What is Cloud Accounting

What is cloud accounting? Cloud accounting is a great way to manage your small business finances. Using cloud-based software, you can access your accounts from any device with an Internet connection. This makes it easy to keep track of your money no matter where you are.

Plus, you can use cloud accounting software to collaborate with your accountant or bookkeeper, giving you the best advice for managing your finances. Cloud accounting is the right choice if you’re looking for an efficient and secure way to manage your small business finances.

All your data is held on a remote server to which you and anyone you choose can access. You will need to have access to the internet and log in to the software to access your financial data.

Cloud accounting software typically includes invoicing, expense tracking, and bookkeeping features. In addition, many cloud accounting software platforms offer integrations with other business tools, such as inventory and project management software.

As a result, cloud accounting software can save businesses time and money by streamlining their accounting process.

There are still a few traditional accounting software products downloaded from the internet to use remotely. The best accounting software is cloud-based and no longer provides a desktop option. The only way to obtain them is second-hand using places like eBay.

Best Cloud Accounting Software

Here is a quick rundown of the best cloud accounting providers:

• QuickBooks – Award-winning best all-around, includes additional features.
• Zoho Books – Great for small businesses; it has a free version.
• FreshBooks – Great for Freelancers.
• Xero – Recommended by Bookkeepers as an excellent all-around package.
• Crunch – Has accountant backup support, ideal if starting bookkeeping.

What’s the Difference between Cloud Accounting Solutions and Traditional Accounting Software

Cloud accounting solutions are typically accessed online by connecting to host servers, while traditional accounting software is downloaded and used remotely on a laptop or desktop computer.

Cloud-based accounting software is typically more affordable at the start and more accessible than traditional accounting software, and it often includes features such as invoicing, expense tracking, and bookkeeping. In addition, many cloud-based accounting software platforms offer integrations with other business tools,

Cloud accounting is more secure. Desktop accounting software can be vulnerable to data loss if the computer crashes or is infected with malware. Cloud-based applications are typically hosted on servers with robust security measures to protect data.

Cloud-Based Software

Cloud-based software is software that is accessed through the internet. This software is hosted on a remote server, and users can access it from any computer or device with an internet connection.

More and more business solutions offer cloud solutions, including Google Sheets, Microsoft, email, storage, media players and other valuable business resources.

Please have a look at our most popular cloud accounting reviews. Most of these companies offer a free trial period, so you can try before you commit.

Advantages and Disadvantages of Cloud-Based Accounting Software

Here are some advantages and disadvantages of running the cloud over a desktop accounting run on your computer.

What is Cloud Accounting? Benefits

There are many benefits of using a cloud accounting system; these are a few of the main ones:

Security

A cloud accounting system is a secure way to store and manage financial information. Unlike desktop software, which is installed on a single computer, cloud-based software is hosted on a remote server. Data is less likely to be lost or corrupted due to hardware failure.

In addition, cloud accounting software is typically security-enhanced, with features like password protection and data encryption that help to protect sensitive information. Many cloud accounting providers offer access control features that allow users to restrict who can view or edit their data. As a result, cloud accounting software provides a high level of security for businesses and their financial data.

Access Accounts from Anywhere

One of the main features of online accounting software is accessing it from anywhere, 24/7, with the internet. It is beneficial now with more employees and business owners working from remote locations.

The best accounting software for small businesses provides an app for a mobile device through Android and ios. The features that might be included in apps are:

• Banking and connecting to bank feeds
• Reporting of financial information
• Mileage tracking
• Expense tracking
• An overview of the income and expenses
• Raise invoices on the go and email them to the customer

Some mobile apps have the same features as online accounting software, meaning they can complete all the tasks.

Real-Time Information

A significant advantage is that several employees can work on the accounts simultaneously and update them in real time. It is beneficial for businesses with multiple locations or employees who travel frequently.

Also, keeping financial data up-to-date provides financial management with up-to-date financial information for producing reports. This is highly beneficial as it can help save time and money. Reports can be generated much faster and easier using cloud accounting software. 

Online Banking Feed

One of the benefits of using cloud-based accounting software is that it can connect to your internet banking account and import transactions automatically. If you have several bank accounts, a feed is set up for each one.

This can save you time, as you won’t have to complete manual data entry of your transactions into the software. The software will automatically categorise the transactions to see where your money is being spent.

Making Tax Digital

HMRC in the United Kingdom is introducing Making Tax Digital for business.

Making Tax Digital is the move to get digital records and submit them via software. The ultimate goal of MTD is to make the tax system more efficient and reduce the paperwork that small businesses have to deal with. In the long run, this should save businesses time and money.

MTD for VAT started in 2019 for businesses registered for VAT with a turnover of more than £85,000.

The next stage is introducing it to small companies and self-assessment tax returns; an excellent online accounting system will do everything for you.

