Running a business doesn’t just involve managing the administrative side of things. Business owners also have to oversee other tasks that come with business ownership: for example, accounting. Companies and businesses in different sectors across the world attribute the success of their operations to accounting.
Accounting professionals work closely with business owners and organisation leaders to organise and collect information about an organisation’s revenue and spending. They then use that information to create a detailed report of an organisation’s financial health. Note that professionals in the accounting industry can’t do all these tasks by themselves; they use several accounting software tools.
In this post, we’ll take a closer look at an online accounting software “cloud accounting” and how it can make business operations run smoother.
Also known as web-based accounting software or online accounting software, it is a software that is hosted on a remote server called “cloud,” thus explains its name cloud accounting software. It works when users send data to the cloud (where it is processed) and the processed data is then sent back to the users. These cloud software applications can be accessed by users in two ways: networks via a cloud application service provider or the internet.
The greatest benefit that this software offers is that companies and organisations don’t have to set up individual desktops with software. This is because everyone in the company can access the cloud on their own devices and gather any piece of information they need to help create a financial report. With a cloud-based software program, remote teams or branches can also access the same data and the same version of the software, making it perfect for businesses with offshore companies and branches in a far-off location.
Another benefit is that data backup and disaster recovery are often a part of your account. This means that even if computers experience hardware issues, the cloud will still be up and running and the data won’t be lost. In the next sections, we’ll go over the reasons why businesses use cloud-based software for their accounting.
As an established business grows and becomes more complex, it will require the services of accountants. It will also need to use different types of accounting software. The same goes for new companies that are still launching their business out into the world.
There are many different reasons why businesses and organisations should integrate cloud-based accounting software into their daily operations. Here are some of them:
This is good news for small- and medium-sized business owners: with a cloud-based software program, it’s possible to get access to a business’s financial data anytime, anywhere. Because the cloud is hosted remotely, there is no need to worry about wasting time with downloads and updates that come with regular software. If you own a start-up or SME, then consider going for this software application.
What’s more, some cloud-based accounting software comes with a mobile app. This makes it a thousand times easier to get access to your business’ numbers while you’re out for some official business or personal appointment. By using this software, you can have the flexibility to not have to be sitting in your office to check on your cash flow or access your financial accounts.
When your accounting data lives on the cloud, you can get a complete, real-time view of your current financial situation, helping you make informed decisions about the financial future of your company. Now, consider using a traditional method of accounting. It would be a drawn-out process as you would have to scroll through pages of information for you to get past out-of-date reports.
The traditional method not only takes so much time but also delays your business operations. By accessing up-to-date financial data when you need it, the cloud-based accounting software allows you to meet the demands of a fast-growing business.
In support of the above-mentioned points, you can save time when you automate your workflow with cloud-based accounting programs. For example, by entering your vendor information and setting up a workflow that automatically pays that vendor on the same due date every month, you can focus on other business operations. This also allows you to utilise your staff more efficiently as you can assign them with other tasks.
With a cloud-based program, businesses can also automate sending out invoices to their recurring customers.
Another compelling reason to use a cloud-based accounting software program is that it makes it easier for business owners to collaborate with their accountants. The cloud can easily generate reports that the accountants might need from the business. Should business owners decide to give their accountants access to the software, then they can handle any accounting task as they have easy access to the numbers anytime, anywhere.
With a cloud-based accounting software application, business owners also have control of the amount of access they can give to an employee. If you, the business owner, have any employee processing payroll, you can give them access to payroll only. They won’t be able to access bank information.
So far, we’ve only mentioned how a cloud-based software program allows easy access and sharing. Another good reason to invest in this software is that there are lower risks of accounting errors. This is mainly because all the relevant financial information is entered in the cloud, which hackers can’t easily get into.
Pulling up an accurate report at any time is possible, especially if you are categorising or reporting transactions or have to enter expenses and income regularly.
There’s also no need to know different accounting practices, formulas, or shortcuts as one would if an excel sheet is used. All business owners need to do to get an accurate report is to ensure they are entering their income and expenses regularly. So, for improved accuracy of accounting, using a cloud-based program is your best bet.
Earlier, we mentioned that companies and organisations are not required to set up individual desktops with software since everyone can get access to the cloud on their own devices. Access to the cloud is very much convenient as it is available on a mobile app where one can log into their account or use a web browser. This also cuts the costs of having an in-house IT team to deal with technical issues or do things like upgrade and installation.
