Bookkeeping is a critical part of running a successful business. It involves consistent recording of the business transactions which will ensure accurate reflection of income, expenses, assets, and liabilities.
In the world of an accounting office, various approaches are used, and “after-the-fact bookkeeping” is one such approach.
In this article, we’ll take a look at what after-the-fact bookkeeping is, how it differs from other ways of keeping your books, and its advantages and disadvantages.
After-the-Fact (ATF) Bookkeeping Definition
As the names suggests, after-the-fact bookkeeping involves recording your businesses financial transactions after they have occurred. So instead of entering the transactions as they happen, thet are entered at a later time. In the accounting office world this is generally a month later.
ATF Bookkeeping in Bullet Point
- After-the-fact bookkeeping is characterized by the periodic recording of financial transactions. This means that you may gather receipts, invoices, and other financial documents over a specific period and then update your records in a batch, usually on a monthly or quarterly basis.
- With this approach, you may not have immediate access to up-to-date financial information. Because of this, it can be challenging to monitor your financial situation in real time.
- After-the-fact bookkeeping often involves a retrospective analysis of your financial transactions. You’re essentially reconstructing the financial history of a given period.
- Most businesses and individuals who opt for after-the-fact bookkeeping utilize accounting software or spreadsheets to streamline the process. This can help in categorizing transactions and generating reports.
Benefits of ATF Bookkeeping
- After-the-fact bookkeeping provides flexibility in when you update your financial records. This can be especially useful for busy individuals or small business owners who may not have the time for daily bookkeeping.
- By recording transactions in batches, you can potentially save time and minimize the effort required for bookkeeping.
- Some people find real-time bookkeeping stressful or overwhelming. After-the-fact bookkeeping allows for a more relaxed, less constant approach to financial tracking.
Problems with After-the-Fact Bookkeeping
- One of the most significant drawbacks is the limited financial insight in real time. Without up-to-date records, it can be challenging to make informed financial decisions promptly.
- Delayed entry of transactions can lead to errors, omissions, or inaccuracies in your financial records. These errors may go unnoticed until you reconcile your accounts, potentially causing financial issues.
- If you’re a business, after-the-fact bookkeeping may lead to compliance challenges, especially when dealing with tax authorities or financial audits.
- Delayed recording of transactions may result in missed opportunities to optimize financial decisions, such as expense management, tax planning, or investment opportunities.
Conclusion
After-the-fact bookkeeping is usually done for smaller businesses. You may not need, or want to spend the money on monthly bookkeeping, or even have an accounting service act as your accounting dept.
After-the-fact bookkeeping offers flexibility and efficiency, making it a real option for business owners who find real-time bookkeeping a pain, but still want to know how they are doing month to month.
This kind of service does come with some real disadvantages, specifically regarding limited financial insight.
Additional issues are the risk of errors, compliance challenges, and missed opportunities. Since the books are being prepared from historical documents (as opposed to as-it-happens) you lose the ability to adjust as a problem happens.