Accounting is by far one of the most important business areas that can make or break a business. With no scope for errors, several compliance requirements, and security concerns, accounting is indeed a difficult road to tread. If you have been into accounting for a while, you may have come across the term cloud accounting quite often lately. Cloud accounting is more than just a buzzword though.
On-premise accounting software applications have been in use for a long time. These software applications provide the tools that accountants need to reduce the time invested in accounting tasks and increase productivity. But traditional on-premise software, despite being useful, has its own share of drawbacks. That is where cloud accounting comes in.
We will find out what cloud accounting is, how it is different from on-premise accounting and why you should consider it for your business.
What is cloud accounting?
Cloud accounting refers to all your accounting and bookkeeping activities being done online on a cloud-based software. The cloud makes all your accounting data easy to access anywhere and at any time. You don’t store your data on your computer’s hard drive anymore. All your account books, records of income, expenses, assets, and liabilities are securely stored on the cloud.
In the case of traditional accounting software, you would have to install the application on your desktop at your office. It does not give you the liberty to access your data from any other device at any time. On-premise software also needs to be updated regularly and additional backup of data becomes essential.
With cloud accounting, most of these problems are eliminated. It offers the same functionality as desktop software, maybe even more, but transfers the whole system to the cloud.
Benefits of cloud accounting over traditional accounting software
In today’s competitive world of business, cloud accounting software is a better choice than traditional accounting software because of the following reasons.
The biggest advantage of cloud accounting is that the financial data is accessible from any device and at any time. Consider a time like the one we are in, where the Covid-19 pandemic has forced many businesses to allow their employees to work from home. Cloud accounting proves to be a boon in such circumstances. As you can’t be in the office every day, you can easily access your accounting data from the cloud and work doesn’t have to stop. Be it your outstanding invoices, cash flow information, account balances, or anything else.
Some cloud accounting platforms today also have their own mobile apps, that make it even easier to work on the go. Cloud accounting gives you the flexibility that traditional on-premise software cannot.
With cloud-based systems, collaboration is extremely easy and convenient. Particularly in remote working conditions, cloud-based accounting software makes it easier to share files and work together on reports. Anyone on the accounting team can access the data and documents from anywhere, meaning remote work does not pose a problem and work can carry on as usual.
With cloud accounting software, access can also be limited to only certain sections for different employees. For instance, an employee authorized to have access to supplier billing only can be restricted to that and not given access to payroll or bank information.
Integration with other software
Cloud accounting software usually has open APIs which means that they can be easily integrated with other third-party software that you may be using. There are several other software applications that a business needs, including forecasting apps, project management software, invoicing software, and more. Compatibility with these apps allows the accounting software to easily import data from them and minimize the manual intervention required.
Automation of repetitive tasks
A major portion of time in accounting is spent on data entry tasks. With traditional software, most of the information has to be input manually, be it billing, invoicing, bank reconciliation, expenses, claims, or others. With most cloud accounting software, data entry tasks like these are automated.
Since the cloud-based software can be integrated with other apps you use, it can import data from those apps automatically when you need to. Billing details, bank statements, employee details, etc. need not be added manually. Data can be automatically updated in real-time which also gives you access to real-time reports giving you a complete picture of your financials instantly.
Traditional accounting software runs the risk of losing all data in case of a major malfunction. This gives rise to the need for creating additional backup and recovery systems. With cloud accounting, your data is much safer. In cloud accounting, the data is backed up on servers in more than one location by the service providers. So loss of data is usually not possible.
There are no physical hard drives involved so the risk of data leaks, theft, or loss of data due to any unforeseen incident such as a fire, natural disasters, etc. is also much lower. As all your data on the cloud is encrypted and data security protocols are strictly followed, cybersecurity concerns are also minimum.
Pay as you grow
With cloud accounting, the overall cost of ownership is much lower than traditional accounting software. Most cloud service providers have a ‘pay as you grow’ policy of service. Small businesses often find it difficult to get on-premise accounting software that can accommodate their future growth.
For instance, you may need fewer users and lesser storage now but will need more as you scale your business up. With traditional software, you either have to upgrade to new software with these additional features later, or settle for an expensive software now, where you wouldn’t be using its full capacity right away.
With cloud computing, you can purchase a plan that suits you right now and scale-up, increasing your spending as you grow. You can add more storage, user accounts, and advanced features as your business expands.
Every business can benefit from cloud accounting, no matter how big or small. Adopting cloud accounting at the early stages of your business ensures that your accounting data is error-free, accurate, and secure from the very beginning. If you are still using traditional on-premise accounting software, now might be the right time to move to the cloud.