Introduction To Cloud Accounting

You might have been hearing the word “cloud” a lot recently and in a lot of different contexts. “Cloud accounting” is now a buzzword too. Have you been curious about what it is, and does your business need it? You’ve come to the right place to figure this out.

Most businesses are rapidly moving towards cloud technology, and the accounting industry is leading this paradigm shift. Shifting to the cloud has huge benefits not only for CPA firms but also for small and medium business (SMB) owners. But let’s first clarify what exactly is “the cloud.”

To explain it simply, “the cloud” refers to servers and computing functions that are accessed through the internet. When something is said to be “in the cloud,” it is stored on the internet instead of your computer’s local hard drive. So when you use any application or storage service on the internet, you are, in fact, using cloud services. Now, we can address the main question.

What is Cloud Accounting?

Cloud accounting leverages remote servers (the cloud) to host accounting software. It grants businesses the flexibility to access and manage their accounting data from any internet-connected device, fostering real-time collaboration and scalability for growing companies.

With cloud accounting, you access your accounting software via the internet instead of storing it on your computer’s hard drive. You do not have to install any software or application on your computer to run the program of your choice.

While cloud computing has spread its influence over countless areas, accounting is one field that is ideally suited for unison with cloud technology. Cloud technology brings the required seamlessness to this highly data-driven and regulated work. Its advantages are proven by the rapid growth of the cloud accounting market in recent years.

Benefits of Cloud Accounting

Cloud accounting streamlines business processes through secure, web-based software. Unlike traditional desktop applications, cloud accounting grants small business owners and their finance teams remote access to key financial data. It fosters seamless collaboration and simplifies financial reporting.

Increase efficiency by accessing data anytime, from any location

Business owners often work on-the-go from their mobile devices. Cloud accounting enables remote access to their financial data. They can see all the pertinent account information anytime, as long as they have an active internet connection. CPAs can coordinate with their team from any location. This flexibility increases efficiency, as urgent tasks are no longer delayed.

Lower cost of ownership

Unlike traditional accounting software, cloud accounting requires no software installation or maintenance. Updates are automatic and often a part of the package with no added charges.

Data backups happen on the cloud as well. All these added features lower the operational costs involved in accounting. Most cloud accounting software is available at a predictable subscription price. Vendors like Ace Cloud Hosting customize their prices according to business requirements.

Automation of manual data processing

Cloud accounting software automatically integrates all your transactions with other accounting data. This software matches the bank statements with invoices and ledgers. All these processes are traditionally handled via a painstaking and time-consuming method. It frees up your team’s time and reduces the probability of human error.

Increased real-time collaboration and updates

All data is accessible to all authorized users. They can work on it simultaneously and get updates in real time. It is perfect for coordination and collaboration in your team. User permissions can easily be managed to ensure only critical personnel access data.

Improved business continuity

Accounting data is critical and expansive. Its loss can mean long-term financial consequences. Cloud accounting software stores your data on a remote server, with backups in several other locations. It offers an invaluable security blanket. Business disruptions due to technical errors or natural disasters do not pose a threat to your data security.

Limitations of Traditional Accounting Software

While traditional accounting software fits a purpose, it brings along inherent limitations that can hamper your business growth:

• Limited Data Update: Information might not always show real-time activity, which leads to outdated accounting insights.
• Data Accessibility Blockages: Data is restricted to one computer where the software is installed. Transferring data from one device to another involves transferring files (e.g., USB drives), which can be insecure and cumbersome.
• Restricted User Access: Only one user can access the system at a time, potentially restricting collaboration and restricting access for key personnel.
• Backup Challenges: Maintaining backups can be complex and expensive, increasing the risk of data loss in case of technical malfunctions.
• Costly Upgrades: Upgrading software can be a significant financial burden, often requiring new licenses and potentially additional training.

Cloud accounting offers a modern solution that addresses these limitations, providing real-time data access, enhanced security, improved collaboration, and automatic updates.

What’s the Difference Between Cloud Accounting and Traditional Accounting Software?

Unlike traditional software that limits your accounting to the office desktop, cloud accounting allows your team to access files from anywhere, fostering collaboration with convenient multi-user access and eradicating the document clutter that afflicts traditional methods.

• Accessibility: Traditional software restricts access to accounting applications installed on the specific computer, while cloud accounting offers remote access from any device.
• Collaboration: Traditional accounting requires data duplication, whereas cloud accounting facilitates real-time collaboration by allowing multiple users to work on the same documents simultaneously.
• Updates: Traditional accounting software requires manual intervention, while cloud accounting features automatic updates
• Security: Traditional accounting methods rely on user-implemented protections, while cloud accounting prioritizes data security with robust measures.

