Cloud Accounting 101: What Is It And Who Can Benefit By Using It?

Are you ready to take your finances to the next level? Cloud accounting is an increasingly popular way for small businesses and entrepreneurs to manage their finances.

With a cloud-based system, business owners no longer have to worry about keeping track of paper invoices and receipts; instead, they can perform all their bookkeeping tasks in one streamlined online application accessible anytime, anywhere.

In this blog post, we'll take a deep dive into all things related to cloud accounting—from what it is and how it works to who can benefit from using it. So, if you're curious about how switching to the cloud could help simplify your bookkeeping process while increasing efficiency and saving time (and money!), keep reading!

Let's get started!

What Is Cloud Accounting? 

First things first: let's get a handle on what cloud accounting software actually is before we get into the meat of the conversation about why cloud accounting is so critical for small companies. To begin, let's have a quick discussion on basic accounting software, which, in addition to preparing you to understand cloud accounting better, will also assist you in gaining some perspective.

The term "Accounting Software" describes a piece of software that is installed on a computer and gives the user the ability to perform accounting transactions and keep records.

The terms "accounts payable," "accounts receivable," "ledger," and "trial balance" are examples of important modules that are included in general accounting software. In the past, the vast majority of accounting software demanded an on-premises installation, accompanied by a one-time payment of the licence cost.

On the other hand, because the program is hosted on remote servers accessible through the internet, it is not necessary to install it on your local computer. To gain access to the software, all that is required of you is that you utilise a device that is compatible and has internet connectivity.

This provides you with a wonderful option to avoid physically being present near a local computer and to carry out financial responsibilities in a remote fashion instead. Because of cloud computing, thank you!

Why Accounting Software Is Important For Your Small Business 

Now, let's put this into perspective. Maintaining a profit should be the primary focus of all businesses. Therefore, the efficiency with which you handle your financial matters can be a significant element in deciding the level of success you achieve.

You will have an easier time managing your financial activities and a simpler burden if you use accounting software. And if you believe that the initial cost is too expensive for your budget, you should reconsider this belief.

Accounting software might come with a monthly subscription, but it also spares your worker's time and reduces the amount of office equipment you have to buy every month. Both of these benefits more than makeup for the cost.

Your small company might require a unique set of features, a specific plan, or a specific product than that of a larger organisation. Still, the appropriate software application can offer your company the push it requires to maintain its position as a competitive player in today's digital market.

The following is a short list of the primary advantages that using accounting software can provide to your business:

1. Reduces human error 

It is human nature to err, and it isn't easy to completely eliminate the possibility of doing so. Accounting software essentially does away with the requirement of manually inputting information.

If you conduct your equations involving money with the help of a computer application, the likelihood of making mistakes in those calculations is drastically reduced. This not only gives you the ability to have a higher level of confidence in the accuracy of your outputs, but it also assists you in remaining in conformity with local, national, and (if you conduct business internationally) regulatory requirements.

2. Speeds up your work 

In any company, time is equivalent to money. Accounting software may help you shave off a significant amount of time by automating workflows and assisting you in completing tasks that are both simple and complicated in a matter of seconds.

In addition to helping with bookkeeping, accounting software can make it easier to perform other tasks, such as invoicing, billing, and reporting. Certain pieces of software can even communicate with the rest of the programs on your computer. For instance, if your company utilises Uber, your accounting software can link with Uber so that the company's monthly ride reports are immediately transferred to your system.

These reports will be imported as bills for you to pay, which means you won't have to hunt down the relevant information or manually determine it. As a result, you and your workers will be able to save a lot of time, which will allow you to focus on developing other methods for growing your company.

3. Keeps your data secure 

When vital data is included within a spreadsheet that has been destroyed, lost, or corrupted, it might be challenging to locate that information. On the contrary, using accounting software that is hosted in the cloud can spare you the hassle.

When your financial information is encrypted and kept in a safe location in the cloud, you will have unrestricted access to it at any time, and you will no longer need to be concerned about the possibility of data loss.

As new staff join your company, it is also simpler to provide them with better security by simply issuing login details and imposing two-factor or multi-factor authentication. This makes the process much more streamlined.

4. Saves you money 

In addition to saving you time, which saves you money, accounting software can also assist you in reducing the amount of cash you spend on actual purchases. For example, going paperless enables you to spend less on office equipment while helping the environment and reducing your impact on the planet.

This is made possible by the fact that all of your data is saved in the cloud. So, if you are migrating from traditional software or spreadsheets to a cloud system, you won't need to buy any extra hard drives or storage space, and you won't have to worry about losing any data.

