Real-time accounting; the future of business financials

Ten years ago one of the most important people to a small business owner was their accountant, but over the last few years, the rise of real-time accounting software has meant that increasingly, people are taking their business finances into their own hands. 

Following on from last week's article on cashflow and how important it is, I thought I'd look at what real-time accounting is, and how it might be able to help you and your small business' survival through the Covid-19 pandemic.

Using traditional accounting methods, on average it takes companies 6.4 days to close their books at the end of the month, meaning that the finances from that month are completely unknown until the second week of the following month. Madness!

What is real-time accounting and how can it help?

Real-time accounting is when your books are caught up to the present and you know exactly where you stand with your finances. There's no waiting until the end of the year, rushing to your accountant, and hoping for a miracle.

You can see every transaction right in front of you, as it happens. 

Real-time accounting comes with a lot of business benefits; it allows you to see your finances at that exact time, this overview means that your cashflow management can be much stronger, and flexible around the current business and financial climates.  

One benefit of real-time accounting that will make a big difference to small businesses with limited finances, is that it allows you to keep a constant eye on your budget and adjust spending accordingly.

If you've had a sudden uptake in business and incomings, being able to see it in real-time means that you can allocate more of that profit to marketing strategies, investing in expanding your offering and so on, to continue the positive wave. With the old system, you wouldn't be able to make these budget allocations until well into the following month, by which time the wave may have passed, meaning you lose out on countless potential customers. 

The beauty of real-time accounting comes at the end of the year when taxes are due. By having your data collected all in one place as it happens, you have clear records of all your incoming and outgoings, making your taxes a walk in the park.

So where does this fit into my cashflow forecast?

A cashflow forecast is built around knowing your exact finances and the current moment, so you can project what they might look like in the following months. If you don't know what your current business costs are, as they are going out, how will you forecast them in 3 months time?

Having this data on hand also allows you to assess the impacts that different internal and external forces may have on your business, leading to greater knowledge of your business, clients, and what impacts them, both positively and negatively. 

Ultimately real-time accounting leads to agile businesses, who can constantly adjust their direction and decisions based on what their finances look like, and are expected to look like in the coming weeks.

It's strategies and techniques like these that will give your business the real edge on surviving through difficult times or business downturns. 

Why real-time accounting is so important in the current climate

Real-time accounting is going to become vital to the survival of small businesses over the coming months. In order to rebuild in the wake of the Covid-19 pandemic, many business owners will need to turn to banks, and other lenders for financial help, and all of these will require up-to-date accounting information and for there to be a clear financial plan going forward. Real-time accounting makes collating and accessing this information easy, instantly putting you at the front of the queue for financing. 

It provides a well-rounded a two-pronged attack for small businesses; it not only aids your access to finance but also allows business owners to closely monitor the performance of their company, allowing them to make more informed strategic decisions, based on solid and sound financial information. 

How Auria can help

For years we've been talking to clients about real-time accounting and the huge impacts it can have on the successful future planning of your business. We understand how it works, but we also understand how daunting it can be to change from a system you've been using for so long.

Although we are accountants we are much more than that. We're business advisors, here every step of the way on your business growth journey - and real-time accounting is just one of the many things we can do for you.

If you're looking to take that step towards having real-time finances why not drop us an email at [email protected] or give us a call 020 7291 1000 and let us help you to make this transition.