With the advancement of technology, we see transformation in everything. From our daily products and processes to complex machines, everything is evolved for the better. However, the advancement not only brings benefits but also comes with risks. In today’s world, we see that a lot of business processes have evolved, including accounting. We often hear the modern-day term “cloud accounting”. In this blog, we will understand cloud accounting, including its benefits and risks.
What is Cloud Accounting?
Cloud accounting refers to the exercise of using internet-based software and technology to manage bookkeeping, financial processes, and transactions for businesses and individuals. Rather than saving files on a desktop or a laptop PC, files are stored in the cloud i.e. third-party servers. All the records, such as sales and expenses, are kept online. Accounting information in this case is generally safe as the user needs login credentials to view or edit it, much like accessing online banking. Let’s discuss the benefits of cloud accounting.
Benefits of Cloud Accounting:
There are various benefits to cloud computing; the primary benefit is the automation and accessibility it provides to its users. You can access files and make changes from anywhere in the world. All the accounting processes are automated; you can access any report at any time on any device. Let’s go through the benefits one by one.
Accessibility:
Experts often consider accessibility to be the primary benefit of online accounting. Accounting users can access and make entries from anywhere with an internet connection. This saves time and reduces the requirement for a significant amount of hardware and office space necessary in traditional accounting. Any business or individual can benefit from cloud accounting. For instance, firms that have a global presence and transactions throughout the year can make good use of cloud accounting.
Automation:
Cloud accounting almost eliminates the need for manual accounting. The user only has to make a few entries; all else is automatically updated. This gives real-time information on the business’s financial performance and position. It is worth noting that any accounting software usually updates everything promptly. However, with the help of cloud accounting, every user will be able to see the real-time impact of the updates.
Collaboration:
One of the main benefits of cloud accounting is collaboration. Multiple accountants can view or edit the accounting system in real time, depending on their role. Furthermore, different teams in a business can work together on financial tasks, getting information on a real-time basis. It is worth noting that with a cloud accounting system, a business can restrict the roles of individuals depending on the nature of their jobs. This brings flexibility to the system so that different teams can work on different areas simultaneously.
Integration:
Cloud accounting allows other business processes to integrate with the accounting system, allowing further automation. For instance, QuickBooks allows integration with the banks, and consequently, it enters the transactions into the accounting system automatically. The user only has to check whether entries are correct and simply check the update button. In this way, through integration, it allows time savings and reduces the need for manual entries. Other examples include integration with e-commerce and payment gateways.
Risks of Cloud Accounting:
No doubt, online accounting brings a lot of benefits, and it seems that the benefits outweigh the risks generally. However, it varies depending on the circumstances. Let’s discuss some of the risks
Internet Dependency:
As we know, cloud accounting is dependent on the internet, so you may face connectivity issues. For instance, if the internet connectivity goes down, you may face problems accessing the accounting system. Consequently, an important accounting task might be delayed or missed.
Cost of Cloud Accounting:
Usually, cloud accounting works on a subscription model, and most experts consider it cheap. However, if we add up all the costs on a long-term basis, it might cost the business more. Therefore, businesses should work out the best plan that works best in terms of cost and productivity.
Data Security:
Most credible cloud accounting organizations implement the highest level of data security. However, there is still a chance of cyberattacks and data loss. Therefore, it is always recommended to have files stored on a drive offline. Furthermore, storing the data on third-party servers also raises concerns over unauthorized access to data, data privacy, or any other data breach.
Limitation on Usage:
A cloud accounting system may not be suitable for every business. Some packages do offer customization; however, they cannot offer everything to every business. Furthermore, the users don’t have any control over the data storage locations or any other technical area; therefore, it is not possible to tailor the software according to the specific needs of the business.
Conclusion:
In essence, cloud accounting is a transformative rise in accounting, delivering unmatched accessibility, automation, and collaboration. While its benefits are undeniable, the reliance on internet connectivity and data security concerns emphasize the need for cautious adoption. Striking a balance between convenience and risk, businesses must carefully evaluate their specific needs and circumstances when considering adoption. The adoption should ensure a seamless integration that maximizes advantages while mitigating potential drawbacks.
Creative Zone Tax & Accounting, Your Accounting Pal:
The principles of accounting will remain the same in any accounting system. Therefore, it is always beneficial to remain compliant and avoid penalties. In the UAE, there are a series of penalties for non-compliance. Therefore, always consult a qualified accountant before setting up your accounts. You can contact us for any of your accounting needs for any stage of business.
