Are you looking to eliminate the stress of traditional bookkeeping from your business? Maybe you’ve just started your venture and are looking for an affordable, cost effective way of keeping track of your business finances.
Well, cloud-based accounting could be the solution you’ve been searching for.
In this article, I will be explaining what cloud based accounting is and the benefits it can bring to your business vs traditional accounting methods.
What is Cloud-Based Accounting?
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For years business owners have used accounting software to record, organise and maintain their companies financial affairs. This ensures they have an accurate record of the money going in and out of the business ready for their yearly tax and quarterly VAT returns.
Cloud based accounting essentially does the same thing. Except rather than having the software installed and maintained manually on single desktop computers, cloud software uses remote servers that can be accessed via the internet. On any device.
Using cloud accounting can eliminate a plethora of problems usually associated with traditional accounting methods.
The Problem with using Traditional Accounting systems
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Time-Consuming
Depending on the size of your company, traditional accounting can be a labour intensive, time-consuming task. This is due to the manual nature of the work involved. Your employees will need to manually key and reconcile information from daily operations such as receipts, invoices, payments etc into the companies accounting system.
Incorrect Data Entry
It’s easy to make mistakes when manually keying information into your accounting software. Even if all the information entered was checked by somebody else, mistakes can still slip through the net. After all, we are only human, and even the best of us make mistakes from time to time.
Technical Issues / Loss of Data
We’ve all been there. You are in the middle of typing something important and just as you are about to finish, your computer decides to crash. This is the last thing you want to happen, especially when it comes to accounting. But as Murphy’s law states, “whatever can go wrong, will go wrong”.
Better have the IT department on speed dial!
Loss of Paperwork
When you have cabinets full of files, contracts, invoices and receipts, you are bound to lose a few documents from time to time. But what if the worst-case scenario happens and your office gets burned down? Not only do the entire company files go up in smoke, but so will your business.
Granted, that’s probably an extreme example, but it can happen.
Cost
Traditional accounting systems can come with many unforeseen costs. It may sound obvious, but the desktops themselves can be a financial drain. They need insuring, maintaining and upgrading as your business grows.
Then there’s the software.
First, you have the upfront cost. Then you will have to pay for updating or even replacing the software when new versions are released. Then, as your business grows, you will have to pay for additional licenses so more of your employees can use it.
This can all add up to thousands of pounds over the course of a year.
Security
Storing accounting information on your desktop can pose many security risks. Your system may be subject to viruses and hackers if your security software is not regularly updated.
Devices could also get lost, damaged or stolen.
Transferring files to employees and other individuals can also be a problem. Sending sensitive information via email or USB stick could mean that it ends up in the wrong hands.
Benefits of Cloud Accounting
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Access Any Time, From Anywhere
The beauty of cloud accounting is the fact that you are not tied to an office or any other location. Because your data is stored in the ‘cloud’, you can access your accounts at any time from any device, 24/7. As long as you have an internet connection, simply log in via your web browser or open the mobile app to view your records in real-time.
Cost-Effective
Cloud accounting saves you from spending money on costly IT infrastructure. As all your data is cloud-based, there’s no need for expensive hardware or software that needs constant updating and maintenance.
You also reduce labour costs as you are now eliminating the need for manual data entry.
Time Effective
As a business owner, time is your most valuable asset. The time you would be spending on data entry, reconciling paperwork and backing up data can be spent on actually growing your company.
Easily Shared
Rather than sending files and documents via email, arranging meetings or handling lots of paperwork to share with colleagues, management and other key stakeholders. Everyone that needs to see the numbers can access the data from any Geographical location via their own devices.
Military Levels of Security
All of the data stored in the cloud accounting system is highly encrypted. This means only you and a selection of individuals (of your choosing) can actually access the information. As I mentioned before, this takes away the very manual process of sharing information with your stakeholders, thus eliminating the risk of your accounts ending up in the wrong hands.
There’s also no need to have your data stored on a physical server or harddrive. This means, if your equipment ever gets stolen or hacked, the perpetrators will not be able to access any confidential information.
Reduces Paperwork
Reducing the use of paper is both great for the environment and for your business. With cloud accounting, all documents can be scanned and digitised, meaning you won’t need to keep any paper copies of invoices, receipts etc. This can save vital office space and any storage costs.
You’ll also save money on reduced printing and postage costs.
Links to Your Bank Account
Many cloud accounting platforms offer live feeds to your bank account.
By linking your bank account to your accounting software, you eliminate the need for any time-consuming reconciliation activities.
Streamlined Processes
If you are looking for a more efficient way to send invoices and get paid, cloud accounting has the solution. Many platforms offer built-in invoice functionality which streamlines the whole invoicing process.
Also, payment apps like GoCardless can be connected to your online accounting and invoicing, allowing customers to pay you automatically. This speeds up payment times and reduces the manual workload.
What We Use
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There are many cloud accounting platforms on the market, all of which have their own unique features and USP’s. The platform you choose will depend on the needs of your business.
At The Tax Bros, our cloud accounting platform of choice is Xero.
With over 2 million subscribers (and counting) and features to suit any size of business in any industry. It’s no wonder Xero is one of the world’s fastest-growing SaaS companies.
Check out the video below to see how Xero can bring your cash flow to life with real-time financial data, available anywhere, anytime, on any device.
