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What are the Benefits of Real-Time Accounting?

June 25, 2021

According to Ottawa University, between 45% to 60% of businesses have moved to cloud computing. Why have they done this? What is the ROI of their decision? 

In this article, we’ll answer these questions as well as explain why real time accounting is here to stay.

What is Real-Time Accounting?

The phrase ‘real-time accounting’ means a user can access their respective accounting software via an internet connection, from anywhere in the world. The information is updated automatically. It's also commonly known as ‘cloud computing’.

Why real-time accounting is beneficial to you

Lower Costs

Being able to pay a relatively small subscription fee for access to accounting software saves accounting firms a lot of money. They can then reinvest the savings in other areas of the business that can provide them with a better ROI, such as employee training.

The previous model of purchasing expensive software licences that had to be downloaded to individual computers was far more expensive.

Flexibility 

The competition for talent is fierce, and being limited by location can be a hindrance. However, being able to take full advantage of cloud accounting can allow firms to hire from further afield as real-time accounting enables employees to work remotely. 

Some unforeseen events such as the COVID-19 pandemic,  are less likely to affect businesses that have a remote workforce.

Increased Visibility and Trust

Real-time accounting systems increase the level of visibility of company accounts.  As hinted in the name, there is no delay in the display of information. Whenever something happens it’s instantly recorded. Previously, before real-time accounting was mass adopted it would be easier for accounts to be manipulated. Any firm that uses real-time accounting can generate an enhanced degree of trust. It’s much more difficult to carry out any inappropriate financial actions.

Easier Compliance

The UK government scheme Making Tax Digital has accelerated the shift to real-time accounting software. HMRC (Her Majesty’s Revenue & Customs) the UK’s tax agency has realised submitting tax returns needs to be more efficient. This could also be in part of the rise of entrepreneurship among the population. Many non-professionals aren’t familiar with financial processes, particularly when it comes to tax, which can lead to mistakes and late submissions, which can both lead to fines. 

Real-time accounting systems help solve this problem by making it easier to collect, view and submit financial reports in order for people with firms of all sizes to submit correct tax returns, on time.

More Advisory Opportunities

Having access to real-time information makes providing an advisory service much easier for accounting firms. 

They are now able to give their clients informed financial advice simply by logging into their clients accounting software portal. Profit, revenue, expenses for any specific period can be analysed in-depth, which can underpin sound financial advice. 

Compliance is now much easier to achieve with real-time accounting systems, which frees up time for an accounting firm to be able to use bring advisory service 

The potential ROI on a savvy accountant, coupled with real-time accounting can be extremely high. 

Advisory services can help clients:

  • Become more tax efficient
  • Identify and take advantage of opportunities for growth 
  • Minimise inefficiencies
  • To experiment with different business tactics
  • Obtain investors much easier than their competition as they are able to quickly see up to date and historical financial data. 

Meaning they can become integrated into their client’s business, not just being ‘the accountant’ 

All facets of business are linked back to finance so being able to interpret data and advise clients can help accountants to be almost indispensable to their clients.

How to Implement Real-Time Accounting

Choose your accounting software

Before selecting your accounting software you need to have a think about a few elements:

  • The size of your business and the business of your potential and current clients — Different platforms are suited to different segments of the business world and their range of tools will reflect this.
  • What your budget is — Whilst significantly cheaper than what accounting processes used to cost, there is still a fairly wide price range when it comes to real-time accounting software. The number of platforms means you will be highly likely to find a platform you can afford. 
  • What you going to do with it — Despite having a wide range of tools, not every business will be able to take advantage of all of them. Having a clear idea of specifically which tasks you need it for will also help you make a better decision. If you just need it to ensure compliance, choose a more minimalist option.

Analyse your business goals

High growth in the next twelve months? Profitability in 4 years? No outside investment? VC funding? Answering questions like these with clear, concise answers will help you to maximise the benefits of real-time accounting. 

For example, let’s say you want to grow annual pre-tax profit by  29% over the next twelve months, without any outside investment.  Being able to view what the business has earned, from which categories, from its inception to now means spotting trends and opportunities for increasing profit margins will be easier.

Data Analysis

Real-time accounting has shifted the role of accountants, from one that makes sure the business survives to one that makes sure it thrives. Ensuring you have adequate data analysis skills is a key part of the implementation, the software will provide you with the tools to do great work, but you have to have the skillset to use them.

What are the benefits of joining INAA?

Here at INAA, we help accountants help their existing clients and acquire new ones. 

Webinars, conferences, thought leadership articles and more are just some of the benefits available to our members.

Join today to become a better accountant.