Many business owners struggle with whether to move their accounting to the cloud. Let’s talk about some of the benefits and risks of shifting to cloud accounting, so you can make the best decision for your business.
We'll take a look at some concepts like accessibility, real-time collaboration, data protection, reliability, and analytics offered by the cloud. You'll see a comparison of leading platforms like QuickBooks Online and Xero, along with best practices for successful implementation and the outlook for industry-wide cloud accounting adoption.
The Allure of Cloud Accounting
Cloud accounting promises benefits like improved accessibility, collaboration, and insights. As businesses increasingly adopt remote and distributed workforces, cloud-based systems enable accounting teams to work efficiently and make data-driven decisions from anywhere.
Anywhere Accessibility
Cloud platforms allow remote work and mobile use so accountants and clients can connect from anywhere. With cloud accounting software like QuickBooks Online or Xero, accountants can securely access financial data and collaborate with colleagues and clients remotely via any web-enabled device. Teams can work flexibly across locations without needing to be in the same physical office.
Reliability and Real-Time Collaboration
The cloud enables live multi-user access for better teamwork and responsiveness while ensuring the reliability of accounting software. Rather than siloed desktop software, cloud-based systems allow for real-time collaboration across accounting and finance teams. The cloud also offers robust stability with secure data backups, reduced downtime risks, and automatic software updates.
Advanced Analytics
Built-in BI tools provide actionable insights from financial data. Many cloud platforms integrate business intelligence and reporting features to spot trends and derive meaning from numbers. Instead of periodic reports, real-time dashboards enable data-driven decisions and forecasting. For example, Quickbooks Online lets users customize reports, set financial KPIs, analyze past performance, and predict future outcomes based on intelligent algorithms.
Do the benefits of cloud computing outweigh the risks?
Cloud computing offers many benefits for businesses looking to increase efficiency and reduce costs. However, it also comes with potential risks that must be carefully evaluated.
Cost savings
Migrating to the cloud eliminates large upfront investments in hardware and software licenses. Instead, businesses pay only for the computing resources used each month. This allows for greater financial flexibility and scaling up or down based on needs.
Increased productivity
With data accessible anytime, anywhere, employees can collaborate and work more efficiently using cloud-based tools. This leads to higher productivity and output.
However, as with any new technology, the risks should not be overlooked when considering a move to the cloud:
Security vulnerabilities
While rare, breaches can lead to loss of sensitive data. Businesses must examine a provider's security measures to prevent unauthorized access.
Reliability concerns
Any downtime of cloud services directly impacts operations. Checking for guaranteed uptime in Service Level Agreements is crucial.
Loss of control
With data stored externally, businesses cede some direct control. Clearly outlining responsibilities for backups, maintenance and customizations in contracts is key.
By carefully selecting providers, weighing risks versus benefits, establishing strict contracts, and monitoring performance, businesses can safely leverage the cloud's advantages. For most, the productivity gains and flexibility outweigh the risks. However, each organization should examine their unique needs to determine if a cloud migration makes strategic sense.
What are the risks of cloud accounting?
Adopting cloud-based accounting software can provide many benefits, but also comes with potential risks to consider. A few key risks include:
- Lack of physical control over servers and data: With cloud solutions, businesses lose physical control over servers and data storage. Although vendors aim for maximum uptime and security, outages or breaches can still occur.
- Data transmission outside company infrastructure: With accounting data stored and accessed externally, any transmission of that data introduces some risk of interception or exploitation if proper encryption isn't used.
- Exposure to exploits not directly targeting the company: Even with security measures in place, cloud platforms can contain vulnerabilities that could expose customer data. Vendors must be vigilant in identifying and patching any flaws.
To mitigate these risks, it's important to select established, security-focused vendors that enable encryption of data both in transit and at rest. Conducting thorough due diligence and asking the right questions is key prior to adopting any cloud accounting platform. With proper precautions, businesses can utilize the immense advantages of cloud accounting while minimizing risks.
What are the benefits of moving to cloud accounting?
Transitioning to cloud-based accounting software provides several key benefits for modern businesses. By hosting data and applications on remote servers rather than local devices, cloud platforms offer superior accessibility, collaboration features, automatic updates, and data security.
Ubiquitous Accessibility
With the cloud, authorized users can securely access accounting data from anywhere at any time, via the internet. This enables remote work and real-time collaboration across locations. Cloud platforms also facilitate access from multiple devices, including desktops, laptops, tablets, and smartphones.
