What is cloud accounting, and why does it matter?
- Last Updated : June 12, 2023
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- 5 Min Read
Cloud accounting refers to managing your books online instead of on paper or on-premise software systems. That said, the cloud itself predated today's specific cloud-based business tools. This is why spreadsheets can be saved on the cloud, but they are still error-prone and time-consuming to maintain. Dedicated cloud accounting tools like Zoho Books are specifically designed to record accounts, generate reports, and manage your cash flow online. In this post, we'll discuss how managing your accounts on the cloud can benefit your business when it's done efficiently.
The edge of the cloud
The biggest benefit of cloud accounting software is that you can connect your other processes with it directly. For example, you can add your business bank account to your accounting software so that whenever you create an invoice, your bank details are automatically added. Similarly, whenever you receive payments into your bank account, those transactions will be automatically marked in your digital books. This can save you a lot of time and reduce the chances of transcription errors.
Cloud accounting tools also prioritise convenience. So when you suddenly wake up at 3am on Sunday wondering if the invoices went out, you don't have to stress about going into the office or pulling out your computer to confirm. All these details are stored safely on the cloud, so you can just open your mobile app and double-check instantly.
From a small business perspective, having accounting information on the cloud can often seem like an unnecessary expense. However, the cloud isn't reserved for a specific size of business. Everyone can use cloud accounting software and, in most cases, there are varying levels of features available to you based on your requirements. Most cloud accounting software vendors allow you to start small with a handful of critical functions and expand only when you're ready to. This means you'll get all the benefits and state-of-the-art security of professional cloud applications without going over your budget. That said, moving your books to the cloud is a long-term investment. Your cloud accounting service provider can help you make that transition smoothly.
Further reading: Why is the cloud so popular?
Ah, but what if you can't be on the cloud?
Cloud security has long been the centre of heated debates. It's common to hear people claim the cloud is just not secure enough. After all, how can you trust something you can't see, especially when it's in someone else's control? For example, it's natural for governments, educational institutions, and healthcare facilities to have growing concerns about cloud software because their data is hypersensitive and requires additional security and regulatory compliance by law. However, for situations like this, it's important to understand that not all clouds are the same.
Viola—the private cloud.
When most people talk about saving data on the cloud, they are referring to the public cloud. But cloud software vendors like Zoho and Amazon also offer private cloud clusters. These are ideal for businesses that have to comply with complex legal regulations about data storage and processing. When you store data in a vendor's public cloud, you're sharing that space with others who use that software. With a private cloud, you buy an entire portion of the vendor's cloud so you don't have to share that space with others. This allows you to enforce additional security measures and have a more comprehensive handle on your data.
Speaking of compliance, most cloud accounting tools also make it easier for you to follow government regulations. For example, if you follow the Australian Government's Standard Business Reporting (SBR) guidelines, you can choose an accounting software provider that's already SBR enabled. This means they have all the guidelines built into the system so that your bookkeeping process is automatically in compliance. You can also communicate directly with the ATO through these software systems.
Using cloud accounting software is relatively straightforward. Take some time initially to familiarise yourself with the interface. Once you've integrated it with your business operations, you can start recording your transactions, creating invoices, adding purchases, and generating reports. You can also easily verify your books with your accountant every quarter.
Choosing a cloud accounting software vendor
Your accounts are arguably the most crucial part of your business. Research your options thoroughly to make sure you choose a provider that aligns with your business needs. Here are a handful of things to keep in mind.
Cloud security: Understand the risks involved in cloud accounting so you know what questions to ask your potential cloud service provider. Although your provider is responsible for the integrity of the data you entrust to them, as a cloud customer, you have specific duties regarding data security as well. Check out our piece about cloud security and what to look for when choosing a provider.
Reliability and accessibility: Choose a provider you can trust. Before you commit, check reviews online and offline to understand what you're getting yourself into. Read their privacy and data management policies, and make sure they don't engage in adjunct surveillance practices. Similarly, always check that your accounting software provider maintains proper backup storage systems so you have uninterrupted access to your data.
Support: Choosing one software provider can be overwhelming when you have a range of options. To understand how each software system works, try them out for a few weeks. Your accounting software provider should give you 15 to 30 days to trial the product. During this time, you can also ask for demonstrations and assistance. Use this opportunity to assess the provider's customer service. You want a provider who's willing to offer exceptional support regardless of how simple or complex your questions are.
Price: Evaluate your options carefully. Almost every software vendor offers a range of pricing options you can choose from. You can talk to the provider and explain your processes to understand which features you'll need to start with and how your pricing plan would work.
Weigh the trade-offs: You'll always have to make one or two trade-offs when choosing a software provider. For instance, you may find one that resonates with your business, is affordable, and has excellent support, but isn't SBR enabled. This means if you use SBR, you'll have to manually ensure your accounting style complies with the guidelines. But on the flip side, you'll have all the support you need from the vendor.
We hope this post gives you some clarity about cloud accounting and choosing a software provider that works well with your business. As always, we recommend you research and try any software solution thoroughly before making a purchase. After all, there's no better way to judge a product than by trying it out for yourself.
Have any specific cloud computing questions you'd like us to tackle? Let us know in the comments!
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