Question and Answer: Cloud Accounting
Q: What is cloud accounting?
Cloud accounting software is the same thing as online accounting software and also web-based accounting software. Cloud accounting software is an accounting software that is hosted in the cloud.
According to this article on Wikipedia, Cloud computing is a term used to refer to a model of network computing where a program or application runs on a connected server or servers rather than on a local computing device such as a PC. This hosted application can be accessed by any internet-enabled device such as PC, tablet or a smartphone.
In this case, cloud accounting software is hosted centrally on a server. Each user can access it through their browsers and start using the application without any installation on their devices.
Benefits of Cloud Accounting?
Cloud accounting software has several benefits, such as:
- Secure Storage of Financial Data: Cloud accounting technology can provide a more secure method of storing financial information than desktop-based software. Data is routinely backed up to servers in multiple locations by the SaaS provider, and there are no physical hard drives or computers containing sensitive data that can be stolen. Since financial information isn’t kept on-premise, the risks of fires and natural disasters are also mitigated.
- Pay as You Grow: Small businesses often experience growing pains, which makes choosing software with future growth in mind a priority for many. Cloud accounting software allows businesses to purchase what they need and increase their spend as they grow. This includes adding more storage space, users, and more advanced features. It does not also demand a huge investment in purchase of software with attendant payment training and updates as in desktop software.
- Multi-User Access: Once you reach a point where your business is looking to outsource specific tasks, using cloud accounting can help scale in a cost-effective and controlled manner. The multi-user feature of cloud accounting means you can give different people access to your financial records and bookkeeping process, which they can access remotely.This streamlines workflow and allows you to ask your advisor or accountant questions directly, all based on the most up-to-date versions of documents. The multi-user feature makes for quick communication, team collaboration, and less back and forth.
- Immediate Transactions: Retail operations electronically enter transactions as they occur, whereas you might only enter your transactions at the end of each week or every other week, depending on the size and sales volume of your business. Small business accounting in the cloud compels you to keep your data entry current.With cloud accounting in place, you can quickly spot a gap in cash flow or see if customers are abusing your extension of credit. Business owners who simply place all of their receipts in a drawer to deal with at a later date might not catch a potential issue until it’s too late.You can run balance reports or expense reports and get a financial snapshot of your business at any given point. Cloud accounting software can also handle the calculations for different currencies in the event you do business with foreign companies, compensating for the fluctuations in exchange rates. It can be time- and cost-prohibitive if you or your accounting department has to crunch those always-fluctuating numbers on paper.
- Centralizes Your Most Important Tasks: Several aspects of your day-to-day business operations, like managing inventory, invoices, payroll, and even portions of your customer relations management can all be tied into your cloud accounting software. Save your hard-earned money – no separate software is needed.Plus, the great thing about cloud accounting software is that third-party systems integrate seamlessly with it. If your company uses an ‘actual-minutes worked’ type of format, your time tracking software can integrate with your accounting software to maintain accurate payroll records.You can basically build the accounting software suite of tools with your favorite apps that apply to your specific business.
- Simplify Tax Compliance: You must remain compliant with the tax authorities or you can face stiff penalties. Cloud accounting software helps by showing you things like how much tax you owe (even down to specific invoices) or how much you’ve paid overtime on a specific tax. Cloud accounting software makes it much easier to compile the information you need to file a successful remittance.
- Analysis Tools: Have you ever wondered how much easier (and more accurate) your business tasks might be if only you had a personal financial advisor? Cloud accounting apps not only give you tools to customize your own reports, they even suggest reports for you based on the type of business you own. You can make solid financial decisions when you can see the bigger picture – just like having your own advisor.There’s a report you can run for virtually every question you have regarding your business’ financial health. Wondering which of your clients haven’t paid you yet? Run an Accounts Receivable report.
- Accuracy: The accuracy of your numbers is crucial. There’s always the chance of a transposed number or erroneous math in manual entry accounting, but cloud accounting software does the calculations for you. And the software also maintains other necessary information, like inventory on hand, supplies on hand, and which vendors you use for which products. Need to mail something to a client? Even your client’s addresses are maintained in cloud