What is Cloud Accounting?

The Meeting

I met with a new client, Chris, and we discussed his plans for bookkeeping.

He'd read a little about cloud accounting and wondered: did I know about it? Could we help him with it?

"Yes, to both questions," I answered.

"Well, do you recommend it?" he questioned me.

"It depends on you," I replied.

We then went into a discussion of his needs, his experience with bookkeeping and his computer expertise. Following is an expanded version of our conversation.

Cloud Bookkeeping for Small Businesses

The word "cloud" seems to get thrown around a lot these days. But what does it mean?

We can now store photographs and documents "in the cloud" and access various online services. For accounting, shifting from a traditional downloaded program to an online subscription-based model has many advantages.

What is cloud accounting?

Most sectors are racing towards using cloud technology, and the accounting world is no straggler. To help understand what this means, let's first find out what the "cloud" is.

Cloud computing is a term that refers to functions that are accessed via the internet and software that runs on remote web servers rather than a local computer.

Rather than downloading copies of software onto your company computers, your team logs into the software through your web browser.

The benefits of cloud computing for small businesses are vast. It is no surprise that the industry has seen a rapid shift from traditional accounting methods to online cloud services, often referred to as Software-as-a-Service (SaaS).

How is Cloud Accounting Different from Traditional?

Just as the move from pen-and-paper accounting to software-based accounting had a seismic impact, the evolution from office-based software to cloud accounting is again shifting the foundations of how accountants and bookkeepers work.

Traditional software is downloaded to individual computers, meaning employees can only work on those computers. To get access to important information, you need to sit at that computer or log in to a network that can access it.

Cloud accounting is installed on web servers in the cloud and is accessible through the internet.

Disadvantages of Cloud Accounting

Monthly Subscription

You have to pay for the software monthly rather than buying outright.

Premium Price

You must pay a premium price for the ability to automate your bookkeeping procedures and integrate with other available software.

Advantages of Cloud Accounting

Data Access Anytime, Anywhere

Modern businesses, especially in light of the Covid-19 pandemic, have allowed many staff to work on the go, whether at home or at alternative work sites. Cloud accounting software only requires an internet connection to access business systems and data from anywhere.

Reduced Cost of Ownership

Even though you will pay a monthly fee, that could be considerably cheaper than purchasing and installing multiple copies of the software. Often you need only rent modules necessary for your business and ignore features you do not need.

Frequent and Free Updates

Highly technical and well-trained staff install updates, bug fixes, and security patches as soon as they are available. You don't need to buy those skills. You don't even need to think about it.

The software is always up to date.

Backups and Security

Data is automatically backed up by cloud accounting software, eliminating the risk once posed by a computer crash or an office fire.

Cloud computing companies retain professional security experts to ensure the safety of your information.

Given the cyber threats today, no one should claim their business systems are 100% safe from hacking. That said, a professional cloud security team probably has the best chance of keeping your data away from prying eyes.

Tip: Remember to use unique and long passwords for your access to any cloud-based systems including your bank. If you reuse & recycle passwords then you are the weak link in the security system.

Improved Real-Time Collaboration

Formerly, when someone was modifying a file that a colleague needed, the second person was locked into a view-only version until the first user exited. Thankfully, that's a thing of the past with cloud bookkeeping. All data is viewable and accessible simultaneously by multiple users, allowing everyone to work in real time.

You could be entering invoices for this month at the same time as we are completing your bank reconciliation for the prior month.

Integration

With cloud bookkeeping, you can integrate automatically with related software to support activities such as receipt capture and storage, bank reconciliation, and customer relationship management. (More on those below.)

Disaster Protection

Cloud accounting software is replicated across many servers. Your information is stored in a remote location and backed up to multiple other sites. An earthquake in one area might damage your office and a server, but several other servers carry the same information. Once your office is back online, you'll find your data waiting for you to carry on where you left off.

Disaster recovery is a big issue for small business owners, even though many have not thought about it. We've had clients who had a computer crash only to find out the backup was not working. They had to recreate a whole year of bookkeeping entries. This disaster was very costly and stressful for all involved.

Cloud Bookkeeping Integrations

You will be able to integrate related management tools such as the receipt capture and storage software: "Dext." Once in the accounting system, the cloud acts as your digital filing cabinet so that you can throw away the receipt.

With traditional software, each program worked in isolation. To move information to another program, you needed to export your data in a recognizable format and import it to the second program.

Cloud software is designed with integration in mind. Many cloud accounting options will work seamlessly with other popular cloud-based programs. For example, QuickBooks Online integrates with the world's leading CRM software, Salesforce. This integration can streamline your business, increase efficiency and reduce costs.

Invoicing Support

Cloud-based accounting software can automatically issue recurring invoices and accept payments by credit card or bank transfer.

It can also help you collect cash sooner by sending invoice reminders.

Getting invoicing and collection on auto-pilot will free up time to invest elsewhere in your business.

Should You Move to the Cloud?

Does your business have the time and energy to undertake the project?

Do you want to take advantage of the integrations such as receipt capture, bank reconciliation, and customer relationship management?

If you don't have any time for conversion and don't want to take advantage of integrations, switch later.

When to Start?

When should you move to cloud accounting? For convenience and simplicity, launch at the beginning of the business year.

Remember to start early!

You'll need to consider training and data transition from the old system to the new one. It will be less onerous if you're moving from a desktop to a cloud-computing version of the same software, like QuickBooks to QuickBooks Online.

Regardless, you'll need careful planning and implementation. We should start working with you on this project at least three months before your year-end to ensure a proper and stress-free conversion.

Summary

Chris became a client, and we helped with the conversion from his existing QuickBooks desktop version to QuickBooks Online.

Previously, Chris had one set of books for his invoicing and his bookkeeper had another, but she only recorded the sales when deposited. The new system allows Chris to enter the invoices, and the bookkeeper to work in the same set of books matching the deposits to the sales invoices.

Now Chris can get a proper and complete accounts receivable listing anytime.

Unfortunately, Chris's bookkeeper moved away mid-year, and he was left looking for a replacement. It took a while, but he found a great individual to help him. In the meantime, our staff was able to keep him up to date while getting his GST return filed on time.

At year-end, we will be able to access his books to prepare the year-end financial statements and tax returns for his corporation.

Let Us Help You

You and your business are unique. There are no one-size-fits-all answers for us business owners. We have to figure it out for ourselves. That said, you don't have to do it alone.

We've carefully listened to business owners for more than 30 years. We've helped them resolve their issues and lessen their stress as their business ally.

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