Seamless Software Updates
Cloud accounting systems release quick, seamless updates across all users simultaneously. This spares companies the hassles of manually installing patches and maintaining version consistency. Instead of waiting for local updates, businesses can immediately benefit from new features, fixes, and security measures.
Enhanced Data Security
Leading cloud providers implement robust security protocols like encryption, access controls, and data backup/recovery measures far beyond the capabilities of most small businesses. Critical accounting data stored in the cloud may actually prove safer than locally hosted data vulnerable to theft, hardware failure, or disasters.
By moving accounting functions to sophisticated cloud-based software, modern enterprises gain advantages in accessibility, collaboration, operational efficiency and data security - allowing them to focus less on IT maintenance and more on business strategy.
What are the benefits of shifting to cloud?
Migrating accounting systems to the cloud provides numerous benefits for modern businesses. Chief among these is increased agility and flexibility. Cloud platforms allow real-time visibility into financial data and metrics from anywhere, on any device. This enables dynamic decision making to capitalize on emerging opportunities.
Cloud systems also foster faster innovation cycles. New features and updates roll out seamlessly without disruption. This facilitates the rapid development and testing of solutions to shifting business conditions and customer needs. Resources can be provisioned on-demand to support growth too.
With cloud computing, complex infrastructure and storage demands shift away from local systems. This greatly eases the burden on internal IT teams. They can then reallocate efforts towards more strategic initiatives that drive the business forward.
At the same time, cloud platforms help manage rising customer expectations. Real-time financial insights and visibility build trust and confidence. Issues can also be swiftly identified and addressed before escalating.
Cost reduction is another major benefit. Businesses save significantly on upfront capital expenditures and ongoing maintenance fees by adopting cloud-based accounting rather than on-premise solutions. Better yet, cloud platforms deliver immediate results to the bottom line.
In summary, migrating accounting to the cloud simplifies IT, reduces costs, provides real-time financial visibility, increases agility and innovation, and enables businesses to shift focus towards delivering more strategic value.
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Evaluating Potential Risks
While promising, shifting accounting systems to the cloud introduces new hazards around security, reliability, and more.
Data Protection Vulnerabilities
Accounting data now sits on external servers, posing new threats of leaks and cyberattacks. Businesses should carefully evaluate the security protocols and access controls cloud accounting providers have in place. Multi-factor authentication, role-based permissions, audit logging, and data encryption are key protections to require. It's also wise to inquire about the provider's incident response plan in case of a breach.
Though risks exist, leading cloud accounting platforms invest heavily in security. For example, QuickBooks Online adheres to defense-in-depth principles by layering controls across infrastructure, applications, and operations. Intuit also undergoes frequent auditing and maintains robust disaster recovery systems. Still, due diligence around security is vital when shifting critical accounting data to the cloud.
Integration and Customization Limitations
Pre-configured cloud solutions offer less flexibility to tailor systems to unique needs. Businesses rely heavily on accounting data flowing between platforms like CRMs, inventory software, bank feeds, and more. Cloud accounting packages have made strides with open APIs and integrations, but on-premise software still tends to provide more customization options.
The key is strategically defining integration requirements during the vetting process. Cloud accounting leaders like Sage Intacct allow for some modification while still maintaining regulatory compliance and automatic upgrades. Platforms like NetSuite let you tailor forms, fields, screens and workflows through their SuiteCloud Platform. While cloud systems are more rigid, the right provider can accommodate an ample degree of customization and interoperability.
Assessing Reliability of Cloud Accounting Software
Evaluating the dependability and uptime of cloud-based accounting systems helps mitigate productivity risks. Trusted providers have mature business continuity programs, featuring geographically dispersed data centers, failover redundancies, and 24/7 monitoring. But outages still occasionally occur, so understanding an application's historical uptime record offers valuable insight.
According to NetSuite, their cloud ERP platform successfully processes over 5 billion transactions per year with an average uptime of 99.99%. QuickBooks Online advertises 99.97% uptime along with automated daily database backups. Still, organizations should reference historical metrics and conduct risk analyses when migrating core financial data to the cloud. Using secondary systems and gradual phase-in strategies further hedge reliability risks. With proper evaluation and planning, organizations can feel confident entrusting essential accounting functions to leading cloud platforms.
Advantages of Cloud Accounting Packages
Beyond the obvious, cloud accounting packages offer a range of advantages from cost savings to scalability, empowering businesses of all sizes.
