29 July 2005

Continuous accounting

I worked for a couple of companies during their conversions of their accounting systems from paper-based to computer-based. In one of those I was the IT manager. I vividly remember talking about the conversion project with the executives. They'd listed "reduction in accounting personnel" as a reason to computerize their system, and I was anxious to disabuse them of this. I told them that their expectations would change, and as a result the number of accountants needed would not go down, and indeed might go up. And so it came to pass. Once they realized that they could get new kinds of information in a reasonably timely fashion, they started demanding it.

But one aspect of accounting never made sense to me, at least not once things had been automated. Every accounting department I've ever worked with has a concept of a "monthly close". Now, this made sense with a manual system, where checks were written once a month, and there was a reconciliation to the bank statement, etc. But in today's world, where checks get written just-in-time and bank balances can be checked at any point, there seems to be no justification for the monthly close — companies should be able to show the state of their books at any given point in time.

Finally, decades later, the financial world is beginning to agree. But now that there's the Web available, I would go even further — I think that any publicly traded company's up-to-date books should be available to anyone online at any time. Better information should lead to better investing. And the kind of shenanigans I witnessed at one utility company, where they always deferred taking profits until just after rate hearings, would be much more difficult.

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