Nowadays, businesses are searching for approaches that can ensure success in different aspects, including marketing, management, or finances. That allows them to stay efficient and profitable in the competition existing in a digital era. Therefore, investing in emerging innovative solutions such as cloud-based accounting software is an excellent move.
Cloud accounting systems allow your organization to automate all its financial transactions and functions. They include accounts receivable and payable, payrolls, and various billing modules. If your organization wants to perform faster and smarter, you should consider implementing an appropriate cloud-based bookkeeping tool.
What Is Cloud Accounting?
Cloud accounting is the practice of using an accounting system that you access via the internet. That may involve records of income and expenses, along with assets and liabilities. Such data is encrypted, which predicts that only users with the appropriate access can view the relevant financial information. Many companies started dealing with cloud accounting platforms at the beginning of the 2000s. These days, most cloud-based bookkeeping systems offer tools for quoting, invoicing, and managing bills and receipts, and so on.
How Does Cloud Accounting Work?
First, users need to subscribe to the desired cloud-based accounting software and migrate the required data to the platform. After that, they may use any web browser or a relevant mobile app on their smartphones for accessing their accounts and running their financial routine. Usually, users connect the accounting systems with their bank accounts. That enables banking transactions to flow automatically and eliminates the need to enter a lot of information manually.
How Does Cloud Accounting Differ from a Traditional One?
Cloud accounting is similar to traditional accounting. The only differences are that cloud accounting does not require downloading large software applications onto your work computer.
Cloud accounting is based on virtualization technology. Virtualization allows you to run several operating systems on a single physical server. This means that you can use your resources more efficiently. You can also easily scale up or down as needed. On the other hand, traditional accounting is based on dedicated servers. They provide you with a lot of flexibility when it comes to scalability too. However, this type requires a large initial investment and further maintenance.
Let's discuss how these two concepts are different in the following aspects.
| Aspect | Cloud Accounting | Traditional Accounting |
| Costs | Cloud accounting is an efficient method of keeping track of your finances because it doesn't require you to spend money on hardware or software. You can access your data remotely, and there are fewer maintenance issues. You only need to pay the subscription fee and storage space. | Traditional accounting software requires you to install it on your computer. You need to pay for updates, maintenance, and troubleshooting fees. |
| Accessibility | With cloud accounting, you can access data from anywhere using your secure credentials. Data is kept up-to-date in real-time. Backups are done automatically and securely. Manual maintenance is reduced. Flexibility is increased in terms of location and timing. | Traditional systems are on-premises, which means you have access to them only when you're physically present. You need to be in a certain place or on a specific computer. This affects your schedule, commitment, and efficiency. |
| Data security | Cloud accounting systems have robust security measures. These include authentication, encryption, secure backup, and other features. This allows you to focus on running your business without worrying about security issues. | Traditional accounting software offers security in ways that it is stored on specific computers and cannot be accessed by everyone who doesn't have access to those locations or machines. It also cannot guarantee safety against hardware failure, system crashes, theft or other risks to the computers. If the computer is compromised, then you stand the risk of losing all your data without backup. |
| Scalability | Cloud computing allows users to access applications over the Internet instead of using local servers. They reduce costs and increase efficiency, as well update automatically. | The changes that require scalability come along with the need to update and manage your on-premise accounting software manually. And this brings complications and unprecedented costs. |
| Collaboration | Cloud accounting is an online system that allows users to access information from any location. Users can collaborate on reports by leaving input on them. This makes collaboration easier and helps companies maintain transparency in their functions. | Collaboration is difficult because of the amount of data involved. Data is stored physically and can only be transported by a limited number of means. Traditional accounting software would be complicated if organizations shifted to a virtual workspace. |
Benefits and Setbacks of Cloud Accounting
Often, the main reason for moving to cloud accounting software is the disability of organizations to ensure efficient administration. Instead of hiring additional accounts staff, you should consider adopting cloud-based bookkeeping as a more efficient and profitable approach. However, at the same time, the cloud is not a perfect option for each business. Therefore, you have to analyze both pros and cons of cloud accounting for your company.
Benefits of Cloud-based Accounting Software
Among the most typical benefits of cloud accounting are improving efficiency or making financial data more up-to-date and high-quality. Other critical advantages for clients are the following:
- Cost-effectiveness. For many organizations, cloud accounting is more cost-effective compared to hiring in-house accounts professionals. Most cloud-based tools operate on a subscription basis. It means that their price depends on the number of users, along with the necessary modules. For instance, entry-level costs may typically vary from $20 to $50 per month.
- Easy to use. Cloud accounting solutions always provide user interfaces with easy navigation. Also, many of them offer mobile apps that allow accessing your account regardless of where you are.
- Round-the-clock access. Accounting in the cloud makes the clients’ financial data always available. Different critical indicators are often shown on a relevant dashboard. Therefore, you do not need to spend time searching for them.
- Real-time data. Real-time financial data is available in the case of inputting such information on time.
- Streamlined processes. Numerous users realize that cloud-based bookkeeping allows enhanced performance, eliminates duplication, and provides faster cooperation between teams.
- Security and backups. Your cloud accounting vendor takes care of appropriate security and backups. Thus, that takes away the headache related to updating and securing your in-house accounting system.
- Scalability. Cloud accounting solutions can expand due to your company’s growth. You just need to increase your monthly subscription.
