Most financial accounting software is slow to update, and you don’t know what the business’s financial statements from January look like until the end of February. This makes it challenging to plan as you’re making guesses based on data that may or may not be accurate. If the data is inaccurate, you’ll be scrambling to find ways to fund the unexpected expenses. Therefore, more and more companies are adopting real-time accounting into their processes.
Real-time accounting is when your books match up with your live financial situation. In other words, the balances, revenue, and profit in your general ledger match your current financial situation. This means your financial data won’t change when the books close at the end of the month.
While achieving real-time accounting is somewhat impossible due to the nature of complex billing systems, near real-time accounting software can help you get the data into the ledger much faster.
This is because it automatically adds the data to the general ledger for you.
For example, let’s say all of your cash flow comes from payments through Stripe. Those payments will bare automatically entered into the general ledger. This way, you know exactly how much cash your company has at any given moment in the business.
Even if you have a slightly more complex system, such as prepayments for a service, you can still create a rule so that it reduces the time required to enter it into the general ledger.
On the other hand, traditional accounting systems force companies to wait until the end of the month to consolidate all financial data. Then, it wouldn’t be until the end of the following month that you would have an idea of how much you spent.
For example, let’s say you planned for a $50,000 investment in January, but it turned out to be a $100,000 investment.
With traditional accounting software, the company wouldn’t know that the investment was double the planned amount until the end of February. However, a company with real-time accounting software would know by the end of January. This would then give them time to make adjustments for the following month.
Perhaps the biggest reason most companies are switching to real-time accounting software is that it helps reduce cash flow problems. It does this by immediately providing accurate data on revenue, profit, and expenses before the end of the month. Therefore, the company can easily see when a project goes over budget and course correct, minimizing cash flow issues.
For example, let’s say you plan a project in January that is supposed to be $100,000. However, you don’t close the books until the end of February and realize that it actually cost $200,000. By this point, you have to scramble to find an extra $100,000.
On the other hand, if the company was using a real-time accounting software, they would have known the instant the project hit $100,001 and could have either paused it or prioritized it over other projects.
Real-time accounting is also critical for companies to make better investment decisions. For example, let’s say you invested $50,000 into advertising during January and expect a 2x ROI.
With traditional accounting software, you wouldn’t see the real ROI from the campaign until the end of February (when you finally closed the January books).
As you didn’t realize until the end of February that the campaign from January only broke even, you probably invested another $50,000 into that channel during February. Therefore, there’s a good chance you’ll either break even or lose money on the current campaign. Additionally, you also missed the opportunity to invest in a different channel.
However, if you have real-time accounting, you would have realized the campaign wasn’t profitable even while you were running it. Therefore, you could have course-corrected it by either investing in another more profitable project or changing the angle of the advertising campaign.
As real-time accounting software automatically enters each transaction, employees spend significantly less time performing manual data entry each month.
For example, Cipherpoint, a software company specializing in finding and securing sensitive data for various clients, spent weeks entering all of their data with a homegrown tool they created. However, they soon realized the inefficiency of this process and switched to SoftLedger’s real-time accounting solution. After implementing SoftLedger, the process that used to take weeks to complete now takes just a few days. Not only were they using employee time more efficiently by implementing a real-time accounting software, but they were also happier because they could work on what mattered most.
By automatically entering data into your system rather than waiting for an accountant to enter it all manually at the end of the month, you’ll be able to reduce errors that could occur.
Regardless of how attentive your employees are, errors are not uncommon.
If your data is erroneous, there’s a good chance the company will overspend. This can then lead to tax reporting complications and other legal issues.
If you’re looking for a real-time accounting solution, SoftLedger might be a great fit. Founded by an accounting manager who was frustrated by how long it took to close the books, he decided to create his own real-time accounting software.
Therefore, SoftLedger was born.
Today, it serves a host of different companies across many industries, including cryptocurrency, real estate, SaaS, multi entities, and more. It’s also simple and easy for anyone in the company can understand it.
If you’d like to see for yourself how real-time accounting software can improve your accounting processes, book a demo today!