What Is Cloud Accounting: An Explanation and a Few Benefits
40% of U.S. small businesses spend 80 hours (or more) a year doing their taxes alone. Another 18% spend around 41 to 80 hours on tax preparation. On average though, most SMBs spend 41 hours just on tax-related number-crunching.
Imagine that - almost two whole days for only tax prep! That doesn't even include the time for bookkeeping, invoicing, and finance management. Or all other crucial accounting activities in between.
No wonder admin tasks like these cost the country a yearly $2.87 trillion in lost productivity.
Enter cloud accounting.
Part of an industry now worth $130 billion, it's no doubt the next big thing in the financial world.
But what exactly is it? How does it fit into your small business?
All these and more, we'll cover in this post. So, keep reading to learn why migrating to the cloud ASAP should be on top of your priority list!
What and Where the Cloud is
You've likely heard the phrase "the cloud" over and over again, especially from your IT staff. Even your tech-savvy friends throw the term "cloud" around. It's even possible you've seen news or blog headlines mentioning this word.
After all, cloud computing is a buzzword that appears more than 65.4 million times on search results. That should give you an idea of how big it has become.
While it may be a new term for your ears, its roots go back to the 1990s. Depending on who you ask, some will say Larry Ellison came up with the concept. If it's more of "who coined the term?", they'll tell you Compaq engineers get the credit.
Either way, the meaning of cloud computing is the same wherever you go. Especially in North America, where Internet penetration is now at 95%.
So, what's in its name?
The simplest definition is that it's a way to store and access data and programs via the Internet. In other words, "the cloud" is like a fancier way of referring to the Internet. Since you store and run data and programs online, you're bypassing physical hardware.
We'll go into a more detailed explanation of the benefits of the cloud below. But here's a sneak peek: Cloud computing reduces your dependence on local storage. The less physical storage and hardware you need, the lower your overhead expenses are.
The Cloud 9 of Computing
Come 2020, the cloud will handle 92% of all enterprise workloads. At the moment, eight in 10 companies now generate some revenues from the cloud. In fact, more than 40% of them say the cloud is a major revenue source for their business.
As you can see, it's more of a question of "when to go to the cloud" than "why cloud." After all, cloud-based technologies and services cut costs and boost work efficiency. Greater productivity allows for greater results.
This then lets SMBs thrive rather than only survive in today's competitive market.
The Old-School Way vs. Cloud Accounting
Cloud computing accounting services are in essence, a type of cloud computing. It runs on the same premise of storing and accessing data and programs via the Internet. Only in this case, those data and programs are financial in nature.
Cloud accounting software or services are like traditional, on-site accounting programs. The only difference is the where. To be more precise, where your data goes and where you store and access it.
Accounting the Traditional Way
Before, you had to install accounting programs on your desktop or laptop. You had to have backup hard drives for all that financial data.
All these are pieces of physical hardware that required you to shell out money. They also had to be near you (or on-site) for quick access to what they contain.
That means they ate huge chunks of your business' finances, not to mention physical space. In fact, you may even have had to allow an entire room just for your accounting-related equipment!
Today's Accounting Done Right
Whereas cloud accounting lets you perform all your financial tasks through the Internet. You still need a computer, but only to access the cloud-based accounting services. That means your computer won't be full of memory-eating programs.
Since the software apps are on the cloud, you have remote access to them. If not through the Internet, then through a cloud app service provider.
Here's an even simpler way to understand cloud base definition for accounting:
With cloud accounting, you no longer have to install software on your computers. Even maintenance of the apps is no longer a task you need to worry about.
Cloud accounting solutions also allow for improved collaboration. Real-time access to data lets your people work on the same task at the same time. You can also make real-time data revisions and additions, wherever in the world, you may be.
A More In-Depth Look at Why Cloud is Taking Over Accounting Tasks
In fact, cloud accounting services deliver solutions for virtually any accounting function. A good example is Xero cloud accounting, which can handle almost any financial task you throw its way. Aside from the activities mentioned above, it also does a great payroll and invoicing job.
Note, however, that not all cloud services for accounting offer the same benefits. Some are also only for specific accounting work. In general though, here are some of the benefits you can expect when you start accounting via the cloud:
Accounting Task Automation
Small businesses lose as many as eight months' worth of productivity on admin tasks. All that repetitive entry of data and revisions contribute to this massive loss.
So, imagine what amazing output you could have produced in that span of time! The good news is, cloud accounting solutions let you turn that into reality. With their task automation capabilities, you can save time and boost work efficiency.
You can then use the time and resources you save to focus on your business' core activities. In other words, you can now do what you do best to grow your business.
Data Access Anywhere, Anytime
Access your financial data wherever you may be, so long as you have access to the internet. You can be on a business trip somewhere in Europe and still see your books whenever you need to.
Need to update your U.S. business expenses while in Asia? Cloud accounting lets you do that right then and there.
A Service that Grows Along with Your Business
Stick to traditional accounting, and it'll rack up more expenses for hardware purchases. This is especially true as your business and financial transactions grow.
Go cloud-based now, and you can easily scale your accounting software to meet this growth. All you need is to upgrade your package, and you'll get the same quality of support and service.
A Huge Step to Going Paperless
If you don't go paperless, you'd have a hard time making your business greener. It's a lot easier to go paperless than to go solar.
Mind you, both are critical to making your business friendlier to the environment. But for now, the first step you can take is to reduce paper use at the office.
Moving to the cloud lets you achieve this goal.
Automatic Updates for Improved Accounting Security
Data breaches are so common that in the first half of 2018 alone, 22.41 million records already got exposed. Scary, right?
But that's not all.
Three in every five cybersecurity attacks happen to small businesses. So, if you thought cybercrime only happens to giant corporations, think again. So long as you have unsecured networks, you can become a cybercrime victim.
That's why as early as now, you should consider moving to the cloud. Cloud solutions offer a much more robust and secure place for your financial data. Plus, they're responsible for all software updates, so even less for you to worry about.
Cloud-Based Accounting: The Faster, Smarter, and More Secure Accounting Solution
Whichever way you look at it, cloud accounting benefits businesses of all types and sizes. It'll be a shame if your own organization misses out on them. The huge cost-reduction alone should already be enough of a clincher.
The longer you wait to move to the cloud, the more productive your competitors become. That basically means letting the competition gain an advantage over you!
Connect with us now to find out how cloud-based accounting can take your business to the next level.