Setbacks of Cloud-based Accounting Software
Of course, cloud-based accounting software cannot be perfect for all organizations. Therefore, you need to consider possible risks before switching to the cloud. Below, there are several key drawbacks of cloud accounting:
- Internet connection and speed. Cloud-based bookkeeping needs an appropriate internet collection. In another case, slow speed may affect the overall efficiency and provoke outages.
- Information security. This factor is important because you need to feel confident that your vendor follows all high standards. Besides, you have to maintain strong discipline regarding multiple things, such as controlling access. For instance, when your accountants leave, you should remove their logins to a relevant cloud accounting system.
- GDPR. Compliance with GDPR is significantly critical, especially when your vendor can transfer the required information from the EU borders.
- Vendor lock-in. Many users have great concerns regarding this issue. After all, they may be obliged to switch to different alternative vendors in the future.
- Lack of customized options. Such a disadvantage is always more of a concern for numerous large-sized businesses.
4 Reasons to Invest in Cloud Accounting
Among the most critical reasons to invest in small business accounting are the following:
- Automation. Cloud-based accounting systems allow automating and streamlining the invoicing process. For instance, with cloud accounting tools, your company can provide the automated calculation of employee net pay or superannuation. Also, you can apply such tools for generating HMRC-compliant reports or HMRC payment summaries.
- Improved collaboration. Many accountants should work as one team and share information between them and customers. But sharing data via email may result in great confusion and decrease overall productivity. Thus, applying cloud-based accounting software can solve problems for all stakeholders. All involved can access the necessary information simultaneously and make relevant changes in real-time. It means that each stakeholder gets access to updated information, which leads to better cooperation.
- Integration capabilities. Organizations often need to apply different applications for running their business. Also, they have to integrate such applications with their current accounting software to provide the free flow of corporate data. For example, companies often integrate their bookkeeping systems with CRM systems for getting better visibility of business activities. The relevant integrations are typical for cloud-based solutions because local servers can face performance lag provoked by the increased loads.
- Profit maximization. Thanks to outsourcing accounting services, your organization can function in a more cost-efficient way. That eliminates the need to invest your capital in numerous servers, software licenses, or maintenance fees. Instead, your company can pay for a chosen pricing plan offered by a cloud-based bookkeeping vendor, which is much cheaper. Therefore, you can spend relevant extra funds for expanding your business and maximizing its profit.
7 Best Cloud Accounting Systems
Now, there are multiple various types of cloud-based bookkeeping systems used by small businesses. At the same time, these systems offer different capabilities and pricing plans. Traditionally, small business owners select the right accounting software depending on the two critical factors. These factors are the industry they work in and the number of employees.
Below, we will briefly describe the best existing cloud accounting solutions:
FreshBooks
FreshBooks provide better customization for invoicing than other cloud accounting systems. Its major function is sending, receiving, printing, and paying invoices. But this tool can satisfy your company’s basic bookkeeping requirements too. FreshBooks makes sending proposals and invoices, requesting deposits, and collecting customer retainers much easier. Lastly, it allows tracking time on projects and receiving payments more efficiently.
FreeAgent
FreeAgent is an online accounting tool that serves as a perfect option for freelancers, small-sized companies, and their accountants. It allows businesses to deal with numerous accounting tasks. For example, FreeAgent helps manage expenses, run fully RTI-compliant payroll, create and send professional-looking estimates or invoices. Finally, it enables organizations to track their cash flow.
Kashoo
Kashoo offers multi-currency support, which is critical for businesses that deal with a global customer base. Companies also appreciate the unlimited number of invoices, along with more than 5,000 financial institutions for reconciling accounts online. Kashoo provides users with an uncluttered interface and dashboard that contains an appropriate summary of the company’s financial situation. After all, this tool offers client support via different channels, including email, phone, live chat, or social media.
Odoo Accounting
Odoo Accounting provides organizations with easy and simple management of their regular accounting operations. Therefore, companies can track all their financial activities using one single app. The particular app is synchronized with over 24,000 banking institutions. That allows linking payments with statements easier depending on the transactions related to the business’ bank accounts. Also, thanks to the new List view, customers gain better visibility regarding document statuses.
Xero
Xero Xero is among the key QuickBooks alternatives and is considered a perfect tool for small and growing companies. Apart from being cloud-based, it also offers both iOS and Android applications. Xero is easy to install, configure, and use and is popular for its intuitive dashboard. Organizations apply Xefo to improve collaboration among various users, such as team members, personnel, and accountants. Ultimately, Xero offers some extra features like Hubdoc, which allows capturing bills and receipts, and tracking costs.
Zoho Books
Zoho Books’s cloud-based bookkeeping software allows tracking finances, creating invoices, and collaborating with accountants in real-time. Organizations can integrate this accounting tool with other Zoho products, including CRM, inventory management, or HR management systems. Zoho Books provides outstanding features and automation related to bank feeds, categorizing, or invoices.
Are You Going to Invest in Cloud Accounting?
The attractiveness of cloud accounting software relies on its flexibility. It means that you can use cloud-based bookkeeping from your office, home, or even on the go. Besides, you are always confident that your organization has an up-to-date view of your financial operations.
In addition, the cloud allows developing and delivering necessary software updates much faster and more smoothly. Therefore, you have no need to worry about installing the newest versions of your cloud accounting systems. Also, you will obtain access to new functions immediately. After all, if your financial information is fluid and accessible, you get endless opportunities.
If you come to a decision to adopt or change your current accounting system, our migration service is ready to take the heavy lift and import your data to desired billing software. Got some specific needs? Schedule a call and we'll discuss the best-fitting solution for you.
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