Understanding what is cloud accounting and its benefits for businesses

Software as a Service (SaaS) is the most common model for cloud accounting. This model operates on a subscription basis, where you can access the accounting software via web browsers. Because of this setup, you can perform various accounting tasks without installing the software or requiring additional hardware and resources.

Additionally, the service provider manages all updates, security, and maintenance, so you don't need to do them yourself.

Public cloud accounting hosts an organisation's system in third-party servers you'll share with other organisations and users. Through this setup, you can access accounting features and perform tasks without having the cost of investing and maintaining physical servers.

This model suits organisations with standard needs at an affordable cost. The downside is that it's relatively less customisable and secure than private cloud accounting. You have limited control over the server since this model is third-party hosted for multiple users.

Private cloud accounting provides a dedicated setup exclusively for one organisation. With this model, you'll have more control over your accounting system, which means enhanced security and customisation options. This setup comes with a premium price for the control, security, and customisation benefits you'll receive.

This cloud software option suits a large industry or enterprise with specific organisational demands that need custom solutions.

Hybrid cloud accounting includes features of public and private clouds to allow businesses to balance control, security, and customisation. An example of this setup would be storing sensitive data in the private cloud while leveraging the public cloud's resources to perform routine tasks.

Cloud accounting can help you automate most of the recurring tasks in the department.

For example, most cloud accounting software automatically generates and sends invoices based on schedules or contract terms. With cloud accounting, you can also schedule automatic payments to vendors or overdue reminders to your customers. Automating tasks reduces the overall workload and helps the department focus on strategic decision-making instead.

The standout feature of cloud accounting software is its real-time data access. Businesses can now quickly generate updated financial reports on their performance anytime and anywhere. This helps organisational decision-makers make timely and informed decisions.

Cloud accounting allows multiple users to access the system simultaneously, even from different locations. This setup will enable you to collaborate without manually sharing data with your colleagues. This feature also allows businesses to establish a remote setup in their finance department.

Most cloud accounting operates on a subscription-based model, which means it doesn't require expensive hardware. This setup also doesn't need the business to do a lot of maintenance since the service provider is mainly responsible for it.

As such, the upfront cost of setting up an accounting system and upgrading it is less than that of traditional accounting.

Cloud accounting software often has robust security measures to prevent unauthorised access and data loss. These features include encryption, multi-factor authentication, and regular backups.

Cloud accounting platforms include built-in tools and features to help businesses comply with tax regulations and financial standards. They also have automatic updates, so businesses stay aligned with legal and tax requirements.

Finally, cloud accounting has multi-currency support that facilitates accurate conversions for businesses operating globally. This feature simplifies international transaction recording and reporting.

Artificial Intelligence (AI) and machine learning are improving cloud accounting through predictive analytics.

Predictive analytics involves analysing historical financial data to spot trends or forecast financial activities. This process helps businesses anticipate future outcomes and make informed decisions. AI and machine learning make the process more accurate and easier to implement within the organisation.

Integrating blockchain technology can enhance transparency and prevent fraud.

Blockchain's decentralised ledger records transactions across various devices or users instead of just one entity. Since transactions are recorded in multiple accounts or "blocks," tampering with the recorded information is very difficult, meaning Accountants, Auditors, and users can see the data transparently.

However, blockchain technology in accounting is still a relatively new concept in the development phase, but when integrated successfully, it will be a game-changer in recording and verifying transactions.

More and more cloud accounting platforms focus on improving and personalising user experience. One way to do this is by using APIs.

Application Programming Interfaces (APIs) allow businesses to customise their cloud accounting systems or integrate with other tools. With APIs, businesses and organisations can customise their accounting systems according to their needs and preferences.

Cloud accounting interfaces have also become more intuitive, simplified, and personalised. These allow cloud accounting software to become accessible even to those with little accounting or IT background.

Businesses are concerned about the security of cloud computing accounting software. Storing sensitive information in the cloud raises concerns about potential cyber attacks, unauthorised access, and even data breaches.

Luckily, cloud accounting service providers have implemented security protocols to minimise these risks. These include end-to-end encryption, multi-factor authentication, and regular security audits.

Modernising accounting systems using cloud accounting solutions can be challenging, especially for those with outdated systems. However, most cloud accounting providers offer support to facilitate the migration process. These support types can range from automatic migration tools to step-by-step guides and even a technical support team to simplify and smooth the process.

Implementing cloud accounting within your organisation requires additional skills and knowledge that you and your team must learn.

Cloud technology can be a stumbling block for many, and without updating those responsible within your team, they will find it challenging to adapt. This could result in your organisation stagnating and staying with an outdated accounting system. The best way to overcome this is to invest in training their finance department to use cloud accounting platforms.

As a team member of the department, you can also take the initiative and upskill to learn how to navigate these cloud accounting software products. If you want to master accounting for cloud-based systems, you can learn them via recognised AAT training providers like e-Careers.

Financial regulations and legislation vary by region, industry, and type of financial transactions. These can raise compliance concerns for businesses transitioning to cloud accounting. As enterprises migrate their systems to the cloud, their cloud accounting platform must also adhere to these regulations.

Most accounting platforms are automatically updated to keep up with regulatory changes, helping organisations stay compliant. Cloud accounting also includes automated tax calculations, alerts, and compliant financial report templates to reduce risks and penalties from non-compliance issues.

Cloud-based accounting platforms rely on connecting to the cloud to access, process, and manage financial records. As such, any internet connection issues can easily disrupt organisational workflows.

Choose a cloud accounting provider with offline access or data caching features to mitigate this risk. Both allow users to continue with their tasks during internet downtime. Alternatively, you can opt for a better internet provider with a stable and reliable connection to reduce these disruptions altogether.

In the professional services industry, cloud accounting is essential for tracking time, billing, and client accounts.

For example, you can integrate the accounting cloud software with your project management platforms to track and bill the hours you've worked for the client. You can also incorporate cloud accounting in your Customer Relationship Management (CRM) software to automate tasks requiring manual effort.

Cloud accounting can help the construction industry track costs and manage finances across multiple projects.

Most accounting cloud solutions have job costing features to allocate and monitor costs such as labour, materials, equipment, and even indirect costs for specific projects. They also include budgeting features to manage project finances. Both features result in more accurate cost tracking and proper resource allocation.

Healthcare providers handle large volumes of financial transactions, including patient billings, vendor payments, and insurance claims. Cloud accounting simplifies revenue cycle management by automating invoicing, tracking payments, and integrating with electronic health records (EHR) systems.

Additionally, cloud-based solutions protect sensitive patient financial data through advanced encryption measures.

The logistics industry requires accurate financial tracking for fleet management, fuel costs, and supplier payments. Cloud accounting enables real-time cost tracking, automates shipments' invoicing, and integrates with logistics management software for seamless financial oversight. This helps logistics companies become efficient, transparent, and error-free.