The faster companies respond to market trends and changing expectations of consumers, investors and governments, the more ahead they get. That requires accurate data. Yet today, many companies still make peace with the classic accounting cycle. The solution? Real-time accounting. It provides updated data at any time and gives entrepreneurs the insights to make the right decisions quickly.
"Traditional accounting presents entrepreneurs with two major challenges," says Bea Binst, Director at KPMG Tax, Legal & Accountancy. "The first is too little automation: manual operations continue to dominate the process. The second challenge has to do with the relevance of data: if accounting only contains historic data, how do you use that data for strategic decisions about the future?"
"These challenges manifest themselves at crucial moments," adds Stefanie Worm, Manager at KPMG Tax, Legal & Accountancy. "Suppose you want to make big investments because an opportunity arises in the market. What do you base your decision on to determine whether the investment is feasible? The updated accounting from the previous quarter is rather a weak predictor of the current situation."
"Equally, when requesting additional finances from a bank, such a retrospective will not be sufficient to convince the bank to grant you any funding," Stefanie continues. "The more recent and accurate your company's financial picture, the more favorable your relationship with financial partners. That much is certain."
For those tactical and strategic challenges, real-time accounting is essential.
Real-time accounting: from sales and logistics to accounting
So, what is real-time accounting? "In real-time accounting, accounting records are processed through predefined procedures using advanced accounting software such as artificial intelligence (AI)," says Bea.
"An example: you receive an invoice from a supplier. The accounting team then processes that invoice whereby the relevant information, such as the date, type of service and supplier, is extracted automatically using Optical Character Recognition (OCR). AI, in turn, provides the general ledger account and corresponding VAT treatment. Your accounting is always updated immediately - not just at the end of the month."
"Every electronic payment is read into the accounting system four times a day," Bea continues. "That way, you also know immediately which payments are still missing. This is not an unnecessary luxury in the current economic context. Because entrepreneurs need insight into their performance at every moment of the day. This is the only way they can respond agilely to constant changes."
According to Stefanie, real-time accounting is a somewhat confusing term: "Because it is about all disciplines and processes in an organization. It's about all actions and transactions in and with the organization. From purchases to sales, from projects to timesheets, from accounting systems to the website: all workflows within the whole organization are involved. Therefore, a multidisciplinary approach is vital."
"That means, of course, that all those disciplines have to speak to each other," Bea adds. "The people from the different departments, as well as the systems they work with. So that a new customer, a new sale, are immediately taken into consideration and provide crucial insights for the entrepreneur."
Solving problems before they arise
"Real-time accounting hinges on the right technology integration and software," says Bea. "Do all systems work seamlessly together - from CRM and inventory management to invoicing and accounting? Then the company has a solid foundation to plan and strategize at any time. This also helps them anticipate potential problems, such as depleted inventory that can lead to delivery issues and reduced customer satisfaction."
"With accurately updated data, the entrepreneur keeps his or her finger on the pulse. And because almost the entire process is automated, the error rate is a lot lower. An additional advantage: the employees who today perform manual bookings can now occupy themselves with more strategic tasks, such as efficiency analyses and advice."
Investing in efficiency as well as reputation
"An investment in real-time accounting is the investment of all investments impacting the entire company's administration," Stefanie explains. "The payback period is extremely short because companies not only save time, but also have more qualitative information as a basis for strategic decisions and efficiency gains. This also benefits the company's reputation with customers, investors and the government."
The result? A next-level decision-making process
"Moving from traditional accounting to real-time accounting is a matter of connecting the dots," says Bea. "Not only between technologies and systems, but also between teams and people. It's an investment that pays off quickly."
"At KPMG, we believe that entrepreneurs are entitled to reliable information," concludes Stefanie. "The move to real-time accounting is an important step forward for this. Organizations first notice how much more efficient their accounting is. Then they get to work with the new wealth of information. This takes their decision-making process to the next level."
Reach out to us to discover how to turn insights into opportunities with real-time accounting.