Just like the transition from the horse-drawn carriage to the V8 engine, or film cameras to digital, switching from traditional accounting to cloud accounting might take some getting used to. But when you get a load of just how much easier and more efficient cloud accounting is for your business, you might just come to wonder why you hadn’t made the switch sooner.
But just what is Cloud Accounting?
Very simply, “cloud accounting” means using accounting software that runs in the cloud, or the Internet. All accounting tasks, such as bookkeeping, invoicing, payroll processing or tax computation are all done online, with all the data stored in the cloud.
This, in turn, means that these tasks may be performed on any device, anywhere, because there is no need to install any software or save any files on your device or desktop computer.
Cloud service providers usually charge according to usage, in much the same way the power company charges you for the electricity you use at home. Most cloud accounting software is paid for via monthly subscription.
The most popular cloud accounting software in Singapore includes Xero, QuickBooks, and MYOB LiveAccounts. Other examples include Easy Books for Mac and IOS, Zoho Books, FreshBooks, FreeAgent, and Sage One.
So how does Cloud Accounting make running a business easier?
1) Dashboards. You’ll have easy, at-a-glance access to essential, real-time financial data such as cash flow (who has, and who hasn’t paid), how much money you have in the bank, and how much you owe (e.g. salary, suppliers).
2) Tracking. Keeping track of all your transactions such as banking, credit card use and making or receiving online payments will be a breeze.
3) Ease of use. No more struggling with Microsoft Excel spreadsheets or complicated accounting software.
4) Direct to your bank. Cloud accounting connects straight to your bank, which means you spend little or no time on manual data entry.
5) Management ease. You’ll find it much easier to manage your purchase orders, bills and supplier payments, as well as your inventory, which will be updated progressively as you go about your day-to-day operations.
6) Streamlined payroll processing. This means your staff can submit things like timesheets and expense online, and it will be easier for them to receive their payslips, which are required by Singapore law.
7)Customisable reports. Cloud accounting makes it easy for you to keep tabs on how well your business is performing. Which financial performance indicators are included in your reports is up to you.
8) Any language, any currency. You choose the language you want to work in, and many cloud accounting platforms can work in several different currencies—since you’re working online, exchange rates are updated easily on an hourly basis.
9) Automation. Most tasks, such as updating records and sending statements or bills to customers are done for you, giving you more time to take care of other aspects of your business.
10) Tax Computation. Cloud accounting can also help you with tax computations such as GST and even file your corporate tax returns.
11) Flexibility. Since you’re always connected to your data, you don’t have to be stuck in the office, nor do you have to work within office hours.
12) Improved collaboration. Shared access to your cloud accounting set-up keeps you connected to team members wherever they are, including (if you have one) your offshore accountant.
13) Saves time and resources. Think of the savings you can use for your other business expenses since the cloud service provider will be taking care of maintenance, version upgrades, maintenance, system administration and any server failures. You’ll also save on energy consumption, and, since you’ll need less office space, you can save on the rent, too.
14) Scalable to your growth. Cloud accounting can adjust to the needs of your business as it grows.
15) No long contracts. If you’re a smaller business or you’re just starting out, you’ll appreciate not having to commit to using software for a year-long period and being able to pay on a monthly basis.
16) Always up to date. Your software is updated right away and free of charge.
17) Always backed up. Rest assured your data will always have back-ups—since it’s online, all your files remain safe, even if your office should be destroyed by fire or flooding.
18) Super secure. Even if someone steals your computer or your phone, your financial records remain safe because they are all online and not stored on your device, and because the thief doesn’t have your log-in information. This means being able to assure your clients that their data is secure, as well.
19) Easier for your clients. Cloud accounting doesn’t just make things easier for you, but also makes doing business with you, easier for your clients or customers. They can receive quotes and invoices, and even pay you online using their mobile phones (which also means they will be able to pay you sooner rather than later).
20)Builds customer loyalty. In making things easier for your clients, whether it’s transacting with your business or giving them ready access to their financial information, you make it easier for them to love you. Remember: improved customer relationships translate into improved profitability.
How does Traditional Accounting compare?
Businesses that aren’t using Cloud Accounting are missing out, and are dooming themselves to the following pitfalls of traditional accounting, which includes good, old-fashioned books and ledgers and even spreadsheets or accounting software that aren’t run on the cloud.
1) Desktop-bound. Not running on the cloud means you are tied down to your hard drive, and the window of time in which you have to work is limited by when your computer is switched on.
2) One at a time. With traditional accounting, you can only use one computer, and it’s usually only on that single computer where your financial records are the most updated.
3) Limited access. Traditional accounting also only allows just one person to access your files at a time, which means multiple people, if they need to, won’t be able to access crucial data such as client information simultaneously.
4) Iffy security. If you’re working primarily on one computer, chances are you’re going to end up storing your data on a USB drive if, for instance, you need to work on another computer or share ionrmation—and this is neither secure nor dependable.
5) Difficult to back up. It can be hard to make back-ups using traditional accounting, so much so that businesses using it often dispense with it altogether (even if they know they shouldn’t).
6) Expensive. Traditional accounting software is more expensive to upgrade or update—the software is often only licensed for one computer, which means additional costs for additional users. There may also be hidden fees for extra functionality or updates, and you might also have to spend on maintenance, repairs or even a dedicated server.
7) Tedious and time-consuming. Whether you type it or hand-write it, entering data by hand is always a chore, and carries a higher risk of human error.
8) Slow customer support. It’s bad enough to have to spend extra on customer support, but having to wait for it—especially if, say, you need an invoice or a report in a hurry—is twice the trouble.
9) Technical troubles. If something should go wrong (and chances are, something will) with your traditional accounting software, you are likely to need a technician or some outsourced troubleshooter to rush over to your office to address the issue.
10) Long-term commitment. Businesses that are just starting out are often unable to foresee just how long they’ll be able to stay afloat and usually balk at having to enter into extended traditional accounting software contracts.
You’re probably already more ready for cloud accounting than you think. If you’re using online banking, trading or investing, shared online storage solutions like Dropbox, or collaborative platforms like Google Docs, Sheets or Slides, then that should give you a fairly good idea of how cloud accounting works.
At U Ventures, we use cloud accounting as part of our drive to leverage the latest accounting software and technology. We also provide accounting software training to empower your staff with cloud accounting know-how.