Definition
 

Cloud accounting makes use of accounting software hosted on a secure remote server. Accounting systems, reports, and financial data can be stored and accessed by small business teams from any computer with an internet connection. 

 

Description

Cloud accounting is a solution that allows multiple users to view and save data securely online or on remote servers. Your users transfer all of your data to cloud providers, where it is processed, securely stored, and returned. 

Cloud technology enables streamlined business procedures that are adapted to the company's growth. 

Instead of installing and executing accounting software on a local computer or server, cloud accounting uses cloud-based servers and storage infrastructure that can be accessed via an internet connection. 

This enables organisations and people to access accounting data and carry out various financial transactions from any location and at any time, via a web browser or a dedicated mobile app. Cloud accounting solutions often include invoicing, expense tracking, payroll processing, financial reporting, and collaboration capabilities, allowing for greater flexibility, scalability, and real-time access to financial data for better decision-making and efficiency.

Importance of Cloud Accounting

Cloud accounting can help businesses in the following areas:

• Remote Accessibility

Before cloud technology, accountants had restricted access to their data because they had to physically drive to their office desks to work on the files and data.

Cloud-based solutions now enable CPAs and their teams to use their accounting application from anywhere in the world, as long as they have access to the Internet. You can access your accounting data from anywhere by logging in with your laptop, tablet, or mobile device.

• Advanced Security

Accounting programs kept on local PCs are rarely backed up with many layers of encryption and are subject to security breaches.

Security, a significant concern for most firms, is also given top priority by cloud service providers. Accountants can be confident that their data is entirely secure when stored in the cloud. To protect sensitive financial information, cloud service providers employ a variety of safeguards and techniques, including login management systems, firewalls, multi-factor authentication, IDPS systems, and others.

• Team-Collaboration

Accounting operations necessitate delivering files and reports via email to numerous team members before they can be provided to the clients. Eventually, each participant has multiple versions of the same material downloaded to their local desktop.

Conversely, data on the cloud allows teams to collaborate on up-to-date documents in real-time, minimising the need for wasteful downloads. Furthermore, you can readily grasp the company's cash flow, financial situation, and reconciliation reports, allowing you to make more informed strategic decisions.

• Regular Backups

Losing important financial information may be devastating for any organisation. To avoid this, you and your team must maintain your local desktops up to date and manually backup data at the end of each day.

To avoid data loss, cloud service providers perform regular backups and store information at multiple data centres. As a result, regardless of when or from which device you log in, you'll always have access to the most recent information.

• Customer Support

Do you have a dedicated IT team to handle technical issues with the accounting software? Are they available 24/7 to resolve these concerns for you? Probably not.

But don't worry. Choose to host your applications in the cloud. The service provider will have a team of specialists available 24/7 to answer your questions about setting up, installing, updating, or maintaining your accounting program.

• Business Continuity

The frequency of cybercrimes has increased dramatically worldwide. So, no matter how many security precautions you take, data saved on local PCs is constantly exposed to cyber-attacks.

In contrast, the cloud service provider employs various safeguards to protect your data from cyber threats or even disasters. They use several security measures, including firewalls, anti-virus, brute force protection, 24-hour CCTV surveillance, smoke detectors, and more, to ensure physical, end-point, and network security.

• Cost-Efficient Solution

Businesses typically incur significant costs for managing in-house servers, purchasing high-end hardware, hiring a specialised IT team, and infrastructure.

Hosting your accounting programs in the cloud can avoid all of this. The cloud hosting provider handles installation, maintenance, upgrades, and other associated charges. They also provide customised plans, so you only pay for the tools your accounting firm requires.

What are the benefits of accounting software for startups?

1. Saves time:

Setting up your accounting software, like any other new software system, requires some initial time investment. However, once completed, it will save you hours of work per week by automatically performing time-consuming manual bookkeeping and accounting tasks. 

2. Generate financial reports

No more waiting while your administrative help prepares your monthly reports. Accounting software platforms include built-in reports that are automatically updated. You may easily download your P&L Statement (or Income Statement), Balance Sheet, and Cash Flow Statement, which include critical insights such as income and expenses for the month, quarter, or year.

3. Sync financial data

Accounting software will sync data from all of your online accounting tools via API, eliminating the need to download financial information from each source and spend time on data input to create a comprehensive financial record. 