Payment Processing

Many cloud accounting solutions can set up payment processing on sales invoices issued to customers. This can mean that invoices get paid faster, offering an easy payment solution. Some of the solutions include Paypal, Stripe and GoCardless.

Sharing Information

Most providers allow more than one user. The plan subscribed to will depend on the number of users you can invite.

Nearly all cloud accounting solutions allow you to invite a bookkeeper or accountant. It is beneficial at year-end and in producing the company accounts. You can still carry on with the work while they are making any changes for the previous year.

As a bookkeeper, I sometimes receive questions on how to complete a task. I can log in to their software and explain what they need to do step by step.

Low start-up costs

Although most providers have an online monthly subscription, some are free, while others start from £5 per month. The subscription will automatically renew each month or year.

Most offer a free trial, so you can see if it is suitable for your use.

The costs will depend on the business’s features like bank feeds, stock management, reporting, payroll, and tracking sales invoices.

With a traditional package, the cost could start in hundreds of pounds.

Cancel at Anytime

As with most business cloud systems, you can cancel at any time.

There might be several reasons for cancellation like changing software or the business has ceased trading.

Once the subscription is cancelled, you might continue to access the data or the data removed from the system. When you cancel a subscription, ensure that all the reports required are downloaded.

Cloud-Based Accounting Software Updates

One of the significant advantages is that you will know the software will always be up to date.

Most business cloud providers are constantly updating the software either for improvements or for rules like making tax digital. You will know that users use the most up-to-date software every time they log in.

Online Support

Cloud-based providers have different online support. Some will offer online chat, while others have email or telephone.

Some newer providers, like Crunch, even offer online accountant support. It is ideal for a small business needing help with both its accounting and software.

Reduce Accountant’s or Bookkeeper’s Fees

By keeping the financial data up to date, you may reduce the fees of a bookkeeper or accountant.

Completing your account will help you to understand the figures and keep on top of the cash flow and financial reports.

Keep Track of Customers

Most services allow you to invoice customers from any device, enabling customers to get invoices quicker and hopefully pay them fast.

They also keep track of customers’ debts and can send out automatic reminders if set up.

Scan Bills

Do you want to try and reduce paperwork? Most accounting packages include features to email pdf’s jpeg, and other receipts directly to the account.

There are even add-ons to scan or photo the receipt, and the software will extract the information and provide it as accounting data. A couple of suggestions are Dext and AutoEntry.

Upgrade the Software as Business Grows

One advantage of cloud accounting software is that you can upgrade the package if the business grows or changes.

When choosing accounting software, check the pricing plans and look for any features you might need. It might include stock management, payroll for new staff, project tracking or several users.

Software Guides

Most cloud accounting for small businesses includes online guides, help and videos.

If you are looking for something, they usually include a question mark that you can press to get further information. Some also have links to guides on the page.

Easily Integrate with other Solutions

Zoho Books has 40 different solutions for small businesses that integrate into the accounting software.

Xero has lots of partners that have built additional apps for extra services.

Set up User Roles

If you are worried about other staff seeing the accounts, you can set the primary user as an admin and restrict the other users to different tasks.

An example might include setting just the sales ledger so that they can raise sales invoices.

Fire or natural disaster

If the business is affected by a fire or natural disaster, you can still access the accounting software and data as long as you have an internet connection.

Cloud Accounting Disadvantages

The monthly Fee Might be Expensive

Although the monthly subscription might start cheap, it can soon get expensive if you need to add additional features or invite new users.

Sharing Information with the Wrong People

If, as a small business, you invite lots of users to log in, you might share the wrong information with people if you have not set the user controls.

It is always best to restrict access where you can.

Wanting to Keep Records in House

More significant business can include a developer team and their servers. It allows them to keep all their information within the company.

Even some smaller businesses prefer not to use cloud accounting for their records and use a desktop option.

Good Internet Access is Required

One problem some people face is slow internet access. If you have slow access, completing the accounts might take a long time.

If this is the case, it is worth looking at some of the traditional options for the desktop versions.

What is Cloud Accounting? – Choosing the right package

There are so many different options for online accounting software that finding the right one may be a minefield. Start by looking at what each one has to offer and the prices. Most have a free trial, so it is worth looking in detail at how they work and how easy they are.

To help, use our free accounting software comparison tool. It lists all the top software, and you can compare the features and prices of each one.

If unsure, speak to other people, including accountants and business owners.

Check out our guide on the best accounting software for small businesses. It includes the best free and paid options.

Here are a few options available.

Conclusion to What is Cloud Accounting?

Cloud accounting for small businesses is when your accounts are held remotely by a third party.

Cloud accounting has many benefits, including real-time data, online support, bank feeds, mobile apps, payroll, MTD for VAT and ITSA and sharing data.

Using cloud-based accounting software is a great way to improve financial management. It provides up-to-date financial information that can be used to generate reports quickly and easily. 

Return from what is cloud accounting? To the business accounting basics page.