Cost-Effective Scaling Solutions
Cloud accounting software provides an affordable way for companies to scale their finance and accounting operations. By leveraging the cloud, businesses only pay for the computing resources they use instead of investing in expensive on-premise infrastructure and software licenses. This allows even small companies to access enterprise-grade accounting systems that can grow alongside their evolving needs.
For example, a 10-person startup could begin using a basic online accounting package with core functionality like invoicing and expense tracking. As they expand to 50+ employees over several years, more advanced capabilities like inventory and payroll management can be activated seamlessly without migrating data or platforms. The business enjoys enterprise-level accounting tools scaled to their budget.
The cloud accounting model empowers lean teams to punch above their weight class in terms of systems and functionality. Resources are available on-demand instead of sitting idle. This scalability and flexibility is extremely valuable for growth-focused companies.
Seamless Updates and Innovations
Another major advantage of cloud accounting platforms is automatic delivery of the latest features and updates. On-premise software requires manual upgrading which demands time and money for implementation services. With cloud packages, new capabilities are rolled out continuously by the provider for all customers at no additional cost.
For instance, advanced AI integrations for automating data entry and analytics may be added with no action required by the customer. Or expanded international tax compliance features could be activated simply within the accounting software settings. This ensures companies can leverage cutting-edge innovations to streamline operations without undergoing disruptive system migrations.
The regular infusion of new innovations also creates long-term value. Businesses can rely on cloud platforms to continually expand scope and depth in step with modern accounting needs and standards. Rather than facing a major overhaul every 3-5 years to keep pace, the accounting system evolves steadily thanks to the cloud delivery model.
This advantage keeps financial data, workflows, and reporting capabilities up-to-date automatically regardless of the provider’s release cycles. Teams are empowered to focus less on accounting upkeep and more on strategic initiatives that drive the bottom line.
Assessing Leading Cloud Accounting Platforms
When moving accounting functions to the cloud, it's important to carefully evaluate potential platforms based on key criteria such as security, reliability, integrations, and ease of use. As with any software adoption, the choice should align with your business requirements and priorities.
QuickBooks Online
QuickBooks Online (QBO) stands out as an exceptional accounting software-as-a-service (SaaS) solution for small and mid-sized businesses. With robust core accounting tools, hundreds of integrations, and strong mobility, QBO enables streamlined financial operations.
Specifically, QBO provides:
- Secure cloud data storage and backup: QBO leverages enterprise-grade security like 256-bit SSL encryption to protect sensitive financial information. Automated daily backups provide an extra safeguard.
- Reliable uptime: With guaranteed 99.9% uptime, you can depend on 24/7 access without unexpected downtime disrupting productivity.
- Seamless integrations: QBO connects with hundreds of business apps through open APIs to unite tools for billing, payments, payroll, POS systems, and more.
- User-friendly interface: The intuitive dashboard allows customized views and easy navigation to streamline most accounting needs. Built-in wizards guide users through advanced tasks.
- Robust mobile apps: Android and iOS apps sync across devices for accounting on the go. Users can create invoices, record expenses, manage cash flow, and more from smartphones.
With strong security, reliability, and usability combined with widespread connectivity, QuickBooks Online delivers exceptional modern accounting capabilities. It remains a top choice for growing service businesses and product companies alike.
Xero
As an accounting platform centered around small business needs, Xero makes financial tracking simple through beautiful dashboards and reporting. Alongside robust accounting tools, it provides integrated payroll, inventory management, and other operational features.
Key advantages include:
- User-friendly dashboards: Customizable at-a-glance metrics enable easy monitoring of cash flow, account reconciliation, budget vs. actuals, and common financial KPIs.
- Seamless payroll: Built-in payroll streamlines running payrolls across states, handling taxes, and paying employees by direct deposit.
- Inventory and order management: Advanced tools allow monitoring stock levels and sales patterns to optimize supply chains.
- 700+ app integrations: Xero connects with various business apps for payments, POS systems, CRM software, ecommerce platforms, and more.
- Accountant collaboration: A dedicated accountant version enables collaboration with financial advisors for efficient compliance and advisory.
With the needs of small retailers, product companies, agencies, nonprofits and other service firms in mind, Xero simplifies accounting operations alongside value-added business management capabilities.
Sage Accounting
For larger enterprises needing scalable and customizable accounting software, Sage Intacct stands out for core financials and industry-specific capabilities. With robust accounting tools tailored to complex business requirements, it enables unified visibility and efficient financial operations.
Key strengths include:
- Scalability: The cloud-based platform effortlessly scales from small teams up to enterprise-level accounting needs supporting hundreds of users.
