What Is Cloud-Based Accounting?
With cloud accounting, you outsource to a data center that stores accounting software and your financial information on their own servers. That way, you don’t have to buy extra computer equipment for your business. It’s also easy for authorized users to access the tools from anywhere, on any device.
Cloud-Based Accounting Systems
Cloud accounting software offers a variety of product features. Take the time to figure out what you need from a system before you go shopping. Keep in mind that cloud-based accounting systems can also manage many routine accounting tasks, freeing up your time for the fun parts of running a business. Here’s a list of key features to look for:
1. Flexibility
Invest in cloud-based accounting software that not only meets your needs today but tomorrow, next year, and ten years from now. The ideal software package is flexible enough that you can configure it to suit your bookkeeping methods and scale up as your business grows. With cloud accounting, growth doesn’t require buying added computers or servers.
2. Billing
Having lots of customers is good, but staying on top of the billing takes work. An automated, cloud-based accounting software tool can deliver an invoice right after a sale, authorize a project as soon as you receive payment, or set up an automated recurring billing plan for regular customers. Cloud-based accounting can also update accounts receivable once a bill’s been paid.
3. Accounts Payable
Tracking your accounts payable becomes harder the more your company grows. You have more vendors, more expenses, more bills. You have to enter them in accounts payable, update the ledger as bills get paid, and remember to pay vendors on time. If more than one person at your company handles payments, it’s even easier to lose track.
Cloud accounting makes the process simpler. You can update your accounts anywhere, any time, whenever it’s most convenient. Whether you’re closing a deal out of town or paying off a bill while on the road, you can log into the system and enter the data. An integrated cloud-accounting system can even update the ledger automatically when you use your business credit card.
Learn more about how you can streamline your vendor payment processes.
4. Inventory And Order Management
Cloud-based accounting systems can streamline your sales and inventory process. If a salesperson closes a deal, they can create a sales order on the phone, reserve inventory for the order, create a purchase order for replacement inventory, and set up packing and shipping details.
Cloud accounting makes it simple to track inventory levels even if you have multiple warehouses storing your product. You can check how much inventory you have on hand, where it is, and how long it will take to bring in more.
5. General Ledger
General ledger accounts—cash, assets, accounts receivable, and depreciation—are the basis for all the financial analysis or projections you make. Even with good accounting workflows, keeping the figures up to date requires time and thought you could spend elsewhere.
Cloud solutions for accounting can reduce the work significantly, automatically adjusting multiple accounts when you enter data for a financial transaction. If your company does business outside the U.S., good software can handle all the currency conversions from pesos, yen, pounds, or francs, to dollars and back.
6. Financial Reports
The best cloud-accounting services generate financial reports automatically. If, say, you’re meeting with an investor who wants to see your income statement for the current quarter, you can log in from your phone and generate a real-time statement with a button click. Whether you want information on cash flow, revenue, or short-term liabilities, it’s easy to get it with cloud accounting.
Learn more about the best financial dashboards and reports:
- Reduce manual data collection and entry
- Have access to real-time dashboards and reports
- Create a better customer experience
7. Project Accounting
If your company has multiple projects running, that can complicate the accounting in a big way. You and the project managers need to track expenses, revenue projections, and other details in a separate budget for each project. You also need to track them as part of your overall budget.
The automatic features of cloud-based accounting software simplify project budgeting. When you enter expenses or revenue in the system it can simultaneously record them in the project ledger and in the general ledger. When you close out the project, the software reconciles the two ledgers with less effort than with a human accountant handling the closing.
Read on for everything you need to know about Mastering Project Accounting.
8. Tax Accounting
Tax is another aspect of business that gets more complicated the bigger you grow. For example, if you expand a retail operation into multiple sales tax districts, sales at each store will involve a different sales tax calculation. It’s a lot easier to have the software crunch the numbers than to track and figure them yourself.
9. Security
The 21st century has been full of companies suffering expense, embarrassment, and lawsuits due to someone hacking confidential information. When you compare cloud-based accounting systems, ask about the quality of their cybersecurity. You need a service that can keep your data safe.
