Accounting should always be a part of every company’s start-up plan, but many business owners don’t think about it until after the money starts to flow.
By the time you look at your options, you have narrowed it down to two options.
Do I stick with traditional accounting?
Do I apply cloud accounting?
Let’s check the differences between these two.
Traditional Bookkeeping vs Cloud accounting
We can continue to use traditional bookkeeping approaches without realizing the benefits of a more modern system.
All is simpler with cloud accounting, from record-keeping to transaction processing and paying bills to pursue invoices.
The primary benefit of cloud accounting is that it eliminates bookkeeping as a “to-do” job.
Rather than saving something for a big hit that takes hours, cloud accounting is all about doing little and often and making easy work of a task that no one prefers.
There is also the matter of precision. Traditional bookkeeping techniques, despite their best efforts, are vulnerable to human error.
They obviously cannot mark all the I’s and cross all the T’s. Cloud accounting clears away a considerable amount of human error.
There are less space for errors caused by repeated data entry because if they do happen, a “tech brain” will warn you.
Adopting technology should not be frightful. It ought to be warmly welcome.
Three things to understand on traditional accounting
Onsite hard drive:
The managers’ office is typically the central location for all accounting and payroll in a small office. That is why the bookkeeper must use a single computer to handle all of the paperwork, entries, and payroll.
Installing traditional accounting software onsite requires a technician from an accountancy company or a licensed accounting firm. If any problems arise, a technician must access the machine to perform maintenance and other tasks.
Since traditional accounting software typically installs on a single computer, the number of users who can access the data and make inputs is limited.
Three things to understand on cloud accounting
Dedicated hard drive excreted:
There is no hard drive to store the data for cloud accounting—all of your financial information instead of stores on data servers operated by a third-party cloud accounting company.
You can view your company accounts and any payroll documents you need online, and you can appoint team members to it.
If you are transitioning from traditional accounting to the cloud, you won’t need to give team members access to one device because they will be able to log in remotely.
Traditional accounting will cost too much since it requires an onsite installation and server. Then extra expense on continuing repairs also. It is not cheap.
Since multiple users can access the central dashboard online, cloud accounting is easier to handle.
Technicians will then work with you to fix any problems and get you back up and running without having to call a technician to your office. It’s all managed from afar.
It is much less costly for smaller companies to get up and running because it is a cost-effective service to operate due to online tools.
Due to the factor of uncertainty, this is a significant advantage for start-up companies.
New businesses don’t know how long they will stay in operation, so they will be wary of signing long-term contracts, typically associated with traditional accounting software.
Long-term contracts are redundant for cloud accounting. You can sign for the short term.
Which one is the most effective, and why?
Since it depends on your business, only you can answer it, but keep these three things in mind.
You must share your data:
This does not go well with all businesses. Some people are seriously concerned about security, while others are less bothered.
Data security is considered very seriously by the majority of cloud accounting firms.
The cloud is not for you if you want complete control over your financial records. You are entrusting your information to a third-party service provider.
You must be at ease with this because there is no other choice. For those who want to complete data control, traditional accounting is the best choice.
If you are concerned about non-secure wireless networks gaining access to your data, request your cloud provider if you can limit access to secure connections only.
It is possible, but it is not always the case with the less costly cloud accounting tools.
There is typically an expense associated with improved protection, which goes beyond the standard security that all cloud providers have. It isn’t costly, but it isn’t cheap either.
For businesses, cloud accounting is the ultimate backup to ensure that they still have access to their data.
Consider the risk of natural disasters damaging the only hard drive you have hosting your traditional accounting software, and you will quickly see why getting your data hosted by a third party is beneficial.
And, even though your office is lost, you can access them at any time.
It is unpleasant to consider, but it is a risk and can never avoid any company risk.
How is Cloud accounting reshaping the bookkeeper job?
As one of the earliest professions, accounting is closely intertwined and can seem inflexible, especially when it comes to new technology.
Over the years, bookkeeping methods have changed significantly, owing primarily to technological advances such as adding devices and personal computers.
Desktop accounting software revolutionized the way financial records were kept and produced reports.
Rather than carefully transferring data into paper ledgers, companies could enter all of their data into a database and let the software do the heavy work of balancing the books.
With the rise of cloud accounting, the stakes have become even higher.
Cloud accounting does everything more straightforward.
You can also connect your cloud accounting to your banking feeds. You will have complete clarity and accuracy across all of your systems this way.
There will be no stone untouched, and the device will alert you to it. It is much easier to reconcile this way than sitting with a stack of invoices and a calculator.
Also, today’s business world is infinitely linked. You can’t just leave your accounting to fight for it.
Cloud accounting enables you to monitor your accounts from anywhere as long as you have access to the internet.
This means you won’t be saving receipts until the end of a business trip to misplace them on the way home.
