One of the biggest shifts in recent years for small business accounting has been the increase in the use of cloud bookkeeping/accounting software, with more businesses than ever utilising cloud accounting software rather than traditional accounting softwsre. This article aims to introduce you to how cloud accounting works, and why it might be right for your business.
What is cloud accounting?
We’re all pretty used to using the cloud to store data- whether we realise it when we’re using something like dropbox, icloud, google docs or the one drive. Your hard drive is no longer the central hub. We may also be using it when we don’t realise- for example when we’re using 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.
Cloud accounting software works in exactly the same way- your accountancy data is stored on the cloud and is accessible by you and any authorised personnel from any device at any time.
What is traditional accounting software?
Traditional accounting software usually works on a standalone machine, the data is often backed up (if at all) onto a USB stick or a server. Usually you will complete the bookkeeping manually and will have to make a backup and give it to your accountant monthly/quarterly/annually for them to make adjustments and then come back and restore the backup.
What is wrong with traditional accounting software?
There are a number of issues with traditional accounting software when compared to cloud accounting software. The data in the system isn’t up to date and neither is the software. It usually only works on one computer, and data is moved around insecurely (e.g. on a USB drive) There is also Only one person has user access. Key people can't access financial and customer details. It's can be costly and complicated to keep backups, and you need to remember to do it regularly. It can be expensive, difficult and time consuming to upgrade the software, and you may be charged extra for slow customer support.
What are the benefits of cloud accounting software?
You can use cloud-based software from any device with an internet connection, including your mobile phone. Online accounting allows business owners to stay connected to their data and their accountants. The software can integrate with a whole range of add-ons. It’s easily scalable, cost effective and easy to use.
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.
The true advantage is the flexibility it gives you to run your business from anywhere. You can be confident that you have an up-to-date picture of how your business is doing, no matter where you are.
Software updates can be developed and delivered faster and more easily using the cloud. There is no need to worry about installing the latest version and you get access to new features instantly.
Is my data safe in the cloud?
The cloud is one of the most secure ways to store information. For example, using cloud software, if your laptop is stolen, no one can access your data unless they have a login to the online account, because with cloud software, this is where the data is stored, it’s not on your hard drive.
Particularly relevant given everything that has happened recently regarding Covid-19, being in the cloud means business productivity doesn’t need to be affected because there’s no downtime. All of your information is safely and securely stored off site. If you have access to any computer or mobile device connected to the internet, you’re up and running. This obviously applies to other potential things
In addition to this, if you invite users to view your data, you can control the level of access. This is much more secure than the traditional way of emailing your files or sending out a USB stick with your data on it.
Cloud-based software companies ensure that the security and privacy of data about you and your organisation is always airtight. If you use online banking, then you’re already used to the main concepts and should be comfortable with the security around cloud accounting.
How can cloud accounting benefit my business?
You have a clear overview of your current financial position, in real-time- the fluidity of the data means you can use it to make strategic decisions around your business. Multi-user access makes it easy to collaborate online with your team and advisors. The automatic updates mean you can spend more time doing what you love. Everything is run online, so there’s nothing to install and everything is backed up automatically. Updates are free and instantly available. Upfront business costs are reduced – version upgrades, maintenance, system administration costs and server failures are no longer issues. You spread the cost of the software over the years by paying a monthly subscription. Instead, they are managed by the cloud service provider.
One of the huge advantages, especially when used in conjunction with monthly accounting services from an advisor, is that the fluidity of the data allows you to get to know your numbers and use the data to make strategic decisions.
You can quote, invoice, and credit control through your cloud accounting software. Keep on track of supplier payments, expenses- even run payroll, file VAT returns and estimate your corporation tax or income tax liability.
What are my cloud accounting software options and how much does it cost?
There are a number of cloud accounting software packages available. Xero, Free Agent and Quickbooks being the market leaders. How much you pay will depend on a number of factors. You may also want to consider purchasing the software through your accountant as many will be partners and able to use that partnership to offer discounted prices. You may be able to arrange it through your bank even- If you bank with RBS, Natwest or Mettle then FreeAgent is free to use.