Cloud accounting is an increasingly popular solution to many of the hassles of traditional software. As a growing business or a company with a remote team, cloud accounting is a great way to automate a lot of the computing that used to be done manually. This frees up time and money for other aspects of your business. It enables your accounting team to collaborate much more easily and streamline the analytic process all while keeping your data secure.
What Is Cloud Accounting?
Cloud accounting is similar in basic function to other accounting software in that it offers all the tools and features you need like budgeting, reporting, tracking tax information, etc. The key differences are that there’s nothing to download and you can access your data from anywhere because it’s stored in a cloud, rather than to a specific device’s hard drive.
How Does Cloud Accounting Actually Work?
Rather than installing, maintaining, and updating software on site, you’re subscribing to a service. Paying that subscription grants you access to use the provider’s software and store your data in their cloud.
This means that you can access that software and that data from any device that’s connected to the internet. You don’t need to download anything to any computer. You don’t need to update software every time the provider makes a change.
Instead, the provider updates their software as soon as they make a change so you’re always using the latest version. Your data is also encrypted, password protected, and stored on secure backup servers to minimize the risk of loss or theft.
Anyone on your team can access this software with ease as soon as you provide them with the access credentials and set their level of access. If you need to take that access away for any reason, you simply change the password and provide the new one only to those who you still want to have access.
What Are the Benefits of Cloud Accounting?
There are several advantages that come with switching to cloud accounting. In this section, we’ll look at how cloud accounting stacks up against on-site accounting software:
Automation and Real Time Reporting
Many of the tasks that needed to be done manually before can now be automated. For example, transactions are updated as soon as they occur and tax compliance is tracked automatically.
Because this information is updated automatically, every single member of your team has immediate access to the latest data. That means account balances will always be up-to-date and you can spot any cash flow problems or tax compliance issues the moment they arise rather than learning about them after the fact.
This automation also means you can generate balance reports and expense reports as soon as you need them. Cloud accounting services are also better equipped to handle multi-currency or multi-company transactions, by using automated conversions and equivalencies.
Flexibility and Collaboration
Because accounting data can be accessed from anywhere on any device, your team can work remotely, and you can quickly bring new team members on board. Just give them access to the cloud and they’re ready to hit the ground running. Moreover, with access levels, you can ensure that team members only have access to what they need. This provides an added layer of security.
This kind of flexibility makes it so much easier for your accounting team to stay on the same page. They can generate reports and share data easily. They can stay on track of what other members of their team are doing. All their work is stored in one place which can be accessed from any device so they can continue working no matter where they are.
Automatic Software Updates
Since you’re not actually downloading anything onto your computer, you no longer need to worry about which version each team member is working with. Cloud computing accounting comes with automatic updates. Every time you access your accounting software, you’re accessing the latest, most secure version and you know that every member of your team is as well.
Who Can Benefit from Cloud Based Accounting?
Cloud accounting is suited to any company with accounting needs, but it is especially beneficial to businesses that are growing rapidly or businesses that rely on remote teams.
Cloud accounting is built to be scalable. When your business is just starting out, there’s little room in the budget for large initial investments. Cloud accounting doesn’t have that big initial investment. You just choose the subscription plan that fits your needs and start paying that fee.
As your business grows, you can upgrade your plan to meet your growing needs without worrying about investing in a whole new software setup or costly upgrades.
The ability to access the most up to date data from any device means remote teams can collaborate more efficiently and with a lot less friction. Nobody needs to wait on team members in different time zones or wonder whether the reports they’re looking at are up to date. Every member of your team can access the latest information and coordinate with other team members seamlessly.
How Safe Is a Cloud Based Accounting System?
One of the most frequent concerns small business owners report is security. How safe is cloud accounting compared to on-site accounting? In many ways, it’s safer than traditional software, specifically in terms of data storage and protection.
Your extremely sensitive financial information will no longer need to be stored on any hard drive in your office. Instead, you store it on a cloud and access to that cloud is password protected. If your company suffered a lost or stolen device, none of your financial data would be accessible.
When that data is downloaded onto the computer’s hard drive, as it is with on-site software, it becomes vulnerable. A lost or stolen device becomes a major security risk. The potential for losses like this grows even more when you have to regularly transfer data and reports between team members via a USB drive or email. Cloud accounting services eliminate this risk.
Damage and Data Loss Protection
Cloud accounting also decreases the risk of data being destroyed. When data is stored on a hard drive, any damage to that hard drive threatens the data stored on it. A fire or other natural disaster could wipe out your entire record of financial information!
When you use cloud accounting, that risk is nearly eliminated. A fire or disaster that affects your office will not destroy any data stored in the cloud.
As soon as you get new computers, you can access the cloud from there. Employees can seamlessly transition from one device to another, eliminating down time as much as possible after a disaster.
Will Cloud Accounting Services Save My Company Money?
The short answer is yes. Switching to cloud computing in accounting will save your company money. The savings come from the lower initial investment, the reduction in maintenance costs and updates, and the built-in scalability.
Licensing and Software Updates
With traditional, on-site software, your company would be hit with larger licensing fees and maintenance costs every time you outgrow the capabilities of your existing setup. Cloud accounting has none of these extra costs.
Your fixed monthly subscription fee is the only fee you need to worry about. When you outgrow your current plan, just upgrade to a larger one instead of investing in new software and paying new licensing fees.
Infrastructure and Maintenance
On-site software is expensive to set up, needs to be manually updated, and eventually needs to be replaced with newer versions. That means you need to keep a sufficient IT staff on payroll. You also periodically have to buy new software and update your infrastructure. This all means more money out of your company’s budget and more unproductive down time while your company transitions to the latest software.
With cloud-based accounting solutions, there’s less invested in hardware and infrastructure to equip your office for data storage and processing. The provider has the infrastructure and handles all maintenance costs related to the software. That means a smaller IT staff for you and less investment in on-site infrastructure.
Growth and Scalability
When your business is just starting out, the huge investment required to set up onsite accounting software can take up a significant chunk of your budget. Then, as your business grows, the process of scaling up your software to meet your new needs can be difficult, time-consuming, and bring new costs of its own.
Cloud accounting service providers offer customizable plans based on your usage. This means you can start at a rate that fits your current budget and easily scale your costs to your business.
Rather than investing in expensive infrastructure, updates, and maintenance for a software package that might be too big for your current needs, you can just pay a fixed low monthly subscription. As your needs grow, you just need to change your subscription plan rather than revamping your entire software set up.