HOW DOES CLOUD ACCOUNTING WORK?
We are a modern cloud-based accounting practice, and the question we get asked a lot is how cloud accounting works and how is it different from traditional accounting. If you would like to know more about the difference between cloud accounting and traditional accounting, you can read about it in our previous blog here. Cloud accounting simply means using accounting systems that use software that is hosted online i.e.”in the cloud”.
So how exactly does it work?
Traditionally you as a business owner will do your work on your system and save all your financial records on your computer. Supporting documents (invoices and receipts) will be kept in a physical file (hopefully not!) or scanned and stored in a folder. This information will then be shared with the accountants once a month or quarterly, depending on the arrangement you have with your accountant. We all know the frustrations on both ends that come with the process. Cloud accounting introduces systems that run using the internet and private servers to manage and enable information flow between you and your accountants.
The process is typically as follows:
- You select the online accounting system that you prefer. At The Accounting Village, we prefer Xero and offer that as part of your monthly retainer. There are many others in the market. Your chosen accounting software is the same system you can use for your other business activities such as quotations, invoicing, maintaining a customer database, etc.TIP: Get professional advice from an accountant before committing to any accounting software.
- Information is fed to the selected accounting system from various sources and tools. The accounting system can automatically extract and maintain your bank transactions. As the business owner, you will need to scan and upload your receipts, invoices, contracts, etc, using various accounting tools in just a few clicks
- The accountant accesses the same online platforms to access your information, perform their function, and maintain your financial records.
- You can access and check your financial information on the same system at any place, any time, using the internet.
Why do you need to switch to cloud accounting?
Cloud accounting solves three problems; access, security, and time.
Access -You can access your financial information anytime and anywhere; all you need is a reliable internet connection. Most systems even have apps, which means you literally have access to your finances in the palm of your hands.
Security – Your financial information is safely stored online, making them safe from fire, flood, and any other disaster. Cloud accounting systems come with advanced security and backup systems, otherwise, no bank in the world would be in support of them.
Time – With automation of some of the most time-consuming processes, you sure get back a lot of time. Saving time is saving money. You also save on costs associated with expensive server backups.
It is clear that if you want to have an efficient financial management process in your business, you need to use automated systems. If you want to learn more about cloud accounting and how it can simplify your accounting process, please contact us here, and we gladly show you how you can take your accounting to the cloud.