i.e. after the end of the month – then a finance department has to take care of these tasks in addition to the rest of the intensive period. – end of workload.
With continuous accounting, a finance department can process intercompany transactions in smaller batches throughout each month or even on a transaction-by-transaction basis. This saves the finance team time at the end of the month.
How can SAP support continuous accounting?
To truly realize the benefits of continuous accounting, a finance team must run mock reports using live transactional ERP data. This gives the finance team a glimpse of what to expect and could potentially help the team uncover any issues or problems and then resolve them before the end of the month.
Historically, most finance teams have opted more for a waterfall approach, in which the various stages of the closing process must occur in a particular order. For example, if users generate financial statements from balances that they must first transfer from General Ledger to a reporting and consolidations platform, then producing interim simulations before the end of the month will be difficult.
SAP’s Business Planning and Consolidation (BPC) application solves this problem by extracting transactional data directly from S/4HANA. Users can also combine SAP data with information from non-SAP systems via BPC and get a complete picture of the business, including subsidiaries running non-SAP systems.
BPC’s planning and forecasting capabilities and its other financial processes can also support continuous planning, as can SAP’s Financial Close Cockpit and Advanced Financial Close. Finance teams can use Financial Closing Cockpit and Advanced Financial Closing to create close task lists and templates that include pre-close milestones.