Cloud accounting software can help your firm to thrive
As a growing number of businesses adopt cloud-based accounting software, Ian Thomas, managing director at MHA Broomfield Alexander, looks at the reasoning behind it, the benefits and pitfalls of making the switch, and how to choose the right product
AS THE development of modern technology gathers pace, it’s perhaps little surprise that research last year suggested three in four SMEs were looking to cloud-based solutions – including for accounting – as a way of increasing their business efficiency. Indeed, since the beginning of the decade, adoption of cloud-based services across the piece has increased by more than 80% and businesses that have been operating with cloud-based software for some time have cited its flexibility, operational cost savings and its potential to enable a competitive advantage.
Although small business owners will likely have had many different reasons for starting their own company, it’s probable that a love of balancing the books doesn’t rank highly on the list. Business accounts have long had a reputation of being complex and time consuming for anyone who isn’t an accountant or inspired by numbers.
However, there are now a variety of cloud-based accounting software packages available, like Xero, Sage and Quickbooks which help to transform the traditional dread of managing company accounts. Technology that simplifies and speeds up processes like paying bills, recording payments and chasing invoices can only be a good thing; after all, watching your business grow and thrive should be fun and cloud accounting can help.
Cloud accounting software gives business owners the ability to see cashflow in real time, as statement lines from bank accounts are fed into the accounting software automatically.
Meanwhile, bank balances, invoices, bills and expenses can be viewed at a glance, helping to create a holistic picture of the business’ overall finances. There is also the convenience of being able to view accounts “in the cloud” – effectively accessing them whenever and wherever you wish and on a number of devices.
Cloud accounting also negates the need to share a computer or exchange sensitive files, as the software enables you to work on the same data – at the same time – as your advisers.
Arguably one of the biggest selling points of cloud accounting software is that most updates are free and automatic, signalling the end of regular installation and maintenance costs.
Intuitive accounting software can also enable business owners to be more in tune with their financial situation, helping to avoid problems and take action at the most appropriate time. An added bonus is that accountants and financial advisers are able to provide businesses with much better insight and advice, helping to improve processes and spot future opportunities for growth.
Moreover, amid the government’s move to digitising the tax system, cloud-based accounting can also support SMEs in their compliance with new regulations next year.
Businesses will also need to consider any potential difficulties or disadvantages before making the move to a cloud-based system. One of the biggest concerns prior to adopting the new software is around the security of data and the threat of data loss; while software providers are continually updating their security systems to guard against any breaches or hacking, the complete protection of data is never guaranteed so businesses need to have back-up plans in place.
In addition, as the data is stored in the cloud, it can technically be stored anywhere in the world and may therefore be subject to differing data protection laws from that of the UK. It’s also important that businesses measure their accounting needs against exactly what a given piece of software does, as it may not cover every aspect of your current or future method of accounting.
Businesses will also require a high-speed and reliable internet connection. With the advancement of technology and broadband speeds, one would expect this to be much less of an issue moving forward.
It’s understandable that such a significant change in the way a business operates won’t come about without in-depth consideration, and many businesses will adopt either a migratory approach – slowly moving from existing systems to the cloud – or a hybrid approach, where existing systems will continue to work alongside new cloud software.
However, all small businesses have one thing in common – they need good cashflow to survive. Having good visibility of that cashflow – and their accounts in general – is a key ingredient in ensuring a business is being run as efficiently as possible, helping to identify risks in advance and to grasp opportunities as they arise.
Cloud accounting technology supports this, and is the way forward in opening up a new world of innovation for business.