Any time you encounter issues with cloud-based software, you can access tech support via telephone or chat. Professionals are always available to help you resolve any issue with the cloud. You don’t have to employ an in-house IT team to deal with the software, saving your business on labour costs.
One thing that hands-on SME owners can agree on is that the paperwork can add up and become quite a challenge when handling their finances in the traditional method. You don’t have to go through the arduous task of filing expenses, receipts, multiple currencies, and invoices when you use a cloud-based accounting software program. The software allows you to import the data from your seemingly endless paperwork straight into the cloud.
By moving the data into the data, you can get an easier up-to-date view of your finances without flipping through papers. If your goal is to minimise the risk of manual errors or losing important data, then the cloud software can help you achieve that. So, go paperless and go for a more efficient method of managing your finances.
At this point, you must be wondering how secure a business’ financial data is on a cloud-based software program. It is guaranteed safe as it uses encryption. This means that it rewrites the information into a secured unbreakable code, which enables it to send and restore data safely. The type of security used to make online banking safe is the same one used in a cloud accounting software program.
These are the security measures a cloud-based software program offers:
- Automatic updates
- Customer service and technical support
- Dedicated anti-malware staff
- High-level digital security software
- Inbound and outbound encryption
- Multiple built-in user authentication methods
- Multiple segregated networks
- Off-site automatic backup server
- Regular security audits
- Secure premises
- Security staff
Cloud accounting and traditional on-site accounting are not entirely the same. Let’s take a look at the key distinctions between the two.
- Cloud accounting is more flexible as the accounting data can be accessed from anywhere on any device with an internet connection.
- It automatically updates financial information.
- It provides financial reporting in real-time.
- It ensures that account balances are always accurate.
- Fewer errors (mainly due to manual data entry) take place.
Traditional Accounting Software
- Traditional accounting software only runs on a few select on-premises computers.
- It requires more maintenance than the cloud-based one.
- It needs to be downloaded or installed on an in-office computer.
- It can’t complete backups automatically.
- It may struggle with multi-currency and multi-company transactions.
Every time a firm grows, it encounters greater software license and maintenance costs, too. From fees for new licenses and database to systems management costs, the firm might have to spend more with traditional accounting software. We also need to factor in the expensive capital purchases of new hardware like servers.
Cloud-based solutions save you from all these problems. When your business contracts are up, you won’t get stuck with permanent, expensive equipment and licenses. Similarly, there are no big spikes in costs when your business expands a little.
Accountants use helpful digital tools to collect and organise data. Two of the most popular digital tools are Xero and QuickBooks. These software programs can create invoices, process customer and vendor information more efficiently, and help navigate financial tasks.
Pronounced zee-row, this software was created in New Zealand and is well-known in the UK and Australia. It is a cloud-based software program that offers a simplified, intuitive user interface. With its straightforward approach to managing inventory, invoicing, paying bills, running the payroll, and converting currency, first-time users with limited or no accounting knowledge can easily navigate Xero.
This accounting software is popular not only among accountants but also to small- and medium-sized business owners, self-employed people, and freelancers that need tools to manage finances, inventory, clients, vendors, and customers. The majority of QuickBooks users are owners, accountants, and employees in the US.
Traditional QuickBooks is designed for desktop computers, but it has a cloud-based version called QuickBooks Online.
Both Xero and QuickBooks are great cloud-based accounting software tools. Depending on the particular industry, revenue model, or process requirements that apply to a business, benefits can be extracted from each solution. If you’re stuck deciding between the two, it pays to make a decision based on the specific needs of your business.
Consider the nature of your business first. It may require very specific accounting tasks like project timekeeping, detailed payroll reports, and recurring standard invoices. Either of the two tools might carry out those tasks perfectly while the other might not.
One thing is for sure: start-ups and SMEs considering subscribing to Xero or QuickBooks Online are on the right track to an optimised accounting function.
In the business world, the cloud is the future. For a business to keep up with the rapidly changing business environment, it needs to adapt technologies. Maintaining old processes may not deliver a business’ competitive edge. While change can be difficult, the benefits that come with it far outweigh the risks.
A transition from the traditional method to the cloud is not a question of capability but of whether or not a business can stay ahead of its competitors. If you’re ready to transition to the cloud, get in touch with us here at CJ Accountancy Services Ltd. We are specialists in Xero and QuickBooks accountancy software and can provide the right accounting solutions for your business.