An outline of cloud accounting software

“Cloud software” is a term that people are becoming more used to hearing and reading about. Businesses and consumers all use some variant of cloud software in their everyday lives. It seemed inevitable that cloud accounting software would begin to make itself known in the industry.

In the accountancy world, some firms are hesitant to make the move away from their traditional accounting systems and implement cloud alternatives. Mistrust of a format that seems to be more difficult to understand – due to its lack of physical tangibility – is holding businesses back.

A key area of modern accountancy involves the storage and usage of data. This is paramount to helping a business become successful, and to consistently grow. So why is cloud accounting software not yet used by all accounting firms?

What is it?

Fundamentally, in order to be classified as cloud accounting software it needs to be a software that is hosted on remote servers, rather than onsite.

Xero defined cloud accounting software as “a platform to make data and software accessible online anytime, anywhere, from any device. Your hard drive is no longer the central hub.”

QuickBooks’ outline of cloud accounting further stated: “Employees have greater visibility within an organisation and can collaborate more effectively. And for business owners, peace of mind comes from knowing that routine maintenance and updates to the software are managed by the SaaS (Software as a Service) provider.”

In actuality, cloud accounting software, in itself, is not all that different from the more traditional systems that accounting firms are more used to. The main difference is that the application functions are all performed offsite, not on the user’s actual desktop.

If you have internet access, then you are able to sign into the server and access the relevant data needed. For example, a client’s supplied financial information.

What are the benefits when compared to traditional accounting systems?

Investing in a cloud accounting software system has proven long-term benefits, particularly when considered from a business expenditure standpoint.

Instead of having to install and manually maintain the accounting software on their individual desktop computers, firms pay a monthly subscription in exchange for access to their own remote database. This database can then be solely accessed by the whole company.

Employees in companies with cloud accounting software can secure the relevant data they need, even when working remotely. In larger companies, all employees can work with the same data, rather than relying on manual transfers when new information is needed.

An easily accessible cloud accounting system allows for an increased cohesion within firms. For bigger firms that have a global presence, cloud accounting software has become essential for each branch to achieve their overarching goals. In contrast, smaller firms require less of an in-built infrastructure to be in place when seeking to invest in cloud accounting software, thus saving on extraneous costs.

As well as this, for smaller firms that are focused on establishing themselves in the accountancy ecosystem, cloud accounting software – as it usually involves a monthly subscription – does not tie them to a predetermined contractual obligation. This allows more flexibility when finding the right software provider that will work for the company, rather than feeling ‘chained’ to a provider that does not work for them.

Cloud accounting software – in comparison to more traditional accounting systems – can more easily facilitate a paperless environment because of its storage facilities. For firms who are more conscious of their environmental footprint, this is another benefit to consider.

Furthermore, when companies are experiencing a rapid surge in growth, it proves to be expensive with the current systems they have in place. They have to spend more on extending their software licence and in the general maintenance of software across each company computer. The expenses involved in new hardware, like servers, can be a real drain on company finances.

With cloud accounting software, updates occur automatically, and the manual maintenance of the hard drive is not needed, due to the data being stored remotely. IT staff are not required to maintain or update the cloud accounting systems – again, this is all done remotely.

It can be concluded that cloud accounting software promotes more flexibility in accountancy firms – global as well as local.

Problems with traditional accounting systems

It is important to consider the drawbacks for accountancy firms who still run other accounting systems.

The first point of contention is that global technological advances will soon make it impossible to run a business without having an effective online cohesion between employees across the company.

Only one person has access to the data on one hard drive at a time, meaning that key people may not be able to immediately access the financial or customer details they need, when they need them.

Moreover, current accounting systems do not allow for simple data sharing through hard drives, unless you use a USB device. For a large company looking to share data between a number of people, this just is not feasible.

When considered from a security standpoint, transfers of data through something like a USB device means that the process is generally less secure, and open to corruption. Fires or flooding in the workplace could destroy company computers and, with them, any data that had been saved to the hard drive.

As aforementioned, it is far from cost effective to maintain and continually upgrade the software used on each individual hard drive. Customer support can also be expensive and slow.

What cloud accounting software is available?

Making the decision to move from traditional accounting systems to cloud accounting software is one thing, but knowing which provider to choose can be a daunting task.

Some of the software providers available are the following:

• Xero
• Intuit Quickbooks
• FreeAgent
• Sage 50c Premium
• Wave
• Zoho Books
• KashFlow
• SAP Business One
• Netsuite

Of course, it must be noted that there are several other options for cloud accounting software. For more information on those listed above, click here.

Is cloud accounting safe?

As most applications on cloud accounting software take place on a shared remote server, there is no need for a manual transference of data. All employees will have access to the same cloud database, each with an individual password.

Information can be shared between any who have the same access rights to the system. The risk of sensitive information being taken by an external source is far lesser than a security breach occurring when using current accounting systems.

Cloud providers make sure to provide backup servers in two or more locations. This means that, if one server goes down for any reason, accountancy firms should still be able to access their data.

An accountancy firm can also store all of their shared data in the same place. Only those who are provided with the relevant access can view and use that information.

Cloud accounting software guards against external threats more effectively than traditional accounting. Nonetheless, there are still potential risks that firms need to consider when choosing to use cloud accounting software.

Potential risks of cloud accounting software

Employees using cloud accounting software do rely more heavily on a secure WiFi network and powerful remote computers than those using more traditional accounting systems. When systems are running as they should, this is not a problem.

However, for those employees who have chosen to work remotely, this may present complications and potential security risks. For example, an employee working in a local café may choose to connect to the local WiFi. As this is not a secure connection, they are running the risk of a data breach.

This has been remedied somewhat by the majority of cloud software providers, as they now include a two-factor authentication process. This means that, when an employee goes to sign in to the server, they will be sent a code via text message to their mobile. Using this, along with their username and password, they can then access the server.

Whilst this does safeguard from a majority of threats, employees will need to remain aware that accessing their cloud server when not connected to a secure network does mean there is a risk of external threats.

Larger businesses that decide to make the move to cloud software will need to put a structured plan of implementation in place. For example, signing all employees up to the new system and ascertaining that all the critical data they already have is transferred over smoothly.

The future of accounting systems online

It has been predicted that, by 2020, 78% of small businesses will rely solely on cloud technology. This is too high a percentage to be ignored by firms that have yet not made the transition.

On their website, Hubdoc said: “The cloud is the future. Even if your on-premise accounting solution seems to function ‘just fine’, or if you’re diligent about managing your traditional processes, the world of accounting is inevitably changing, and it’s important for your business to keep up. The risk associated with maintaining old processes isn’t a question of capability – rather, it’s a question of whether or not you want to grow your business and maintain a competitive edge.

“Change can be difficult, but if the potential business benefits outweigh the costs, then it’s worth your consideration. As daunting as a transition to the cloud might seem, don’t be intimidated.”

Cloud accounting software is the future of accounting. The next few years will see an increasing number of firms beginning to source out cloud providers and move their critical data onto remote servers.