While cloud computing has been around for a number of years, only now is it beginning to be adopted as a mainstream business tool.
As business advisors, we’re often asked about what exactly the cloud is. In the simplest terms, cloud computing involves storing and accessing data and programs over the internet instead of your computer’s hard drive or server. Service providers use large networks of remote servers with specialised connections to share the load of processing and storing data on behalf of their users.
Cloud computing allows users to increase capacity or add capabilities without investing in new infrastructure, training new personnel, or licensing new software.
What is cloud accounting?
“Cloud accounting” is more specifically the utilisation of bookkeeping and accounting software in the cloud for the processing and recording of your business’ financial transactions.
The development of cloud based accounting software represents the next generation of record keeping technology and can be a more efficient and innovative way to monitor and follow the financial performance of your business.
The benefits of cloud accounting
For many business owners, a cloud accounting solution can have many benefits over traditional desktop accounting solutions including:
One data file
Cloud accounting programs have a multi-user function allowing you and your accountant to access the same data and work on the data simultaneously, savings enormous amounts of time.
No longer does your accountant have to contact you for a file, update it and send it back. Adjustments to entries can be processed instantaneously by you or your accountant. Spending less time on data management translates to less cost to your business.
Additionally, data can be set to ‘read only’ rights for some users, allowing your key stakeholders to access information at any time while maintaining its integrity.
Daily bank feeds and real time information
Your business’ bank transactions can be retrieved daily. Daily bank feeds allow you to access information about the performance of your business in real time. This puts you in a better position to take advantage of opportunities or address financial issues faster than ever before.
Additionally, by combining your accounting software with electronic banking, many transactions can be prepared automatically. This removes the need to handle repetitive transactions multiple times.
Cloud accounting enables users to access their data from any location as long as they have an Internet connection. This provides the ability to work from home, while travelling or from a second location.
Many of the large providers are also configured to operate on tablets and smart phones.
Online software is regularly updated for changes in the accounting and taxation environment, such as new tax rates or legislative amendments. Not only will this ensure your data is being treated correctly, it also eliminates the need to purchase and install regular software updates, saving both time and money.
Access to third party programs
Most cloud accounting programs run on an Open Application Programming Interface (Open API) which allows third party providers to create modules and add-ons. These can cover anything from payroll and HR to ecommerce, inventory tracking and property management.
It is important to apply the same stringent assessment techniques to choosing third party modules as you would to choosing a software provider.
Since cloud computing emerged, security has been a major concern. Many business owners and directors are concerned about using a service provider to store data outside corporate firewalls. There is some legitimacy to these concerns and it is important that service providers are able to provide evidence of their security.
Major cloud suppliers such as Amazon and IBM have understood the importance of data security and have gone to significant lengths to ensure the integrity and reliability of the data storage houses that they are using.
In reality, there are significant issues with on-site data storage, such as irregular back-up procedures, the safe management of any back-ups and the correct retrieval of back-up data should it be necessary.
Other issues to consider include:
- Data ownership – does the data that an organisation creates, uses and stores within the cloud belong to that organisation?
- Data access – can an organisation’s data be viewed or used for unknown purposes without its prior consent? Also, what rights do you have to access the data or services in the event of contract termination or missed payments?
- Sovereign security – Are the server farms located overseas? If so, how stable is the country in which they reside?
It is important that business owners understand the data ownership and access concerns with any cloud accounting program being used.
Choosing a service provider
Australia’s most popular accounting software providers, MYOB and QuickBooks have brought cloud-based products to the market in addition to their standard off-the-shelf packages. A third significant provider in Australia is Xero which only offer cloud based accounting software packages.
It is envisaged that over the next decade other accounting software providers will release cloud-based products and it is expected that this form of accounting software will grow in familiarity, popularity and usage.
Moving your financial data to the cloud demands a high level of trust between you and the provider and it’s important to ensure that the specific needs of your business are met.
In evaluating a service provider, you should look at the following:
- Integration – How well does it integrate with your other IT systems and is this important to your business?
- Transition – How will the transition from your current software to the new program take place? Will there be any significant downtime to your business?
- Scalability – Is the package scalable? Many businesses will find that a smaller user-friendly package may be more appropriate when starting out; but may need to increase the level of services used as the business grows and reporting requirements become more complex.
- Access to technical expertise – What level of support is available? Thanks to automation tools and self-service web portals, the cloud is largely a do-it-yourself effort. When your financial data is in question, however, it is important to ensure that support is available when required.
- Future strategy – Does the provider have cohesive strategy for evolving and incorporating new features. Will these incur additional costs?
- Ongoing costs – Are the rates advertised guaranteed? If so, for how long?
- Security – Your service provider should be able to provide evidence of the steps taken to protect the security of your data.
William Buck is a licensed distributor for some of the major cloud accounting suppliers. Our experts can assist you in the selection, design, implementation and ongoing management of a cloud accounting solution.