Traditional Accounting software and its problems
Accounting is a highly critical process reliant upon numbers and complex calculations. Hence, it was quite natural that accountants also happened to be the earliest people to use computers for their accounting work. Creation of ledgers, P&L accounts and various other account statements became computerized. However, in today’s dynamic and high-risk business environment, conventional accounting software are no longer the best option for companies. Today’s accountants are not just book-keepers maintaining a business’s transaction records, but dynamic business advisors who keep track of a company’s financial health, future growth and play a role in the overall soundness of its operation.
The problem with desktop-based accounting software:
- The data stored in a desktop accounting software is not up to date as it requires constant input with regards to new transactions and keeping it in sync with real-time situation requires constant effort. Further, it is only as good as the last version you purchased, and not the latest version of the software available in the market.
- You can install it only on one system usually, and data needs to be transferred from place to place by using USB drives. Such a system puts your data at risk of theft and also makes your computer vulnerable as any virus or malware might get transferred to it through the portable drive.
- Limitation on number of users: Only one person gets access to the system. In large organizations with multiple key people, it becomes almost impossible to access financial or customer details.
- Keeping backups costs you more and is time consuming.
- Software upgrades cost you time, money and system downtime.
- The customer support service is slow and usually costs you on-site visiting charges and other costs.
Enter Cloud Accounting: The ultimate solution for business owners
There is a great buzz going on about the term Cloud Accounting and how Cloud Accounting Software is transforming businesses around the world. However, in case you haven’t yet jumped on to the Cloud Accounting bandwagon, here is why you should. Simply put, it is a modern web-based system where you can access your accounting software from any internet connected device. Some people also refer to it as online accounting. If you look around, there are plenty of cloud services that we use such as online banking, email services, file sharing sites, Netflix, Google Docs, Dropbox and many others.
In a cloud computing ecosystem, there is a set of networked computing where main servers host a program or an application or information and it is accessible to all the connected users through internet. You can access the hosted application using any internet enabled device including desktop or laptop computers, tablets or smartphones.
The cloud-based accounting software is hosted on centralized servers at a data center. Users all over the world simply need to log into their accounts using a web browser and use the application from their PCs or phones.
In fact, Cloud Accounting software is such a great invention that it has led to a rapid adoption in the global accounting industry in the 21st century. The modern-day bookkeeper and businessman can now work on the same system simultaneously irrespective of their location on the planet. Cloud accounting software has eliminated the need for accounting professionals to keep importing their client’s data into their files and subsequently transfer the data from one system to another.
Today, the global accounting software market is flooded with products that offer dozens of high-value features, and all such programs compete to make cloud computing easier for you. However, when you wish to choose the technology that you wish to introduce into your office, you need to have a thorough look at all the features we need from a cloud computing software.
Excel-not so excellent, anymore
Accounting professionals all over the world, use Excel as their tool of preference. However, the program is not only extremely laborious, but it also lacks various features that the accountants need. There are also a number of desktop software variants available in the market which can be installed on the personal computers and used offline. However, such programs lack in various benefits of cloud-based accounting software such as flexibility, security and a number of other features.
Having said that, let’s take a look at all the beneficial features of cloud accounting that make it the perfect solution for small business owners.
Management of Inventory:
Let’s take the instance of those who are into retail business and need to keep an inventory of the products available in stock. For such small business owners, the option to keep track of inventory will be highly beneficial. In advanced accounting software versions, there are features such as raising the alert upon depletion of stock and updating you whenever need for ordering more stock arises.
Generating sales data:
The option to track the products that are being sold is an invaluable feature for retailers and it can make a great impact on your profits and overall sales. For instance, as a store-keeper, it would be a handy feature for you to know which products/brands sell out faster and have a better profit margin compared to other products which occupy the store shelves longer. Such data helps you plan your stocks better and ensure that your best-selling products don’t run out of stock. It will also help you save costs by cutting down expenditure on lesser selling products and maintaining adequate staff levels.
