The days of dealing with spreadsheets and files full of paper invoices and other financial information for your business have now become redundant and replaced with much more accessible, meaningful and inexpensive accounting solutions. Also, businesses that keep their accounting software on a stand alone computer not only run a risk of data loss, that software is taking someone’s time to enter data manually. This is not ideal particularly when there are cloud-based accounting solutions that will generate efficiencies and allow owners and managers to better understand the financial position of the business.
Before going much further, we should explain what we mean by cloud accounting. Let’s look at the old way of accounting and then we can contrast that to cloud accounting. Historically, accounting software functioned as follows:
- accounting software was purchased in a shrink-wrapped box from a store, taken to the office and loaded onto a computer,
- the software could only work on one computer by one person at any one time, as there was only one license,
- data was manually entered into the accounting system and it could only be done by one person at a time,
- only one person has user access so key people can’t access financial and customer details,
- the data in the system was not up to date as it needed to be manually entered and often business owners waited until the bank would send out bank statements,
- It’s costly and complicated to keep backups (if done at all) and there is a risk of losing data from a computer failure, building fire or theft,
- the information on the computer could not be accessed at any time in any location other than the office in which the computer was kept,
- often, the software provider updated their software requiring you to purchase an upgrade and then install it on the computer. This is expensive, difficult and time consuming,
- each year, a data file was downloaded onto a disk or USB device and forwarded to the accountant to do the annual accounts. This procedure is not secure or reliable. Often when the disk was received by the accountant, either compatibility problem, disk error or a virus on the USB device rendered the whole exercise a waste of time, which needed to be repeated.
If the above looks familiar, you can see how it can suck up far too much of your business’ time and effort. The old systems did little or nothing to add value and it costs your business money that could otherwise be saved on a cloud platform.
So, what is this thing called the cloud? Think about when you use internet banking. Every time you access this data, you’re using the cloud. The cloud is a platform to make data and software accessible online anytime, anywhere, from any device. Your hard drive is no longer the central hub. So too, with cloud-based accounting systems, your data and information can be accessed from any device with an internet connection.
Online accounting means business owners stay connected to their business information. Also, your accountant can access the information, so they can work from the same information you have and offer better advice.
In the cloud, there’s no need to install and run applications over a desktop computer. Instead, you pay for the software by monthly subscription. If there are any updates to the software, it happens seamlessly behind the scenes without you even knowing for it or needing to pay for it. Further benefits of cloud accounting include:
- easy to use, with enormous training resources and videos available online together with unlimited email support.
- allowing multiple users to access the information at the same time,
- user rights can be tailored and restricted to the person’s role in the business,
- daily, bank and business credit card transactions are automatically fed into the system. No more data entry. All you need to do is allocate these data feeds to the appropriate category using a drop-down menu,
- there is only one source of data and that data no longer requires backing up, and
- a helpful dashboard allows the financial health of the business to be assessed at a glance with charts providing details of cash reserves, invoices waiting for collection from customers and invoices not yet paid by your business and other useful customer or supplier information.
We are big fans of cloud accounting. There are a number of well known accounting brands currently in the marketplace. The platform we support and encourage our clients to use is Xero. Contact us if interested as we can help you get started.