What Are The Benefits Of Cloud Accounting?

The field of cloud accounting software consists of several different systems that are meant to perform a variety of accounting and bookkeeping tasks. Expensify, on the other hand, is a cloud-based system that assists in the management of worker costs, while Xero is online accounting software hosted on the cloud.

Despite the fact that the advantages of using cloud accounting software will vary depending on the system, in principle, a few of the advantages of using such software include the following:

• The capability of automating many manually performed accounting and bookkeeping tasks. Because of these automation possibilities, accountants and bookkeepers may assist their customers, save time and boost their productivity, which frees up more time for them to focus on growing their businesses.

• The capacity to access information in a way independent of place or the device being used. This makes it easier for remote services to be provided and "anytime" interaction to take place, both of which will contribute to the strengthening of the ties that an accountant or bookkeeper has with their customers.

• The capability of performing updates to data in real time. Companies will have the ability to make more educated choices earlier rather than later if they are able to swiftly access information and data on their financial situation (i.e., in real time).

• The capacity to easily scale up to satisfy the ever-increasing demands of the company. Let's imagine that your company makes 0–100 transactions each month, but it suddenly undergoes tremendous growth that leads this amount to skyrocket to 10,000+ operations each month. Your cloud-based accounting software has to have the capacity to accommodate this expansion readily.

• The capacity to enable operations to take place in a paperless setting. Because of this, there will no longer be a requirement to physically keep and maintain paper records, which is not only helpful from the point of view of costs and office space but is also excellent for the ecosystem.

• The capacity to provide changes in an automated fashion. Because of this, the program's function will be improved, and protection will be enforced more effectively.

• The capacity to bring down expenses. The expenses associated with conventional software are only incurred when using cloud-based software (including maintenance, upgrades, system administration, etc.).

• The capability of integrating with several other cloud-based services. Your cloud accounting software platform will see improvements to its effectiveness as well as an increase in its overall power as a result of these integration options.

Why You Should Consider Cloud-Based Accounting For Your Business

1. Optimising remote working capabilities

Access to suitable information, data, and files is essential to the functionality of remote working. Therefore, cloud storage is protected against unwanted access as well as the accidental deletion and destruction of your information.

This ensures that your information is always safe. Accounting and bookkeeping in the cloud enable companies to concentrate on running their business more efficiently while not disrupting already established activities and procedures. They are also able to expand more effectively without having an impact on the deliverables already in place, thereby continuing to generate value.

Availability, data acquisition and retrieval, and even protection can all be adapted to one's preferences in cloud accounting.

2. Accessing advanced technology

Accessibility to more advanced technology and developments in software may be made possible for organisations, particularly startups, through the utilisation of cloud accounting.

The development of technology results in less need for human labour while simultaneously improving accessibility to reporting and analytics. Given the important role that accounting plays in the management of financial resources, technological advances help companies keep up with the latest trends in their industries. Cloud-based accounting developments can assist companies in providing increased value to their clients.

One further advantage of using cloud accounting is that organisations, notably bookkeeping and CPA companies, are able to concentrate the proper amount of focus on the demands of their accounting systems.

3. Reducing vulnerability to business continuity

Making the switch to accounting software that is hosted in the cloud gives organisations the ability to ensure continuity of operations and protect themselves from the risks connected with workers and other skilled human resources, such as attrition or layoffs.

Even if the employee in charge of the data cannot be reached, the company can still obtain the data saved on the cloud whenever necessary. In addition, accounting that is done in the cloud also permits backup, which, in the instance that an unexpected incident occurs, is essential to securing information and data.

Accounting Software Features 

The following is a list of significant characteristics that you ought to look for in the accounting software you choose:

1. Invoicing and billing 

No matter the size or nature of the company, proper billing and accounting are essential functions. As a result, you require software to assist you in carrying out this fundamental operation.

After a purchase is placed, your accounting software ought to immediately begin to automate this procedure by delivering individualised bills along with friendly payment reminders. If you have good software, it will even let you submit predictions, and after your clients accept them, the forecasts will be immediately converted into invoices.

2. Payment integration

Your company's total cash flow will improve when you get payments in a more timely manner. If you link a payment gateway with your accounting software, it would be much simpler for your clients to make direct payments from the digital invoices you send them.

After that, rather than you being required to maintain a record of the status of these bills manually, your system will automatically designate them as paid. When selecting your software, you should make sure that it is compatible with all of the major banks and payment gateways that both you and your clients use. Using this method, you will be able to obtain prompt payments through various channels, including credit cards, debit cards, and online bank transfers.