Management of your Contacts:
Contacts are vital for a small and medium business owner, be it your buyers, suppliers, channel partners, service partners, employees or other associates. They are all important elements of your sales ecosystem. Hence using an accounting management software that allows you to automatically sync your contacts and send them relevant push notifications, invoices, purchase orders, and other promotional emails, will be a boon for your business.
An efficient accounting software can analyze your data from the previous month, quarter or year as per your need. You can get a precise forecast of your budgetary estimates. It offers you the ability to generate customized sales reports, profits, losses, investments, staff costs or operational expenditure. Leveraging these reports, your business can sail smoothly on the financial front in the year ahead.
Cloud accounting software makes it easy for you to prepare client estimates. For instance, you might be a landscape developer who received a client query for landscaping 30 acres. After surveying, you can easily feed in data into your cloud computing software and it will help you prepare an itemized estimate for your client. You will have the option to prepare the estimate on your laptop or even the tablet computer and share the same with the client via email. Advanced programs can also turn an estimate into an invoice after the project is completed.
Advanced accounting software programs can integrate payroll feature allowing the users to turn employee timesheets into pay-checks. This allows you to further make salary payments using direct bank transfer or print checks as per your company’s established business practice.
Managing your Taxes:
A good cloud-based accounting software can help you in calculating and collecting the accurate sales tax amount from your customers. Further, it can reduce errors and ensure that you are not penalized for depositing wrong tax amounts. You can also use the software to calculate the income tax and simplifies timely filing of taxes.
Keeping Record of Time:
Human resources are always one of the biggest expenditures for your business. By using an online accounting software, you get the option to track employee timing. This allows you to precisely calculate labor costs or billable time and send the invoice or report to the clients directly if you happen to be a mechanic, doctor, lawyer, landscape developer or any other professional service provider.
Scanning of Receipts:
Cloud-based accounting offers you the great advantage of receipt scanning by simply clicking the photo of a receipt using your smartphone and upload it to your cloud software for filing. Hence, it makes the whole process of receipt management more efficient and speedier.
Management of Bills:
Online accounting software integrates your bank account with your accounting process, and it can also track as well as pay your bills. There are options to set-up auto-payments for things such as rent, utilities bills, and supplier payments. You receive automated payment alerts on your phone and the software automatically updates the expenses in your financial books.
Bank Account Reconciliation:
The highly advanced level of connection security and seamless integration, empowers a sophisticated accounting software to take care of your bank transactions. It can automatically transfer funds received to your bank account on a real-time basis.
It is necessary for you to be on the move in the highly dynamic business ecosystem of the 21st century. Further, it is common for a modern business organization to have remote employees and freelancers working for them. Hence, a mobile accounting software also offers integrated mobile apps.
Apart from the incredible functionalities that Cloud Accounting offers you, it also comes with other benefits that make online accounting your ideal choice.
Advantages of Cloud Accounting Software:
Cutting edge Security:
Being a small business owner, it is natural for you to worry about how your data is stored by the cloud service provider. However, you must know that cloud technology is among the safest data storage options. For instance, let’s say you work on your laptop computer and it gets stolen. Now, thieves or hackers won’t be able to access your data unless they have your online account’s login credentials with them. In Cloud Accounting Software, the data is stored on encrypted remote servers, and not on your hard drive.
In another scenario, a landslide, fire or hurricane might cause destruction of property, but, your business productivity or operations would still remain unaffected as there is no downtime courtesy of the cloud. All of your data is safely tucked away in an off-site server. All you need is to access any computer or smartphone which has an internet connection and you are back to work!
In earlier days if you needed to share your data or files with others, you usually had to give the files to them in a pen drive or send them as email attachments. Such a practice gave complete control of your files to outsiders. However, with cloud technology, you can govern the kind of access you want to offer. You might share read-only links of the files that prevent any scope for misuse of your data. Also, as a service provider, the reputation of cloud companies rests on the data security provided by them.
Accounting made as easy as a Facebook status update
We may not realize it, but we are using cloud technology in almost every aspect of our lives already. Paying utility bills online, internet banking, online shopping or checking the emails/social media on our smartphones, streaming audio and video are just some of the examples of our cloud usage. Hence, it makes perfect sense to use cloud accounting software and enjoy the numerous features and safety aspects of the new technology. It is like using the good old desktop accounting software, but, in a revolutionary new way with the capability to do so much more.
