Batch accounting refers to a system of transferring items from journal, to ledger, to financial statement in a linear order. In this system, transactions are grouped and processed by subledger and results in entries that will not instantly appear in your general ledger. Batches are accumulated in your books of record through a process called "posting" after which period-end reporting can be finalized.
With batch-based entry, you have the opportunity to review data entry prior to posting transactions to the books of record. Most accounting software will check a batch for out of balance errors before it is posted, and your staff gets the chance to catch and fix any obvious errors in the batch prior to its posting. Once a batch is posted, there is typically no automatic mechanism to make changes. Posted items are permanent, but you always have the option of correcting an erroneous entry when necessary by creating a modifying entry that reverses the original one.
Posting a transaction results in permanency because the original posting batch cannot be deleted or modified. This system establishes internal controls because the multi-step process allows for peer review before posting, therefore making it more accountable.
Real-time entry systems work as the description implies. When you save an item - such as a vendor invoice - the data is immediately transferred to ledgers and financial statements. Every transaction that is entered and saved affects the entire system immediately--in real time.
Thanks to real-time's instantaneous nature, there is no need to post information to the general ledger while working in a subledger. So, this processing method has the advantage of always being up to date. For example, when you create a client invoice, the income statement immediately shows the revenue credit, and the balance sheet immediately shows the accounts receivable debit. All other information is updated to reflect the new invoice as well, so the client's total balance due is immediately brought up to date.
Working with a real-time system allows you to produce current reports, as needed, for your projects and financial decision-making processes. Since posting is immediate, reports will reflect the most current information as well.
That is for you to decide. Here is a list of characteristics that can be associated with each system:
While real-time processing has its benefits, this system lacks the reliability and accuracy of batch systems because the data is immediately posted without first being reviewed. The downside is that when there is no data scrubbing until after the fact, inaccurate data can potentially be made available to program managers and other executive staff.
The DCAA has a preference for batch versus real-time as set forth on the SF1408 that it uses to evaluate accounting systems. To wit, "The accounting system provides for interim (at least monthly) determination of costs charged to a contract through routine posting of books of account." Real-time is regarded as a looser system with fewer controls, and DCAA prefers the internal controls inherent in batch processing since it allows for the ability to review entries prior to posting transactions related to contracts to your books of record. Compliance with DCAA standards and regulations should be at the top of any government contractor's priority list, so good old-fashioned batch-based software still remains the best way to go when it comes to your accounting system.