Real-time Bookkeeping: The myths, the benefits and how to do it now

What is real-time bookkeeping or ‘continuous accounting’?

Real-time bookkeeping, or continuous accounting, is the practice of recording and tracking business transactions as close as possible to when they actually occur.

It gives business leaders an up-to-date and accurate picture of their financial situation at any moment in time, which ultimately helps them to make the most informed strategic decisions possible. This is especially important in a time of economic uncertainty.

And yet, despite the huge benefits that come from real-time bookkeeping, many businesses are still reluctant to move from their traditional, sporadic, disorganised manual bookkeeping processes that usually take place at the end of a set period (typically a month or quarter), when they get around to it, or when their accountant chases them up!

We’ll concede that bookkeeping is a dry topic, but we strongly believe that business leaders need to shift their mindset away from viewing bookkeeping as a tedious but necessary part of business to seeing it as the engine that will dramatically improve your decision making.

Real-time bookkeeping myths

Many of our clients have now embraced real-time bookkeeping. But in the process of converting them from their old ways of working, we became aware of some interesting myths around real-time bookkeeping which we want to dispel now…

Myth: HMRC will still want to see paper receipts.

Reality: HMRC have no requirement to see the paper receipt. Simply take a picture of your receipt and you can get rid of it!

Myth: Real-time bookkeeping wouldn’t add any value to my business.

Reality: We couldn’t disagree more. Quite simply, the main benefit of real-time bookkeeping is its ability to help you make the best-informed, data-driven decisions in real-time.

Myth: It’s just simpler for me to do the bookkeeping myself manually.

Reality: Think of it this way: as a business owner, your time is finite and valuable. If you had to set your hourly rate as a business owner, what would it be? Now, based on the number of hours you spend bookkeeping each month, how much money would you save by doing this in a more efficient and effective way or even by getting someone else to do it for you? How much value would you gain if you spent your time working on tasks that add real value instead of a day sorting receipts and combing through your bank accounts?

Myth: Real-time bookkeeping is only for larger businesses.

Reality: This is just not true. Many of our sole trader clients or smaller limited company clients use real-time bookkeeping. In fact, we’d argue that it’s easier for a smaller business to move to real-time bookkeeping because their systems and processes are less complex and fewer transactions will be going through the business.

Myth: Real-time bookkeeping will be a hassle.

Reality: Once the software has been set up, real-time bookkeeping is far easier. Simply capture an image of your receipt, submit it and then forget about it. Much easier than going through piles of receipts at a later date trying to remember what each was for!

Myth: Real-time bookkeeping is a pipe dream and doesn’t work in practice.

Reality: Many of our clients would show you otherwise. But it will take a shift in mindset and the adoption of new ways of working which we’ll outline below.

Myth: Automation of bookkeeping means my loyal people will lose their jobs.

Reality: Advances in AI and automation mean that your people will be able to do their jobs more efficiently and effectively. There might be less manual intervention, but we believe that this will free up your staff to add value to the company in many other ways.

Myth: A bank feed to my bookkeeping software means my accountant has control of my bank account.

Reality: This isn’t true. We’re bound by strict rules and regulations which prohibit this.

Forget the carrier bag of receipts!

And now for something that we wish was a myth but is still the reality:

Many business owners still think that bookkeeping is collecting receipts in a bag and dropping them off at their accountant once a month (or less frequently than that) to sort through.

In many businesses, the unfortunate reality is that the logging of transactions is still done as and when the person with the receipt gets around to it, or when the company accountant chases up.

This puts these businesses at a significant competitive disadvantage. Competitors who have embraced real-time bookkeeping will already be making real-time, data-driven, informed decisions weeks or months before you are.

The main benefit of real-time bookkeeping? Data-driven, real-time, proactive decision-making

Yes, real-time bookkeeping saves you time. But the main benefit of real-time bookkeeping is that it helps business leaders to make well-informed, data-driven strategic decisions.

Business owners who have established real-time bookkeeping are able to accurately assess their business performance and financial health in real-time and are able to adjust their decisions and strategy accordingly.

Whereas business owners who still rely on sporadic, inefficient bookkeeping processes get data that is already out of date, which significantly impacts their ability to make timely decisions and to take proactive strategic decisions.

How does real-time bookkeeping support financial reporting and management information?

Real-time bookkeeping also significantly improves your standards of reporting and the management information available to your leadership team.