One of the biggest advantages of cloud accounting over conventional desktop-based programs is the anytime access factor. In a conventional setup, you are bound to a particular computer to access your files or perform your tasks. There are no such problems with cloud accounting. All the data and records maintained by you are stored in off-site servers and with secured encryption. You don’t need to download any software on your devices. You can log in from anywhere, anytime using a web browser and an internet connection.
Easy, Economical, Effective
Online accounting reduces a company’s IT infrastructure costs while also proves to be time-saving as it provides continuous and real-time connectivity with your business. On the other hand, desktop-based systems need you to invest in IT hardware, incur maintenance costs and also require a server on which your application software and data will be stored. On top of that, you also need to hire an IT expert to take care of the server as well as your office’s network. All this gradually adds up. In cloud accounting, everything is based in the cloud. You don’t need to maintain a dedicated IT infrastructure and you have the option to access your software no matter where you are. You no longer need to get to the office to get things done as online accounting allows you to make payments, send invoices to customers and do other things on the move. This results in great time efficiency.
Team collaboration and data sharing
A good online accounting software makes it very easy for you to work with colleagues and share data with relevant people. The integration of cloud accounting simplifies the whole process. There is no need to use the good old USB drives or CDs to be couriered to the clients. In fact, with cloud technology your accounting team doesn’t need to indulge in back and forth emailing. Collaborating becomes as simple as logging into your email and social media account.
One of the biggest pluses with cloud-based accounting is the possibility of going paperless at your office. Conventionally, accountants need to deal with a humongous amount of paperwork, data entries and create hard copies. Such a set-up proves to be time-consuming and harmful for the environment as well. All these things coupled with compliances and financial management can eat up a lot of valuable time. On the contrary, web-based accounting systems help you cut down on the paperwork. Invoices are created digitally and emailed to clients, thus, eliminating the cost, effort and time consumed by printing and postage. Your payment processes become paperless and faster. Bills received and receipts can be scanned and saved digitally.
Integration with various other services
An advanced online accounting software can be integrated with various popular applications such as file sharing app Dropbox which allows you to store and share files online. You can also connect them with a number of other software applications.
Accounting is a high-pressure business with hardly any scope for inconsistency, errors or poor quality of service. Cloud accounting makes provision for storing all the files in a single format and at one place. Every user has access to the same data and tools which helps avoid chances of human error or lack of consistency. Further, all the revisions are visible to everyone on real-time basis.
Cloud also gives you the ability to mitigate risks caused by natural disasters or any accidents that can’t be prevented. In cloud-based accounting systems, you are able to recover data very quickly for various emergency situations. According to data available, as many as 20% of cloud accounting users claim that they were able to recover from a disaster scenario in under four hours.
Apart from the natural disasters, there is always a likelihood of a system failure or a power surge and other technical problems impacting the office computers. This puts to risk the valuable data that is stored only on those office computer systems. At times, local data recovery personnel might not be able to retrieve data from the affected computers, leading to the nightmarish situation of you losing your data permanently.
However, as mentioned earlier, all the data stored on cloud remains safe from any such natural or local disasters and can be accessed from any computer or smart device using an internet connection.
Automatic Updates: One of the most persistent headaches for desktop software applications is the constant need to install system updates and software patches. They can cause disruption to work and wastage of precious time apart from costing extra.
However, cloud-based accounting applications have the ability of automatically refreshing and updating themselves. Thus, they don’t need the IT department to go ahead and conduct an organization-wide update.
Gain the edge over competition:
Despite the growing acceptance of cloud accounting, a majority of accounting firms are still operating traditionally. Well, the decision is theirs, but, staying offline and in silos puts such companies at a disadvantage compared to those smart organizations that go for cloud-based accounting software and use it to their advantage. If you are a firm that implements cloud-oriented accounting technology ahead of your competitors, you will have the first mover’s advantage. By the time your rivals wake up and make the switch to cloud, you will already be proficient with cutting-edge tools.