Another significant advantage of cloud accounting over desktop accounting software is that you still have access to the most up-to-date framework.
You won’t have to spend time downloading a new version of the program. It’s done behind the scenes for you at no additional expense.
Benefits of Cloud Accounting
Businesses that are involved in more cost-effective financial management strategies should seriously explore the use of cloud accounting.
Flexibility in access
You can access your accounting data with an internet connection, regardless of the time and location.
With desktop accounting software, your financial data will store in a local device, resulting in some restriction to access.
But in Cloud accounting, your data is saved on a cloud server, and there is no need to install any application to access the data.
Working online lowers your IT costs and saves you time by having you linked to the company at all times.
Desktop-based systems necessitate an investment in IT hardware as well as ongoing maintenance of the hardware.
A server is needed to house the application software and associated data. Furthermore, you would need to pay an IT professional to manage both the server and the office network, which can be a costly overhead.
Cloud accounting stores all in the cloud. There is no expensive IT infrastructure to maintain, and you can access the software from anywhere.
Security and Backup
When you use the cloud, all of your data and documents are backed up using a robust encryption method.
In desktop accounting daily, you have to take the backup of your work. And you have to seek updates each time your provider releases a new version of the application.
In Cloud accounting, your data automatically stores as you go, saving you both time and money on time-consuming backup procedures.
All of your accounting data is encrypted at the source and saved to the cloud. As a result, only authorized people can access your sensitive information.
When you are in the cloud, collaborating with colleagues and exchanging data with advisors is a breeze.
You had restricted access to your accounts while using the old desktop approach, which made communication with colleagues and advisors difficult.
In cloud accounting, you can integrate the software with other online applications to reduce your workload.
Cloud accounting will help you to get a paperless office.
Dealing with paperwork, data entry, and financial administration will eat into your business time with conventional accounting.
All must be written and handled in hard copy, which is inefficient, unreliable, and harmful to the environment.
You will significantly reduce the dependency on paperwork by using an online accounting system.
Invoices may be emailed directly to customers, saving money on printing and shipping while also expediting the payment process.
Since the records are all digitized and stored in the cloud, there is no need to retain the paper originals, which reduces file space and storage costs.
Does Cloud accounting already transform bookkeeping?
Cloud accounting, unlike desktop accounting software, is hosted on remote servers.
Rather than keeping all of the data onsite in a local server managed by the company or segmented on a single computer, the information is accessed over the internet and stored in shared data centres using web-based cloud computing accounting software.
When accounting data and applications hosted in the cloud, there are several advantages.
The business, the bookkeeper, and any other accounting teams can access data and documents in real-time from any location, including mobile devices, making collaboration easier.
Remote access also makes it possible for companies to outsource their bookkeeping since the whole accounting process, including paper management and internal correspondence, can be moved online.
Greater security and control come with greater access, which is a vital factor for compliance.
Cloud accounting usually uses encrypted links to ensure data confidentiality as it moves between a company’s computers and cloud data servers.
Error and security fixes can also be implemented easily in the cloud because software updates for cloud apps carry out quicker than upgrades for desktop software, which can take years.
You always have the most up-to-date, as well as the most stable, version of any provided cloud application.
Bookkeepers have also benefited from cloud-based document storage.
Rather than storing endless files full of paper receipts, invoices, and expense forms, records can be safely stored digitally in purpose-built applications.
Free up physical storage resources in the workplace are often in short supply, but it also simplifies the search for specific papers.
Bookkeepers may use the time they would have spent juggling papers to focus on higher-level activities.
Customization is another important aspect, as cloud-based business line applications can connect with other software and sync with data sources such as banks.
With the right combination of integrated software, a powerful workflow can build, shifting the bookkeeper’s function from data entry to product quality.
Data entry reduces, if not eliminated, by cloud accounting. Instead, these applications would enable businesses to automatically download financial transaction data by syncing bank and credit card accounts.
Bookkeepers can benefit from cloud technology by incorporating efficiencies into their routine accounting processes.
We have already seen how cloud accounting transforms companies to operate their back offices, assuming that financial data is always up to date, readily available, and reliable.
Small and medium-sized firms can no longer rely on a crazy dash at tax time to get their financial statements up to date.
Intelligent businesses now want financial data on demand available for forecasting and strategic planning. Bookkeepers must be mindful of these demands and adaptable.
We’ve seen how modern technology can replace human employment with automation in many sectors, but computers can’t replace the human analytical mind.
Instead, emerging technology can make accounting professionals’ lives simpler by automating tedious tasks like data entry, manual reporting, and routine calculations, enabling them to take on more complex and strategically critical positions within the organization.
Traditional bookkeepers who learn to use cloud accounting software technologies will keep up but will be ahead of the trend as the profession continues to develop.