Unlike traditional desktop accounting packages, cloud accounting software tends to be marketed as a Software-as-a-Service (SaaS) model, where a small monthly 'licence' fee is paid on a recurring basis instead of investing in hardware and software at the outset.
In the cloud computing world, data is sent to the cloud via the internet, and with the cloud accounting software, financial records are securely stored and managed 'in the cloud', meaning that they can be accessed at any time and from any device. The result is that user-friendly, real-time data can be accessed from anywhere there is an internet connection, making the workforce truly mobile.
For SMEs, particularly those in the start-up phase, a significant advantage of cloud accounting would be avoiding the initial outlay on computer hardware and accounting software, and freeing up cash flow. For existing businesses, the move to a 'pay as you go' system with updates included and automatically installed at no extra cost has very few barriers, other than the initial migration of data.
Where cloud accounting offers real value, however, is through the access to real time data by multiple users on multiple devices.
Each user profile can be set to allow access to only specific information if desired and the most sensitive information can be restricted to only the most senior people in the business.
This flexibility offers real opportunities to think differently about how routine accounting processes are managed; for example, efficiency can be improved by training sales people to invoice customers at point of sale, rather than relying on a central administration team.
In considering cloud accounting, the main concern to most business owners is retaining the confidentiality of their data.
By using a cloud accounting provider, an SME will effectively be giving an external third-party access to sensitive financial information.
It is vital, therefore, to ensure that a reputable provider is chosen, with a good track record for security and encryption of data. Business owners will also surrender control over backing up data to the cloud providers and, although this ensures data is safely backed up, it is held off site by the cloud provider and can make data extraction difficult in the event that the business wishes to change providers.
The availability of good internet speed and reliability is clearly important and will affect the operation of cloud accounting.
A poor internet connection can cause frustration and any outage in the internet will limit the accounting function of the business.
The move to cloud accounting is undoubtedly gaining momentum as a cost-effective option for small businesses.
In each case, the benefits and drawbacks of cloud accounting should be considered and evaluated in light of the individual circumstances of the business and its accounting requirements.
For further information or advice, Kate McCann can be contacted at firstname.lastname@example.org. Grant Thornton (NI) LLP specialises in audit, tax and advisory services