3. Expense tracking 

You must not only make sure that you get paid, but you must also make certain that you maintain track of all of your paid and unpaid costs. The software you use should make it possible for you to track the expenditures of your entire company from a single location.

You should also be able to scan receipts for expenses and have the system automatically gather the necessary details. You will be able to get a clearer image of the current state of your company, pinpoint the areas in which you have been investing more money, and develop stronger investment plans going forward thanks to all of this information's ability to assist you in discovering those areas.

4. Bank reconciliation 

Checking that your records and your bank statements are consistent is an important step to take if you want to make sure that the information you have about your finances is correct.

The process of reconciling your bank accounts will be automated by a decent accounting system, which will retrieve and match activities from your bank accounts, as well as indicate any differences that are found. You may also use this capability to identify forged transactions or payments with mistakes.

5. Reporting 

The purpose of a business report is to provide a unified overview of the health of your firm. Therefore, at any moment that you require a profit and loss statement, a balance sheet, or a cash flow statement, the accounting software that you use ought to be capable of generating those reports for you.

As the proprietor of a small business, it has the potential to provide you with the knowledge you require to improve both your short-term and long-term decision-making, allowing you to feel more certain that you are properly steering your company.

6. Tax Compliance

Taxes. Whereas no one likes dealing with them, accurate record-keeping of these transactions is essential to the success of your company. Should you make even one mistake during this procedure, you risk getting into problems with the law and paying significant fines to the authorities.

For this reason, you require software that can be compliant with Australian tax requirements while also simplifying the filing of your taxes. For example, you should be capable of creating invoices inclusive of the GST, adding additional taxes, and simply filing your tax returns using the accounting software you use.

What Does Cloud Accounting Mean For Your Accountant Or Tax Agent?

Cloud accounting is something that most accountants, bookkeepers, and tax agents feel confident suggesting to their customers, with the exception of situations in which exceptional cases preclude them from doing so.

Not only are they aware of the advantages Internet accounting may give your company, but they also experience those advantages personally.

1. Cloud accounting for bookkeepers

For bookkeepers, cloud accounting involves rapid paperwork, fewer hours invested doing data input, and many more hours invested advising company owners about how they can enhance their systems or lower costs. Cloud accounting also means reduced risk of losing data.

2. Cloud accounting for accountants

Cloud accounting allows accountants to devote more time to counselling their customers on managing and expanding their businesses while minimising the likelihood of errors such as redundancy and other types of mistakes. Cloud accounting also implies more effective administrative procedures for accountants.

To illustrate this point with a real-world scenario, come tax season, accountants whose customers use MYOB Business are able to quickly and effortlessly access their customers' online files. In addition, they can process end-of-year modifications, which can be changed in real time without significantly disrupting the clients' experience.

Because this is an automated procedure, there is no requirement to e-mail files to one another or check the accuracy of figures obtained from various sources at any point along the process.

Another advantage of cloud computing for consultants is that it enables them to analyse their customers' operating efficiency at any time (even in April or May of each year for tax planning) and to offer preventative and prompt advice on matters that may have an impact on their company (such as falling margins or a looming super payment).

This aids in keeping the company on track and ensures that it complies with its tax requirements, which adds extra value to the product offering that the advisor provides.

What About The Security Of Cloud Accounting?

Individuals immediately discover that they no longer "own" their information (and occasionally their clients' information), so any conversation about cloud computing invariably raises questions concerning information security and confidentiality. This is because cloud computing implies that individuals can no longer control their information.

As we continue to witness data leak after data leak affecting the world's most well-known companies and the security of their consumers, it is more crucial than ever to be conscious of the various security threats.

What's the upbeat report? This is the responsibility of the company that provides your cloud accounting software. The accounting software companies MYOB, Xero, and QuickBooks, along with others, devote a great amount of effort and money to ensuring that their servers uphold a higher level of privacy and reliability than their users could uphold on their own accord.

Some instances of how online information security is continually improving include implementing capabilities such as two-factor authentication and others.

Final Thoughts 

If you are a small business owner, your accounting tasks might expand far beyond the typical bookkeeping, particularly if you are planning on expanding the company. Over time, this will need much more labour than your crew can handle to keep your organisation afloat. But why bother wasting time and effort on mundane activities when they may be automated?

When you have accounting software at your side, you can easily handle the financial aspects of your firm and streamline even the activities that take the most time. Purchasing a reliable accounting system is never a poor investment, regardless of the size of your company.

