Finance teams reaching for continuous accounting still have a way to go until closing the books becomes obsolete. But software innovations like those in lease accounting are bringing companies one step closer to end-to-end automation.
Often referred to as “record to report,” or “R2R,” continuous accounting is the automation of the entire accounting process. It begins with the initial recording of each business transaction: sales are recorded at the point of sale, expenses are recorded through accounts payable, and lease obligations are recorded when leases are abstracted into lease management software. Each transaction triggers the automatic completion of the accounting processes that follow, including amortization schedules, journal entries, reconciliations, period-end close, and financial reporting. This R2R automation decreases the risk of human errors and provides a trail of records for auditors.
R2R for Lease Accounting
R2R for lease accounting is rapidly evolving, and some lease accounting solutions already include numerous automated functions. Once lease data has been abstracted into the software, the lease accounting process can be completed with just a few mouse clicks.
For example, the following functions are automated in some lease accounting software:
- Amortization schedule creation
- Lease classification
- Standard and ad hoc reporting in real-time
- Adjustments for omissions, errors, and modifications
- Journal entries
- Discount rate selection
- Reconciliations via integrations with enterprise resource planning (ERP) systems and other financial reporting applications
Integration synchronizes accounting entries among multiple systems, reducing manual data entry. It also provides accountants, reviewers, and auditors with immediate access to data. External auditors can be granted read-only access to approved systems. These integrations save accountants time so they can focus on analyzing numbers and providing strategic insights on ways to improve the financial results of the business.
What’s Next in Automation?
Blockchain may make integrations with specific vendors obsolete since data will automatically be integrated among all parties.
Artificial intelligence (AI) is already being used to alert users to potential data entry mistakes as they occur. In the future, it may expand to automatically correct user mistakes and abstract leases simply by scanning them into a database.