With an increasingly uncertain economic outlook and the spectra of inflation and interest rate hikes on the horizon, having the most efficient operating structure for your business has never been more important. One commonly overlooked source of inefficiency may be your accounting practices. That’s because every business needs an accounting system—but advances in technology have created new possibilities in cloud-based accounting software that can make your business more efficient—and more profitable—than ever before.
Advantages of ‘the Cloud’ | Automation and Accuracy
Cloud-based accounting has several distinct advantages compared with traditional accounting systems, whether housed in physical files or private in-house servers.
The constant synchronization that is the hallmark of cloud-based accounting – your files are constantly uploaded to and updated on a remote, cloud-based server – means that information can be constantly adjusted in real time, which means a greater ability to catch mistakes and therefore less errors. Traditional accounting systems, by contrast, need to be updated manually and can be less accurate as a result.
Cloud-based accounting software can also automate many of the tasks that drain your energy and prevent you from growing your business by spending your time on marketing, sales, project development or other profitable activities. Things like creating balance sheets, paying subscriptions, producing invoices and estimates, importing transactions and expenses, creating financial statements, sending payment reminders, processing vendor payments, and making journal entries can all be wholly or partially automated with many cloud-based systems. This simplicity is especially helpful for small firms who have fewer staff and less time to devote to administrative and clerical tasks. The automation of cloud accounting can cut down or eliminate double entries, inserting data into the wrong column or inserting the wrong number – by doing less repetitive tasks and spending less time on things like duplicating invoices and scanning receipts, it reduces the margin of error for data entry considerably. This is especially important for larger businesses, with more data to process and a greater likelihood of costly mistakes.
Many cloud-based systems can also flag errors and imbalances in real time, preventing them from sitting in your accounts and distorting your financial picture for weeks or months.
Keeping your firm’s accounting information in one centralized location also means that every team member works from the same set of data, which greatly enhances accuracy and makes it easier to fix mistakes as a team.
Finally, many cloud accounting programs allow you to link your banking and sales accounts to the software, which can help give you the most accurate picture of your business’s health – including sales, expenses, tax compliance and inventory – at any given moment. This interaction can give you instant peace of mind when a payment is received, or help you track payments that you are owed.
Advantages of ‘the Cloud’ | Lower Overhead Cost
Apart from automation and accuracy, another crucial advantages of cloud accounting software is its lower overhead cost.
Using a remote system eliminates the need to rely on a dedicated in-house server and the IT specialist you would need to set up and maintain it. Since the cloud updates its own software automatically rather than needing a new reminder, it also means that service updates will never catch you off guard. For a new or growing business, cost efficiency is key to staying competitive and maintaining your market share, and many cloud accounting programs can scale up to advanced functions as your business grows and spreadsheets become more and more unwieldy.
Switching to cloud-based accounting could be the first step you take to overhaul your operations by moving to a smaller, more efficient office, switch to less complicated computer hardware or even moving to a completely virtual, work-from-home workspace.
Cloud accounting also promotes cost predictability, with a vastly reduced risk of sudden shocks due to computer crashes or new software purchases. According to some estimates, switching to cloud-based accounting may save up to 300 work hours per year, for a fixed cost of between $10 and $50 per month depending on the software, and without the steep investment of full-fledged enterprise resource planning (ERP) programs, which can cost thousands of dollars.
Finally, the completely digital nature of cloud accounting means that you spend less on paper, ink and even postage – studies have estimated that the average office creates 350 pounds of wastepaper per employee – which is better for the environment and your bottom line.
Advantages of ‘the Cloud’ | Access on the Move
Another advantage of cloud-based accounting for an increasingly mobile business environment is its accessibility.
Paper files, or physical computer servers need to be physically maintained and accessed, while cloud accounting can be done from anywhere and can also facilitate remote work or accessing critical information during conferences and business trips. This accessibility makes it easier for verified third parties to collaborate with your business, send or receive information via mobile devices or short notice, and makes sharing data more secure, as cloud data isn’t reliant on e-mails or physical files, which may be easy for intruders to access, or unwieldy formats like USB.
Is Cloud-based Accounting Secure?
Many people may have qualms about the security of cloud-based accounting – after all, paper or in-house computer systems can at least be always seen. But with multi-factor authentication (MFA) and encryption becoming increasingly prevalent in professional e-mail accounts, standard digital safety practices can make cloud-based accounting as safe or safer than your current system. Many programs allow for different tiers of data access to different users, depending on which chunks of data you need or want to share. The economies of scale of digital security also tip in cloud accounting’s favour – data centres can invest more per capita into server maintenance and security than almost all individual firms. The costs of IT maintenance are born by the software vendor rather than you, and cloud-based accounting can almost completely eliminate the risk of loss for on-site accounting data, whether due to theft or disasters like fires and floods which can permanently destroy paper records and fragile computer hardware.
If you have questions about making the switch to cloud-based accounting, the team at Hall & Associates is always on hand to answer your questions and share our experience.