Insight
Accounting in the Cloud
September 2014
What is the Cloud?
Cloud computing allows you to access remote hardware and software services over the Internet. It also allows you to store data remotely and securely instead of holding data on your local machines.
Cloud accounting offers the same benefits that your local PC-based solution may offer except you access it over the Internet using your web browser. This means you, and others, can access the system anywhere, and at any time.
Advantages of cloud accounting
There are several advantages to cloud accounting systems.
- Online collaboration
As long as an Internet connection is available, multiple users, wherever they are, can access your accounting system simultaneously. You can give access to your accountancy advisers too, who can then make online changes to your system. If your business is spread across several locations, cloud accounting makes it much easier to manage your accounting.
- Bank feeds
When you download transactions a cloud-based system can automatically enter these into the system based on rules you establish, or reconcile these bank transactions already in your system. This saves time and means you always have an up-to-date view of how your business is doing.
- Data capture
This allows you to capture other data, such as supplier invoices, and create transactions in your accounting system. There are various providers who will analyse a scanned or paper copy of a supplier bill and then feed this to the cloud accounting system as a supplier bill transaction with the bill attached. Then you will have a supplier bill as a purchase waiting to be paid with a copy of the bill available to view. This eliminates the need to enter the supplier transaction manually. The list of possible data capture is growing all the time.
- Mobility
Most cloud accounting solutions offer smart-phone and tablet applications so that you can generate invoices or quotations on the run. You can also manage basic accounting processes like approvals or accepting matched transactions.
- Automatic updates
Your software updates automatically when you log in. This way you know you are always using the current version with up-to-date features
- Add-on modules
Most cloud accounting packages offer a suite of add-ons that allow you to extend the functionality of your system. For example, add-on modules for recording time costing jobs, inventory, point of sale, and online trading are available and provide enhaced features and often integrate seamlessly.
- Paperless office
A cloud accounting system allows you to send documents and reports electronically.
Different solutions
There are several established solutions and each has its own benefits. The following are popular choices in the Australian SME sector:
- Xero
- Saasu
- MYOB
- Quickbooks online
- Reckon
Pricing
All cloud accounting packages are based on a subscription model. In Australia prices start at around $25 a month but you pay for add-ons separately. Depending on what features you add, the more likely monthly cost is $50 to $100.
Security of data
Data is always backed up so there is virtually no risk of you losing it. If you are comfortable doing your banking online then you should have no concerns about accounting online. However, if you do not trust the security of the Internet then cloud accounting is not for you.
Things to consider
Anything that makes your accounting processes simpler is welcome; for a start it saves you time that you can spend elsewhere in your business.
Before you decide to go cloud-based, and before you choose a package, make sure you do your homework. It is worth you discussing it with your accountancy advisers too. Areas to look at include:
- your volume of transactions
- must-have features versus nice-to-have features
- whether you need inventory capability as this is usually at a basic level with cloud-based accounting
- the speed and stability of your Internet connection
Once you go cloud-based there's no going back, short of re-entering data into your old system. Therefore, it's important you make the right choice for your business. So seek advice, weigh up the pros and cons of each option, and then make an informed decision.
CASE STUDY
Excellent Care Homes operates two care facilities that are about 150 kilometres apart. They have a CEO who commutes between each facility but there is no corporate office. As this made a desktop accounting system problematic for centralised accounting, a cloud accounting system offered the ideal solution.
Each facility scans supplier bills and sends them for approval. They are then emailed to ReceiptBank (an online receipt processing facility) where they are processed and fed back to Xero, the chosen cloud accounting system. Once a week Xero generates a payments file, which is processed through the Excellent Care Homes' online banking. Bank feeds are processed daily according to rules and most payments and receipts are automatically allocated to the correct ledger account. Very little data is actually entered despite there being around 300 transactions that need processing each month.
The CEO and authorised staff can all access the system from anywhere, even by smartphone or tablet. Their accountants review the data, sort out any minor issues that emerge, and prepare the end-of-month reports and reconciliations. This means Excellent Care Homes has a very efficient accounting process that is always up to date without needing to engage a bookkeeper or internal accountant.