Cloud-Accounting Advantages
Cloud-based accounting services aren’t the only way to handle your bookkeeping. Installing accounting software on your computer is one option for small businesses, but it doesn’t reduce the workload the way automated cloud services do.
Going with the cloud offers considerable benefits. If you install accounting software on your company’s own computers, you or someone on your team will have to apply security patches and see that everything gets backed up. You’ll need to pay for added licenses as you install the software on more computers. You may eventually need to buy servers to hold all your data.
With cloud accounting solutions, the hosting company handles patching, updating, and the data back-up process. There’s no licensing because you don’t have software copies on hand. Nor do you have to buy added servers—that’s the cloud company’s responsibility.
1. Remote Access
Telecommuting has become a fact of 2020s life. Thanks to Zoom, Slack and similar tools, you can staff your company with employees scattered from New York to Baton Rouge to Seattle. With a cloud-accounting system, authorized employees can enter bills or submit expense vouchers without having to contact someone in your office.
Even if employees come into the office, there’s no guarantee they’ll be there when they need to enter a payment or an expense. Remote access also lessens the burden on you, as you don’t have to process everyone’s paperwork.
2. Cybersecurity
If you feel keeping everything in-house offers better cybersecurity than the cloud, you’re wrong. If you keep your ledgers on a computer in your keypad-locked office, someone might still hack the system or get the passwords by phishing. A disgruntled employee might get into the office and access the data physically.
Good cloud-based accounting systems provide solid security including data encryption and real-time monitoring for hacking attempts. Because the data is centralized, access is controlled from the start. Having a cloud-based tool handle security creates less work and possibly less expense than your company setting up digital and physical security for the accounts.
Storing your data offsite increases cybersecurity against other threats like fire, flooding, accidental damage, and theft could all destroy your computers or leave you unable to reach them. With cloud computing, you don’t have to worry about maintaining a regular data back-up, or how to protect your files when a hurricane is looming.
Here’s a guide to Accounting Cybersecurity.
3. Scale
The first year or so of your business, you may be able to record all your transactions in the ledgers without too much effort. A few years of growth later, you may be wondering whether you should set up an accounting department and a couple of servers because income and expense items are coming in faster than you can record them.
Cloud-based accounting systems scale up easily. You can set up for multiple employees or managers to access the system without buying copies of the software for each one. You don’t have to worry about added computer power or servers because your cloud-based accounting service handles that.
4. Automation
Cloud-based accounting software automates financial functions easily. Say your vendor just submitted an invoice. Scan it in, and the software will make the appropriate entry in accounts payable, project accounting, and wherever else is necessary.
Some software connects with your bank or credit card company and records purchases as soon as you make them. The more you automate, the less chance human error will throw off your accounts.
Cloud Vs. Integration: What’s The Difference?
The cloud is about keeping your data somewhere other than your physical premises. Integration is about tying data together—ledgers, stock counts, inventory orders, bill paying, and requests for payment.
Keeping sales data in the cloud is great. Having your cloud accounting integrated with your bank and credit cards to update data instantly takes your processes to another level. The best cloud solutions for accounting do both. Better still is a solution offering sales and accounting options built natively on the same platform—as opposed to those on different platforms requiring the purchase of a sync tool to track and update data in both systems.
Setting Up Cloud Accounting Services
The first step to switching to cloud-based accounting software is to research the many options out there. The most important criteria is one that delivers on your specific business needs. Whether your biggest concern is cybersecurity or saving time spent on bookkeeping or connecting your front and back office, keep your needs in mind when you compare services.
Talk to your team, too, and find out what their concerns and needs are. You need buy-in and commitment to get the best results.
The more of your operations you can integrate into the cloud, the greater the efficiency. Accounting Seed has a huge advantage here because it’s native to the Salesforce Platform. If you’re using Salesforce for CRM, Accounting Seedintegrates seamlessly and connects with other Salesforce apps.
Ask For A Demo
If you want to see what a powerful game-changer Accounting Seed can be, contact us today and ask for a demo. We’re happy to showcase the power of connected, automated, cloud-based accounting systems
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