Cloud Accounting: What is it and can it benefit your SME?
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March 18, 2021Tony Bolger, Onshore Advisor at IMS Decimal, explains what cloud accounting is and how it can benefit your SME.
Many businesses have already embraced the rapid advances in cloud computing and upgraded their desktop accounting software. Should you do the same?
What is cloud accounting?
2006 saw the introduction of cloud computing. Cloud computing is defined as the delivery of computing services – including servers, storage, databases, networking, software, analytics, and intelligence over the internet (‘the cloud’).
Between 2006 and 2015, advances in cloud computing meant that we started to see some notable changes in the provision of accounting software:
- New providers and products, like Xero, came to market
- Existing providers of desktop software, like QuickBooks, upgraded their product to a cloud-based platform
- Existing providers of desktop software re-branded their desktop software as cloud-based, even though it was not a ‘true’ browser-based solution (i.e. specifically designed and intentionally written for the cloud)
How has cloud computing impacted service providers?
Since 2015, further developments in cloud computing convinced many SME’s to transition to a cloud-based accounting platform. Software providers were successfully able to:
- Market their product to both accountants and non-accountants. Their platform can be used by anyone. Platforms are simple to use with real-time help facilities. Screen layouts are pleasing to the eye and easy to navigate
- Recognise that businesses have become more mobile with increasing numbers of staff working away from the traditional office environment. Their software is particularly suitable in this environment because of internet access and can be accessed remotely on laptops or smartphones. There is no requirement for expensive and bulky computer desktops or servers to host the software or process the data
- Quickly develop their product to meet the ‘Making Tax Digital’ (MTD) requirements (in the UK). Many desktop software providers were slow to roll out amendments to the software to meet the requirements and some providers even charged businesses for the cost of change
- Market cloud hosting which offered an enhanced level of flexibility and scalability in comparison to traditional data centres. The on-demand virtual space of cloud computing had unlimited storage space and more server resources. Cloud servers could scale up or down depending on the level of traffic they encountered, providing more flexibility for businesses to grow
What are the similarities between traditional and cloud Accounting?
It is important to emphasise that both desktop and cloud-based platforms perform similar accounting tasks e.g. journal and bank entry, sales invoicing and receipting, purchase invoice processing and payment processing, expense management, forex management, consolidation, inter-company, and generating management reports.
But the similarities end there. Cloud-based software offers additional benefits that desktop software cannot provide.
Benefits of cloud Accounting
- Monthly subscription rates. Products are built on the Software as a Service (SaaS) model
- A single unified ledger, simplifying navigation
- Multiple user access from any location with internet access
- Ease of sharing data (and collaboration)
- Real-time access to the same primary account system
- Enhanced report-writing
- Enhanced integration capabilities to other cloud systems including CRM, payroll and billing systems
- Multiple layers of high-level security
- Automatic backups which store data in multiple locations for extra security
Disadvantages of cloud Accounting
Cloud-based software does have some disadvantages in comparison to desktop software:
- The software is owned by the provider and the data you input sits on the provider’s server. (For statutory purposes, data needs to be kept for 6 years. Should you leave the provider within this period, you will need to obtain a copy of your data)
- Lack of access if there is no internet connection. Data processing speeds are dependent on the quality of your internet
What business changes can cloud services trigger?
The decision to transition to a new accounting software is often hindered by a business’ natural resistance to change. But with good planning, the transition process can be quick and simple, offering businesses the opportunity to:
- Redesign the layout of ledgers
- Introduce features like departmental, project, or cost centre accounting
- Improve management reporting
- Rewrite accounting processes
- Introduce new internal controls
How to choose an Accounts software provider
Everyone agrees that technology, such as artificial intelligence, and increased data analytics will dictate the market.
But the availability of a wide range of accounting software for SME’s can make it difficult to choose.
It is important that businesses:
- Take time to review each platform and decide on a system that suits their needs. Businesses must consider the look and feel of every platform, its customisability and scalability, how it processes and stores data and how it produces meaningful management reports
- Take advantage of the free trials offered by many platforms to fully understand the software capabilities
- Recognise that many software providers who have not utilised cloud technology to develop their product will inevitably experience difficulties in providing future support. There is a real risk that some of those providers will go out of business
At the very least, businesses should commence a review process. This will help them decide whether they should continue to utilise desktop accounting software or whether they should transition to a cloud-based platform.
How can IMS Decimal support your Accounts department?
IMS Decimal provide outsourcing services to businesses who use both desktop and cloud-based accounting software.
We can help a business evaluate the suitability of their existing accounting software.
Software we regularly work with
Here are some of the cloud-based software that we regularly use:
Xero
Built on a double entry accounting framework. Its robust accounting features enable small businesses to view their cash flow, transactions, and account details from any location. Bank transactions are all automatically imported.
Intuit QuickBooks
Offers an attractive dashboard, true double-entry accounting with ample reports and strong accounts charts, as well as customisable invoices, inventory capabilities, payroll support, multiple currencies, and over 400 integrations.
Oracle NetSuite
Suitable for the larger business. It effectively enables companies with several subsidiaries, entities and business units to function using a single account, dealing with different currencies, taxation, and governance requirements.
Exact Online
With an attractive dashboard, this platform helps medium to large businesses manage accounting, invoicing, time tracking, manufacturing, and more.
Taking into consideration all of the above, it is no real surprise that the cloud is the clear winner in this battle with desktop. Cloud software providers have developed products which are incredibly easy to use and specifically cater to the increased mobility of businesses.
As technology continues its natural evolution into a cloud-based world, desktop software will inevitably fall behind. Whilst still enjoying all the benefits of desktop software, SMEs are experiencing a much more dynamic and flexible Accounts function through the world of cloud. If businesses are to keep evolving and remain competitive, it is undoubtedly in their interest to modernise their Accounts operation too.
To know how do we manage our clients’ account software requirements, contact us today: sales@imsdecimal.comRead next: 2021: Upcoming changes to accounts and finance for recruitment companies
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