It means you can view your performance against key performance indicators (KPIs) in real time and take necessary decisions proactively. It can also help you to identify operational improvements and potential areas for cost-saving.

Crucially, the live financial data you get from real-time bookkeeping should feed into your cash flow forecast and financial modelling, giving you even more accurate financial predictions to support your management team’s decision making.

Real-time bookkeeping should help you to identify potential issues before they escalate and put contingencies in place for any future problems you can see on the horizon.

In essence, the more accurate, visible and up to date your numbers, the more useful and valuable they are for your management decision making.

Real-time bookkeeping can also help business leaders to avoid errors and mistakes, by helping them to see and reconcile transactions as they occur, rather than waiting until the end of the month or quarter. It should also make it easier for you to comply with regulatory requirements and standards, as it quickly and easily provides the information and data needed for financial returns.

A mindset shift among Business Owners and Directors is needed

Despite the many benefits of continuous accounting and up-to-date, accurate financial information, we know that many business owners still are still reluctant to move to real-time bookkeeping.

For many business owners, real-time bookkeeping seems like a pipe dream, especially when the business has complex financial operations, or relies on manual processes for tracking and managing financial transactions. And they are often concerned and overwhelmed by the perceived changes that will be needed to systems, processes and ways of working.

We believe a mindset shift is required among Directors, business owners and company accountants.

Traditional, manual, infrequent bookkeeping has had its day. There must be a recognition that the traditional methods of sporadic, manual bookkeeping will hold your business back and make you less competitive.

Top performing companies are now recording transactions as they occur, because they recognise that the accurate data gained from up-to-date real-time bookkeeping will dramatically improve their decision making and competitive position.

Here’s the key point: your competitors will already be making real-time, data-driven, informed decisions weeks or months before you are.

There also needs to be a greater acceptance of the use of technology to support bookkeeping, particularly cloud-based accounting software and AI technology.

We recognise that this will be more difficult for traditional businesses and business owners who like their established, manual ways of working. But if you do not embrace technology, you will put your business at a significant disadvantage.

How to move to real-time bookkeeping

In many businesses, real-time bookkeeping is already a reality. Here’s how your business can move to real-time bookkeeping:

1. Shift your mindset: As we’ve said, you need to recognise that traditional, sporadic, manual bookkeeping will hold your business back. Your competitors are already making real-time, data-driven, informed decisions weeks or months before you are.

2. Adopt a cloud-based accounting system and your tech stack: A cloud-based accounting system like Xero and its related integrations allows financial transactions to be recorded and accessed in real-time from any device with an internet connection. Simply take a photo of your receipt and it’s done. Your bank transactions will automatically feed into your cloud-based system.

3. Embrace AI:Many real-time bookkeeping platforms now use AI to automate certain bookkeeping tasks, such as reading, sorting and allocating invoices and payments. This significantly reduces the effort and time needed to enter and process data.

4. Review and update your current bookkeeping processes: Moving to real-time bookkeeping will need a shift in employee mindset but also new standards, processes and ways of working.

5. Train staff to use the new technology: It is critical to provide staff with training on how to use any new accounting software and to give them the ongoing support necessary to embrace the new approach.

6. Track progress: As its name suggests, real-time bookkeeping is a continuous process, so it’s important to continually monitor and track your progress to ensure that the new approach is being implemented effectively. This can be done through regular review meetings and performance tracking.

7. Feature the benefits: As with any major process change, people are likely to be nervous and pessimistic. Once you have adopted real-time bookkeeping, our advice is to feature the benefits.

Show your accounting team how the new software has made their job easier. And make sure you demonstrate to your leadership team how real-time bookkeeping has significantly increased their visibility of business performance and financial health in real-time and how it will support their strategic decision making going forward.

Join the real-time bookkeeping revolution!

We recognise that bookkeeping is a dry topic, and we know that many business leaders see it as a tedious but necessary part of business.

But that’s because traditional bookkeeping isn’t very valuable. It is backward facing, gives you out of date information and provides no real benefit to the business.

It shouldn’t be this way.

It’s time to change your mindset, to change your ways of working, and to join the real-time bookkeeping revolution.

We firmly believe that with better data and more accurate and up-to-date numbers, bookkeeping can become the engine that dramatically improves your decision making and business performance.

Speak to us today to find out how we can make real-time bookkeeping, quality management information and data-driven decision making a reality in your business.