4. Promote data accuracy

Accounting software eliminates the need to manually update various cells in multiple sheets when your records change. Instead, your financial statements and reports will be updated immediately to reflect any changes you make, allowing you to keep your data error-free. 

5. Crisp accounting statements

When you start receiving external demands for financial statements, it's critical to present documentation that appears professional rather than DIY. Particularly when dealing with potential investors, the financial information you publish must be precise, correctly written, and timely. If they aren't, they reflect poorly on your financial situation, and you may miss out on opportunities. 

6. Aligns tax filings

Standardised financial statements and correct, categorised data make it easier for your tax accountant to prepare your return and compute any available tax credits. Some accounting programs provide built-in tax reporting.

How does cloud accounting work?
 

• Cloud accounting streamlines corporate procedures through the use of secure web-based applications. Small business owners and their finance teams may access all vital data from any place, making collaboration and financial reporting more convenient.
• With a cloud application service provider, you gain access to software programs over the internet or other networks. This means you no longer need to set up separate workstations with software.
• Instead, everyone in your company can access the cloud from their own devices, empowering them to work efficiently and be in control of their work environment.
• Remote teams or branches can access identical vital data and financial records, ensuring everyone is on the same page and saving valuable time and money.

Cloud accounting also provides data security; your account may include data backup and disaster recovery. 

Trends that can affect cloud accounting

1. Artificial Intelligence (AI) Integration: AI technologies are increasingly being integrated into cloud accounting platforms to automate repetitive procedures, improve data accuracy, and deliver sophisticated analytics and insights, thereby increasing the efficiency and effectiveness of accounting operations.
2. Increased Data Security Measures: With increased worries about data breaches and cyber threats, cloud accounting providers are introducing more robust security features, including sophisticated encryption, multi-factor authentication, and enhanced access controls to protect sensitive financial information stored in the cloud.
3. Integration with Other Business Systems: Cloud accounting platforms are increasingly designed to seamlessly interact with other corporate systems and applications, such as customer relationship management (CRM) software, inventory management systems, and payment gateways. This allows for more efficient data flow and collaboration across various business functions.

Example

Cloud accounting includes employing software such as QuickBooks Online or Xero to conduct financial transactions, invoicing, cost monitoring, and reporting. 

Users can use a web browser or a mobile app to enter data, generate financial reports, and engage with team members in real time from any internet-connected device. 

The accounting data is safely kept and maintained on remote servers, providing greater scalability, flexibility, and accessibility than traditional desktop accounting software.

FAQ

What is e accounting?

E-accounting is the process of electronically managing and performing accounting functions such as documenting financial transactions, creating financial statements, and managing financial data through the use of digital technology and software platforms.

What are the different types of cloud computing?

Cloud computing is divided into three categories: infrastructure as a service (IaaS), platform as a service (PaaS), and software as a service (SaaS). IaaS provides virtualized computing resources via the Internet, PaaS provides a platform for developing and deploying applications, and SaaS delivers software applications via the Internet on a subscription basis.

What are the basics of cloud computing?

Cloud computing refers to the delivery of computing services—including servers, storage, databases, networking, Software, and more—over the Internet ("the cloud"). It allows users to access and use computing resources on demand without needing physical infrastructure or direct hardware management.

What are cloud-based applications?

Cloud-based applications, often known as Software as a Service (SaaS), offer access to a vast array of options. These software products are hosted and controlled by third-party companies over the Internet, making them easily accessible. These applications are accessible through a web browser or a dedicated interface, removing the need to install or maintain software on your devices. Examples include Gmail email services, Microsoft 365 productivity suites, and Salesforce CRM platforms.

Mention different cloud computing features

Cloud computing has various characteristics that set it apart from traditional computer methods. It offers:

1. scalability (the ability to quickly and easily adjust resources to meet changing demand),
2. flexibility (access to computing resources from anywhere with an internet connection),
3. cost-effectiveness (pay-as-you-go pricing models and lower upfront infrastructure costs),
4. dependability (redundant infrastructure and data backups), and security (built-in security measures and data encryption).

These comprehensive capabilities have made cloud computing a popular alternative for organisations and people looking for effective and dependable IT solutions.