Unless you’ve been living under a rather large rock, if you’re interested in accountancy, you will have heard about the latest game-changer: cloud accounting. This relatively new technology gives businesses easier access to data and information and can help streamline processes such as bookkeeping, saving them time in the process. As cloud software can help reduce these repetitive, admin-based tasks, it can give accountants the opportunity to take on more of an advisory role.
With such benefits, you’d think every company would jump on board. However, cloud accounting still has its sceptics and critics. Will and [more importantly] should stubborn business owners remain resilient to change or do they need to keep up to date and adopt the latest technologies? Today we look at the pros and cons of cloud accounting with the aim of making that decision a little easier.
Cloud Accounting, Traditional Accounting – What’s the Difference?
Before we jump into the fine details, let’s contextualise cloud accounting software alongside traditional, on-site accounting software. With cloud accounting, software is hosted on remote servers; data is sent to ‘the cloud’ where it is processed and returned to the user, and application functions can be performed off-site. With on-premises or self-install accounting software, functions tend to be performed on the user’s desktop which can also be where they store their data.
The Cons of Cloud Accounting
One of the biggest issues with cloud accounting for businesses is data security. Cloud accounting allows multiple users to access the same data and files from different locations using unique passwords. This could have ramifications if users are not given suitable training in protecting that information. Additionally, as a company’s data can be stored on servers outside of the UK, the local governments (and entities) in those countries may be able to review and audit that data without seeking the same permissions necessary in the UK. Additional cons include:
- Cost: Small businesses may have to splash out more (over several years) if they want a cloud accounting package which will suit their specific needs. Furthermore, some cloud accounting software can have bandwidth (transferring data) thresholds which can incur extra charges if exceeded.
- Inflexibility: Some cloud computing suppliers make it very difficult for a customer to transfer their information to another supplier, ultimately turning them into a ‘forever customer’.
- Accessibility: As computing in the cloud requires an internet connection at all times, when it’s offline (or not working), you’re technically offline, too. In addition, outages are possible with even the best cloud computing service providers.
- Customer support: If businesses are having any customer support issues such as technical difficulties, they often have to rely on their cloud services provider to resolve them. Alas the level of this support can vary, with quicker response times usually being pricier.
The Pros of Cloud Accounting
One of the main advantages of cloud accounting for businesses is the accessibility of data – individuals are no longer tied to using just their work computer. This means that a company’s employees can access data and information from all over the world in real time. Further pros include:
- Speed: With cloud accounting, businesses can get access to new functions, which could save them time when it comes to completing tedious, manual processes.
- Scope: Companies no longer have to rely on face-to-face meetings for business. With cloud accounting they can take on clients from around the world and discuss their data in real time; time difference is no longer a concern.
- Relevancy: Today, clients are demanding that bookkeeping is compatible with at least one of the popular cloud accounting platforms – businesses are having to rise to meet this demand.
- Security: Some argue that storing data is more secure with cloud accounting as, for example, it’s easier to steal a laptop with a spreadsheet of information than it is to hack a server. Cloud accounting takes away a lot of this threat as financial data is not kept on company computers.
- Cost: Price can also be a positive for accounting in the cloud. Servers are not stored in-house meaning less IT staff tend to be needed to maintain them; infrastructure is one of the biggest costs associated with storing and managing data. As a bonus, less energy should be used.
Some businesses may be understandably wary of adopting cloud accounting, others are simply refusing to move with the times. Unfortunately (for those businesses at least), as we live in a fast-moving technological environment, as time goes by, more processes are becoming automated (the government is looking to make take digital from April 2019) and accounting is becoming more of an online necessity. This may cause problems for or alienate those companies who fail to evolve. Cloud accounting software company Xero carried out research which proved that “businesses using the software have a higher [chance of] survival than those who don’t,” reported Accountancy Age.
Are you interested in cloud accounting? If so, an AAT qualification could be the perfect first step on your journey to becoming one of today’s most in-demand accountants. Contact Aspiring Accountants to discuss the ideal AAT course for you.
For news, insights and career advice on the accounting world, subscribe to Aspiring Accountants’ newsletter.