As digitalization continues to transform accounting practices, a business organization needs to respond and adapt to a more reliable and efficient system and application to streamline its operations. The current trend is the integration of financial management with cloud accounting software. Cloud accounting is the use of internet-based accounting software to store, process and secure financial data on a remote (computer) server unlike traditional accounting systems that need on-premises servers and physical IT infrastructure.
Cloud accounting or online accounting as it is also called allows its users to access financial data or information from the cloud (internet) through a software application. To invest in the technology as business, it is crucial to consider salient capabilities or features of the software before making a decision. Some of the key considerations include:
Real-Time Reporting & Data Visualization: Cloud accounting software leverages on artificial intelligence(AI) and machine learning to eliminate the traditional manual data entry and repetitive accounting processes. Cloud accounting software provides automated and online options to streamline invoicing and accounts receivable at one end and the expense tracking and accounts payable at the other. The software’s capability to ensure seamless and real-time access to centralized financial data should influence the decision to automate it into one’s business operations. Thus, interactive dashboards and integrated advanced analytics tools transform complex financial data into easily understandable charts, graphs and key performance indicators. By visualizing data users gain insights and trends of key business activities.
Cloud accounting solutions can simply tax obligations and help businesses stay up-to-date with their tax obligations by automatically calculating their tax liabilities. A robust cloud accounting software also supports budget forecasting and data harmonization thereby improves decision-making.
Accessibility & Collaboration: Seamless collaboration is achieved by storing financial data online in a single database or integrating with other applications to automate workflows. With this functionality, multiple users can access financial data and work on the same file from various locations simultaneously as long as they have reliable internet connectivity with compatible and mobile-friendly devices.
Scalability & Multiple Functions: A robust cloud accounting software solution can accommodate businesses of all sizes and provide flexibility to scale up or down in response to volume of transactions. In adopting a cloud accounting software, it is also important to consider whether the software can support multiple users and integrate with other business tools. Cloud-based accounting software goes beyond basic accounting tasks. It can be scaled to perform multiple functions and can serve as an expert resource for interpreting accounting standards or applying specific principles.
Configuration & Data Migration: To migrate from an existing legacy system to a cloud accounting software requires careful planning. Careful planning and execution is to ensure data protection and business continuity or avoid disruptions. It is important to ensure data integrity thorough meticulous validation process. But then, the software must align with one’s business’s specific accounting processes. Settings, chart of accounts, tax codes and other parameters must also be configured to match those business needs.
Data Security & Protection: Cloud service providers often host multiple users on the same hardware through resource pooling. A shared infrastructure introduces the risk of cyber-attacks and breaches. To safeguard data security, it is advisable to choose a cloud service provider that stores sensitive data on separate physical hardware and prioritizes data encryption, authentication protocols and regular system updates. It is also worthy to consider data backup and disaster recovery capabilities of a cloud accounting software. A business must evaluate whether the security measures in place can effectively handle cyber-attacks.
Software Maintenance Frequency: Cloud-based accounting software requires fewer software maintenance periods after the initial server setup. The software provider must be capable of maintaining offsite servers and automating back-ups to ensure users have access to up-to-date software versions. Managing servers can be expensive, so it is important that maintenance is efficient. In that regard, it is necessary to consider variables such as monthly or annual subscription fees, additional costs for add-ons or integrations and whether the pricing aligns with your company’s budget.
Other Considerations
Cloud accounting software is continuously evolving and incorporating new trends and capabilities to meet the changing needs of businesses. It is indeed, offering a wide range of benefits that are crucial for businesses of all sizes, from small and medium scale enterprises(SMEs) to multinational corporations. Nonetheless, using cloud accounting software comes with certain risks that need to be managed to fully reap its benefits. It is, therefore, equally important to consider the following factors:
Proliferation of Applications: The cloud accounting software market is expanding rapidly with its integration with other emerging technologies like Blockchain and Internet of Things (IoT). It is important to not only find an application that meets your business’s requirements but also ensure its security and reliability before installation. Those considering cloud accounting software should familiarize themselves with cloud security basics and compliance certifications before starting the migration process and select a reputable provider (vendor) whose is capable of safeguarding their data in the cloud.
Risk of Vendor Lock-In: Some cloud accounting software providers make it challenging for subscribers to switch to a another solution, particularly when proprietary data formats are used, which are not easily transferable to other systems. This lack of flexibility can impede businesses from changing a provider if they are dissatisfied with the service of the current one or wish to explore other options. Businesses must address these concerns with software providers and before entering into a service agreement or contract.
Training and Support
Training and support is crucial for the successful adoption of cloud accounting software. Users need adequate training sessions to familiarize with the features and functionalities of the software. Resources and documentation including manuals, guides and video tutorials can help facilitate self-paced learning. These materials must be easily accessible and up-to-date.
Conclusion
Indeed, cloud accounting is revolutionizing financial management and offers numerous advantages to users. The emergence of artificial intelligent (AI), Blockchain and machine learning(ML) has added additional impetus to the software to improve efficiency, service delivery and, therefore, drive business success. Nonetheless, it is important to carefully balance the benefits with the associated downsides. By considering the key capabilities and addressing potential challenges, organizations can make informed decisions about adopting a cloud-based accounting software for their accounting function.
BERNARD BEMPONG
Bernard is a Chartered Accountant with over 14 years of professional and industry experience in Financial Services Sector and Management Consultancy. He is the Managing Partner of J.S Morlu (Ghana) an international consulting firm providing Accounting, Tax, Auditing, IT Solutions and Business Advisory Services to both private businesses and government.
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