Accounting in the Cloud – Pros and Cons

By Paul Griffiths, Accru Page, Kirk & Jennings, Perth

What is ‘cloud accounting’?

’Cloud accounting’ simply means a collection of accounting applications accessed through the internet. As the physical location of the applications is irrelevant, they are said to be ‘in the cloud’. 

Most of us have been using cloud applications for some time. Every time you access hotmail, internet banking, Facebook or eBay, you’re using the cloud.  However, the range and quality of online business applications has grown quickly over the last few years. Cloud-based business solutions now include customer relationship management systems, project management and document solutions, and accounting software from vendors such as MYOB, Quicken and Xero. Applications have also been developed for tablets and smart phones.

The advantages

Here are some of the key benefits of cloud based systems for small businesses:

• Convenience – You can use cloud-based software from any device with an internet connection wherever you are.

• Low upfront costs  Traditionally start-up businesses require large initial capital investment to establish their IT infrastructure coupled with ongoing maintenance.  With cloud solutions, there is no need to purchase software and much of the hardware.

• Automatic upgrades   Cloud based accounting solutions eliminate the need for software updates.  Once you log in you are automatically on the latest version.

• Subscription based fees Cloud accounting suppliers usually charge on a subscription basis. Cash flows are easier to manage as subscription fees tend to be monthly and greater flexibility is available to adjust your IT capacity. 

• No need for physical data storage  Enabling end-users to store data in the cloud rather than a physical off site location saves space, time and money. Your data is automatically backed-up in case of a computer crash.

• Collaboration – multi-user access, with your permission, makes it easier to collaborate online with your team and your advisors.

The disadvantages

There are some issues with cloud accounting that keep businesses cautious. The biggest one is security. Because all your data is held over the internet, you need to ensure that the software is secure and your supplier has a track record of reliability. Many major cloud software providers now have world class security and can in fact provide a more secure way to store information than on your laptop or network. Whichever way you go, your business is ultimately responsible for the safety of its data.

In the accounting space, it is reported that 16% of SMEs currently use a ‘cloud based’ accounting system, and we are likely to see many more make the switch as innovation on the internet by accounting software providers gathers pace.

Other disadvantages can include outages due to the provider being down, limits to the data you can freely store, slow speeds for uploaded and downloading.

As with all new technologies, there are areas of risk that require careful management and assessment. Do your research so you can determine the best solution for your needs.

Is cloud accounting for you?

If you’re thinking of moving to a ‘cloud-based’ accounting system, knowing your business needs is vital for choosing the right solution. Key things to consider include:

• The size of your business and whether you employ staff

• The level of integration into management and process systems within and outside the business that you need

• Whether you need to manage stock and inventory

• The complexity of your financial reporting needs

• Having the capacity to upscale your accounting tools as your business grows

Knowing what features you need before you compare options will ensure you select the right package for your business. There is little point in paying for more than you need, however if you’re a growing business, then you’ll want a solution that’s able to grow with you.

If you would like to find out more about cloud accounting and how it can add value to your business, please contact Accru Chartered Accountants and Business Advisers.