Choosing cloud accounting, it’s like having your crucial accounting documents securely stored in a central location with easy access for authorized personnel that translates to improved collaboration, efficiency, and security.

Considerations Before Moving to Cloud Accounting

Now that we know the clear advantages of cloud accounting over traditional accounting, it’s time to understand the factors you should consider before making the switch:

Sizing Up Your Needs

• Business Operations: Firstly, you need to determine the features that are crucial for your day-to-day accounting operations. Do you need invoicing, expense tracking, payroll processing, or inventory management functionalities? Cloud accounting software delivers a wide range of features, so identify the ones essential for your business success.
• User Access: Consider how many users will require access to the system. Some cloud accounting solutions offer tiered pricing based on the number of users. Having the right number of user licenses ensures your team can collaborate effectively without unnecessary costs.

Gearing Up for Growth

• Scalability: Choose software that can accommodate your anticipated business growth. Will the platform easily adapt to an increase in transactions, users, or data storage needs? A scalable solution ensures your cloud accounting system grows alongside your business.

Cost Considerations

• Pricing Models: Subscription fees can vary depending on the features offered and the number of users. Carefully review pricing models to find a solution that aligns with your budget and needs. Consider potential additional costs like add-on features or data storage upgrades. Compare pricing models from different providers before making a decision.

Security Matters

• Data Protection: Research the provider’s security protocols. Look for robust measures like encryption, access controls, and regular data backups to ensure your financial information remains safe. Cloud providers prioritize data security, but understanding their specific protocols gives you peace of mind.

Additional Considerations

• Integrations: Does the software integrate seamlessly with other business applications you use, such as CRM or point-of-sale systems? Streamlined integrations can save you time and effort by eliminating the need for manual data entry.
• Ease of Use: Evaluate the user interface and ensure your team can comfortably navigate the software. Consider offering training or support resources to onboard your team effectively. A user-friendly interface translates to increased efficiency and user adoption within your organization.

Is Cloud Accounting Secure?

Yes, it is. Cloud accounting is more secure than on-premises accounting. If your mobile device is ever stolen or lost, no one can access your critical data. Because the data isn’t stored in the device. It is stored on a remote server and accessed via the internet requiring an authorized login to the online account.

Most cloud providers use advanced antivirus to mitigate cyber threats, multi-factor authentication, and encryption to ensure that data security is never compromised. Sharing data is also much more secure, with unique passwords. There is no chance of unauthorized access to the data as long as the passwords are protected.

Lastly, cloud providers have the data backed up in multiple secure servers. So calamities such as fires or natural disasters do not reach your critical financial data. Information kept on-premises can be damaged beyond recovery.

Hosting Accounting Software on the Cloud: An Advantageous Alternative to Cloud Accounting

Hosting accounting software on the cloud involves running traditional accounting software on cloud-based servers rather than local, on-premises hardware. This approach allows businesses to leverage the extensive features of established accounting applications while enjoying the flexibility, scalability, and accessibility of cloud technology.

Cloud accounting uses entirely web-based solutions, and hosting accounting software on the cloud retains the robust capabilities of traditional systems with the added benefits of cloud infrastructure.

Here’s why:

Enhanced Customization:

• Cloud Accounting is limited to the features provided by the service.
• Hosted Software brings full control to customize and integrate with other systems.

Cost Management:

• Cloud Accounting has ongoing subscription fees.
• Hosted Software has potential for reduced long-term costs with scalable cloud infrastructure.

Data Control and Security:

• Cloud Accounting relies on the provider’s security measures.
• Hosted Software has greater control over data security protocols and compliance.

Performance and Reliability:

• Cloud Accounting is dependent on the provider’s server performance.
• Hosted Software is optimized performance by choosing specific cloud resources.

Flexibility:

• Cloud Accounting is limited to the provider’s update cycle and feature set.
• Hosted Software has the ability to update, modify, and maintain according to business needs.

Hosting accounting software on the cloud provides a compelling alternative to traditional cloud accounting. It merges the powerful, feature-rich environment of legacy accounting systems with the dynamic, scalable, and accessible nature of cloud technology. By doing so, businesses gain enhanced control, flexibility, and cost efficiency, making it a superior choice for those looking to optimize their financial management processes.

Are you ready to have competitive advantage with Cloud Accounting?

Staying up to date with emerging technologies is a necessity. The competitive advantage of this new technology has the potential to take your business to new heights. It is easily scalable, remotely accessible, low maintenance, and lowers cost. It has all the features you need to make your business more efficient, productive, and automated. Cloud accounting is the future of accounting, and we need to be a part of it.

Want to move your accounting practice to the cloud? Chat with our Solutions Consultants for a no-obligation 7-day free trial today.

Cloud Accounting FAQs: Your Questions Answered