How Does Cloud Accounting Work?
8 minute read
The cloud as a term may not be something you would immediately associate with finances and, specifically, accounting. Simply put, ‘the cloud’ or ‘cloud computing’ refers to the delivery of computing services via the internet.
You are probably familiar with cloud storage delivered by Google (Androids) or Apple (iOS). However, this technology is incredibly useful when it comes to accounting services too.
Cloud accounting software is something many business owners in Hong Kong are embracing thanks to its efficiency and the fact that it can streamline your financial administration as well as provide a real-time view of your key figures.
But how does cloud software work? What would you get by investing in it and moving your accounting processes ‘up’ to the cloud?
- What Is Cloud Accounting?
- Benefits Of Cloud Accounting
- Traditional vs. Cloud Accounting
- Is Cloud Accounting Safe?
- Should Your Company Switch To Cloud Accounting?
What Is Cloud Accounting?
Cloud accounting software is also known as online accounting software or web-based accounting software. It is hosted on a remote server and that is why it is considered to be on the ‘cloud’.
Users of cloud accounting tools send data to the cloud where it is further processed and returned to the user. The online tools can be accessed by anyone using an internet connection or other networks via a cloud application service provider.
When a company implements cloud accounting software, it no longer has to set up individual desktops with software, since the staff can access the cloud through their own devices.
Additionally, this also enables remote teams or branches to access the same data and the same version of the software.
Now let’s take a better look at cloud accounting benefits.
Benefits Of Cloud Accounting
To have a clearer understanding of what you can get if you decide to use cloud accounting, take a look at a list of the most prominent cloud accounting benefits:
24/7 Access From Anywhere
Many accountants claim that accessing their financial data anytime anywhere is the best thing you get with cloud accounting. There is no need to worry about wasting time with downloads and updates that come with regular software, since the cloud is hosted remotely.
On top of that, some cloud-based accounting tools come with a mobile app. That makes it even easier to access your balance, records, statements, and so on.
Up-To-Date View Of Your Business
When all data is stored on the cloud, you can get a completely up-to-date view of your current financial situation. In turn, this allows you to make informed decisions regarding the financial future of your small business.
On the contrary, traditional methods of accounting cannot give you the benefit of accessing real-time financial data every time you want to.
Automation Is A Time-Saver
Almost every quality cloud based accounting tool allows you to automate your workflow. In turn, automation of this kind allows you to save more time.
For instance, you can enter your vendor information and set up a workflow that automatically pays the vendor on the same due date each month. Also, you can automate sending out invoices to your recurring customers.
Collaboration Is Easier On The Cloud
Collaborating with your accountant is easier when you have the pleasure of using a cloud-based accounting program.
This kind of software makes it easier for you to create reports your accountant might need. Also, you can give your accountant access to the software so they can access all important details and records at any time. Additionally, you have control of the access you give to an employee.
This means that an employee that processes payroll can gain access just to payroll without being able to access bank information.
No Room For Error
When all the important details and pieces of information are entered in the same place, there are little to no risks of accounting errors. On the other hand, when an employee has to put in various details in a platter of different places, mistakes happen much more easily.
If you’re entering expenses and income regularly and are categorizing transactions, you can pull up an accurate report at any time. With cloud accounting software, you just have to enter your income and expenses on a regular basis and you can always expect accurate reports.
No Installation Needed
Since this kind of software is hosted online, there is no required installation. Access to the cloud is available on a web browser or mobile app where you can log into the account. This will also save money on an in-house IT team to do various upgrades, technical fixes, and so on.
Immediate Access To Tech Support
It is possible to access tech support through chat online or via phone and get instant access to technical professionals available to help you with any issues you might encounter. This can save your company time and money, since you won’t have to employ an in-house IT representative to deal with the software.
When handling finances the old way, the paperwork can really clutter your workspace. But with a cloud-based accounting software program, you can import the data from your paperwork straight into the cloud.
Moving this data into the software will give you an easier real-time view of your finances without flipping through papers. This minimizes the risk of manual errors or losing important data, resulting in more efficient finance management.
Traditional Vs. Cloud Accounting
It is worth mentioning a few big differences between traditional accounting and cloud accounting. First of all, the main difference between these two is that cloud-based accounting software allows a user to access the program from anywhere on any device with an internet connection. On the other hand, traditional accounting requires on-premise computers.
Secondly, unlike traditional accounting software, online accounting software updates financial details automatically and provides financial reporting in real time. This means that account balances are always accurate and these programs are also better at handling multi-currency and multi-company transactions more efficiently.
On the other hand, when you have on-premise computers, each time a company grows, it has to pay for a new license and maintenance costs along with new licenses and fees for database maintenance, system management, and other software.
With cloud accounting solutions, however, you are not stuck with permanent, expensive equipment and licenses. In other words, cloud accounting requires less maintenance than traditional options.
Is Cloud Accounting Safe?
There is no need to worry about security. Cloud accounting solutions provide a secure method for storing sensitive financial information.
- For example, a company device (a laptop or a computer) that has sensitive information could be lost or stolen. This always results in an information breach and data theft. On the other hand, cloud accounting leaves no trace of financial data on company computers. Also, access to that data in the cloud is encrypted and protected with a password.
- Users also don’t need to worry about the dangers of sharing data. Cloud accounting allows people with access rights to the online accounting system to access data using their unique passwords. Traditional methods often require flash drives to transfer data. That always leaves some room for potential theft.
- Finally, cloud providers often have backup servers in multiple locations. Even if one server goes down, you will still have access to your sensitive data. With on-site devices that keep sensitive information, you never know what could go wrong (fire, natural disasters, unexpected damages, etc.). These unfortunate events can cause irreparable consequences.
Should Your Company Switch To Cloud Accounting?
Cloud accounting is the future. Even if traditional methods work fine for your business now, you should definitely consider making a switch at one point in time. But when exactly should you make this switch?
Let’s take a look at some of the areas where cloud accounting can help your business so you know when the time is right.
Automation Reduces Workloads
The whole cloud accounting system allows and grants automated bookkeeping, cash collection, and bank reconciliation. This change significantly reduces your team’s admin workload.
When there is instant access to real-time reporting and financial intelligence, you and your management team have all the essential numbers, insights, and key data needed to make informed decisions.
Paying Taxes Online
Simply put, paying your taxes is not only faster but also simpler when using a cloud accounting platform.
The transactions will be recorded immediately and you can even export them into the relevant tax return templates and send them digitally whenever you need to. You will no longer have to wait in lines or send someone from your team to fulfill these dull tasks.
One can hardly know when a scenario like the one with COVID-19 may occur. That is why it’s good to be prepared and flexible enough to let your team work remotely.
If you want your company to leverage the benefits of remote or flexible working, you will be glad to know that cloud accounting allows the management team and your finance department to access all crucial numbers from anywhere in the world.
However, keep in mind that this can only happen if they have the needed credentials and a good internet connection.
To sum it up, it is also worth knowing that the cloud accounting market is growing. For this reason, it may be difficult to select the right provider immediately. However, the cloud accounting software is a great fit for any business that aims to move forward and progress in a technology-driven world.
If cloud accounting is a business aspect you would like to talk about with a proven and reliable cloud accounting provider, take a look at Sleek’s accounting services. We have been helping a number of businesses and there’s nothing we would rather do than help you as well.