Content Summary

• Cloud accounting is an increasingly popular way for small businesses and entrepreneurs to manage their finances.
• So, if you're curious about how switching to the cloud could help simplify your bookkeeping process while increasing efficiency and saving time (and money!),
• Therefore, the efficiency with which you handle your financial matters can be a significant element in deciding the level of success you achieve.
• You will have an easier time managing your financial activities and a simpler burden if you use accounting software.
• Accounting software might come with a monthly subscription, but it also spares your worker's time and reduces the amount of office equipment you have to buy every month.
• Reduces human error It is human nature to err, and it isn't easy to completely eliminate the possibility of doing so.
• Speeds up your work In any company, time is equivalent to money.
• In addition to helping with bookkeeping, accounting software can make it easier to perform other tasks, such as invoicing, billing, and reporting.
• Certain pieces of software can even communicate with the rest of the programs on your computer.
• For instance, if your company utilises Uber, your accounting software may be able to link with Uber so that the company's monthly ride reports are immediately transferred to your system.
• Keeps your data secure When vital data is included within a spreadsheet that has been destroyed, lost, or corrupted, it might be challenging to locate that information.
• On the contrary, using accounting software that is hosted in the cloud can spare you the hassle.
• Saves you money In addition to saving you time, which saves you money, accounting software can also assist you in reducing the amount of cash you spend on actual purchases.
• This is made possible by the fact that all of your data is saved in the cloud.
• The field of cloud accounting software consists of several different systems that are meant to perform a variety of accounting and bookkeeping tasks.
• Your cloud-based accounting software has to have the capacity to accommodate this expansion readily.
• The capability of integrating with several other cloud-based services.
• Your cloud accounting software platform will see improvements to its effectiveness as well as an increase in its overall power as a result of these integration options.
• Making the switch to accounting software that is hosted in the cloud gives organisations the ability to ensure continuity of operations and protect themselves from the risks connected with workers and other skilled human resources, such as attrition or layoffs.
• No matter the size or nature of the company, proper billing and accounting are essential functions.
• After a purchase is placed, your accounting software ought to immediately begin to automate this procedure by delivering individualised bills along with friendly payment reminders.
• If you link a payment gateway with your accounting software, it would be much simpler for your clients to make direct payments from the digital invoices you send them.
• When selecting your software, you should make sure that it is compatible with all of the major banks and payment gateways that both you and your clients use.
• Checking that your records and your bank statements are consistent is an important step to take if you want to make sure that the information you have about your finances is correct.
• The process of reconciling your bank accounts will be automated by a decent accounting system, which will retrieve and match activities from your bank accounts, as well as indicate any differences that are found.
• The purpose of a business report is to provide a unified overview of the health of your firm.
• For this reason, you require software that can be compliant with Australian tax requirements while also simplifying the filing of your taxes.
• Cloud accounting is something that most accountants, bookkeepers, and tax agents feel confident suggesting to their customers, with the exception of situations in which exceptional cases preclude them from doing so.
• To illustrate this point with a real-world scenario, come tax season, accountants whose customers use MYOB Business are able to quickly and effortlessly access their customers' online files.
• In addition, they can process end-of-year modifications, which can be changed in real time without significantly disrupting the clients' experience.
• Because this is an automated procedure, there is no requirement to e-mail files to one another or check the accuracy of figures obtained from various sources at any point along the process.
• Another advantage of cloud computing for consultants is that it enables them to analyse their customers' operating efficiency at any time (even in April or May of each year for tax planning) and to offer preventative and prompt advice on matters that may have an impact on their company (such as falling margins or a looming super payment).
• Individuals immediately discover that they no longer "own" their information (and occasionally their clients' information), so any conversation about cloud computing invariably raises questions concerning information security and confidentiality.
• As we continue to witness data leak after data leak affecting the world's most well-known companies and the security of their consumers, it is more crucial than ever to be conscious of the various security threats.
• This is the responsibility of the company that provides your cloud accounting software.
• Some instances of how online information security is continually improving include implementing capabilities such as two-factor authentication and others.
• If you are a small business owner, your accounting tasks might expand far beyond the typical bookkeeping, particularly if you are planning on expanding the company.
• But why bother wasting time and effort on mundane activities when they may be automated? When you have accounting software at your side, you can easily handle the financial aspects of your firm and streamline even the activities that take the most time.
• Purchasing a reliable accounting system is never a poor investment, regardless of the size of your company.