- Configurability: Sage Intacct allows customized accounting practices, reports, and workflows aligned to your finance procedures and standards.
- Industry versions: Specialized editions provide tailored capabilities for software firms, wholesale distributors, manufacturing, and project-centered industries.
- Global finance: Advanced features handle multi-entity, multi-currency needs for global businesses including consolidated financial reporting.
- Open API: Connect systems like CRM, POS, payroll, and more for organization-wide data synergy leveraging the open platform.
For growth-stage and enterprise organizations seeking a finance platform to scale with evolving needs, Sage Intacct warrants strong consideration. Its robust accounting engine, enterprise-grade capabilities, and industry-specific features enable unified and efficient financial operations.
Best Practices for Successful Implementation
Properly setting up and using cloud accounting systems is key to realizing the full benefits while minimizing disruptions.
Data Migration Strategy
When transitioning to cloud-based accounting software, having a clear data migration plan is essential to ensure a smooth onboarding process. Here are some best practices to keep in mind:
- Carefully map your existing data into the new system. Identify any gaps, inconsistencies, or redundancies ahead of time.
- Establish a migration timeline and test plan. Set realistic deadlines and allow adequate quality assurance testing.
- Prioritize mission-critical data first. Focus on migrating recent and active records before historical data.
- Validate migrated data for accuracy and completeness. Spot check for any issues post-migration.
- Maintain existing system access during transition. Keep old accounting records available until satisfied with new system.
Following a structured data migration approach reduces business disruptions when onboarding new accounting platforms. Investing effort upfront to properly map and selectively migrate clean, consistent data ensures continuity for accounting and reporting needs.
User Training for Maximized Advantages
Equipping teams with the skills to fully leverage cloud accounting software is vital to maximize the return on investment. Here are some tips:
- Schedule role-based training sessions tailored to different users' needs - AP clerks, accountants, finance heads, etc.
- Include hands-on exercises for frequently used tasks to build confidence. Provide access to test environments.
- Offer quick reference guides, FAQs and "cheat sheets" for key features and shortcuts. Make support easily accessible.
- Plan refresher trainings on advanced functionalities or new features during upgrades.
- Solicit user feedback regularly to identify knowledge gaps or system adoption issues.
Dedicated training and ongoing learning opportunities help ingrain new habits and workflows. When users understand how to optimally navigate the system, organizations can fully benefit from automated processes and analytics.
Ongoing Support Resources
Even after targeted training programs, users may need assistance troubleshooting issues over time. Some helpful support strategies include:
- Provide self-help user documentation like knowledge bases, user forums, and online courses.
- Develop an internal help ticketing system for simple "how-to" queries.
- Offer access to email, call or chat support for more complex technical bug fixes or configuration guidance.
- Schedule periodic maintenance reviews to optimize system setup and workflows.
- Monitor support requests closely to identify recurring issues or training needs proactively.
By continually investing in external expertise and internal competencies, finance teams can resolve transitional challenges quickly. This sustains user adoption and ensures organizations extract the most value from their accounting software solution.
The Outlook for Cloud Accounting Adoption
While risks exist, the operational efficiencies and insights of cloud-based accounting position it as the likely future default as reliability and advantages improve.
Overcoming Early Hurdles
In the early days of cloud accounting solutions, connectivity issues and platform immaturity led to frustrating disruptions for many adopters. As technology progresses, platforms become more robust, infrastructure expands, and best practices develop around redundancy and failover systems, these pain points have significantly receded. Most vendors now provide over 99% uptime guarantees along with streamlined data recovery protocols. While failures still occur sporadically, the frequency and impact has diminished to be on par with local systems for most users. As reliability continues to improve, concerns around connectivity and maturity will likely dissipate for all but the most risk-averse organizations.
The Path Towards Industry-Wide Acceptance
With hurdles lowering, the advantages of cloud accounting become very compelling for most businesses. Real-time multi-location visibility, automated reconciliations, and embedded analytics provide operational efficiencies and insights difficult to achieve otherwise. As technology and best practices advance, platform costs lower and integration expands. The network effect then takes over as accounting packages interoperate with each other and a wider array of complementary services. This makes cloud solutions significantly more versatile compared to on-premise systems. Ubiquitous high-speed internet access also enables new deployment models like bring-your-own-device (BYOD) cloud accounting. As risks fall, efficiencies rise, and versatility expands for cloud accounting systems, widespread adoption is soon to follow across the industry.
