Cloud Accounting

 

CLOUD ACCOUNTING

Definition:

Cloud accounting is the practice of using an accounting system that's accessed through the internet. Some accounting systems sit on just one computer. These are called 'desktop accounting systems'.

 

Meaning Benefits and Features

Cloud accounting refers to performing, basic accounting tasks like managing and balancing the books, using software that resides in the cloud and is often delivered in an as-a-service model. Staff or third-party accountants can manage accounts payable, accounts receivable, the general ledger and much more within the application. Just like other cloud-based systems, cloud accounting software runs on a cloud provider’s platform rather than on a local hard drive or server. Users access the tools they need through the internet, meaning employees or third-party accountants do not need to be in a certain location to understand the financial state of the business.

In cloud accounting, accountants, controllers, CFOs, and other relevant parties receive login credentials for the system and access it through a web browser, whether on a laptop, smartphone, or tablet. The provider may also offer a mobile app to improve the user experience on phones and tablets. The software is typically integrated with the company’s bank accounts, so all transactions automatically post to the correct digital ledger. Users often have a home dashboard that displays the financial information most critical to their roles, like available cash, bills due in the next five days or past-due payments from customers.

 

Benefits of Cloud Accounting

1.      Less administration: With cloud accounting software, business owners remove the need to contend with time-consuming software installation, backups and other administrative tasks, because you’re accessing the software over the internet. You don’t need to buy or manage servers or other IT infrastructure to run your accounting software.

2.      Software is always up-to-date: Because the software is in the cloud, you always have the most up-to-date version. The cloud provider automatically updates the accounting software to include changes to tax rates and accounting rules and adds new features. You don’t have to worry about upgrading your software to stay up-to-date; whenever you log in, you’ll immediately get access to the latest version.

3.      Ease of compliance: Cloud accounting platforms help private and public companies with tax compliance by producing accurate financial statements, quarterly tax estimates and yearly tax returns. This helps business owners avoid under-reporting tax liability, which could prompt audits or fines, or over-reporting and paying too much. By automating domestic and international tax calculations, cloud platforms also help ensure compliance with all applicable tax regimes. Some leading cloud accounting solutions even automate revenue recognition to comply with accepted accounting standards.

4.      Paper-free/eco-friendly: Traditional accounting often entails paperwork — lots of it. In today’s digitized world, it’s both inefficient and unnecessary to physically store archived paper records or manually distribute paper reports to investors, lenders and other parties. Ask vendors to send invoices electronically so they can be imported directly into the cloud accounting system. You can declutter the office by scanning paper bills and receipts for processing. Emailing your invoices to clients eliminates printing and postage costs and fast-tracks payment turnarounds. Cutting down on paper also reduces your environmental impact

5.      Data security: You may have concerns about storing sensitive information in the cloud. But cloud accounting services actually enhance security for most businesses in several ways. First, cloud providers apply multiple levels of security, including advanced encryption and access control, to ensure that only authorized users can access your data. 

6.      Accuracy: Cloud-based accounting software improves accuracy by eliminating many of the error-prone manual steps that are required when using spreadsheets. In addition to automatically categorizing transactions and calculating taxes, cloud software can match received invoices to payments and shipments and even automate reconciliation processes, matching internal transactions to bank records and flagging errors.

7.      Customization: Every business is different, which is why it makes sense to choose cloud accounting software that can be customized to your organization’s individual needs. Some cloud accounting solutions allow you to tailor processes and workflows to better match the way your company operates. You can build personalized dashboards that provide each user with an at-a-glance view of their most important metrics and other information. You can also add corporate branding and company-specific terminology.

8.      Automation: When bank accounts are connected to the accounting system, transactions post automatically, meaning no time-consuming data entry or manual imports. This software can also automate account reconciliations, matching bank statements and invoices to ledgers to help you close the books more quickly. Some accounting application can also automatically pay vendors and send invoices to customers on user-defined dates.

9.      Accessibility: As noted earlier, all anyone needs to access a cloud accounting solution is an internet connection, web browser and login credentials. They can access the solution on mobile devices like smartphones and tablets. Employees and other users don’t need to be on a certain computer or in a specific location to see information or complete tasks in the system. That also allows, say, your accountant from a CPA firm to easily find all the data they need and alert leaders to anything that requires their attention.

10.  Lower overhead expenses: Organizations that adopt cloud technology often spend less than those who manage their tech stacks in-house. More than 60% of IT executives said reducing cost was their primary concern, according to cloud research firm Datometry. Much of those savings’ stem from the fact that you don’t need to purchase hardware or pay a large IT staff to manage the system. Avoiding upgrades and maintenance that often result in big bills from the vendor or a partner lower the total cost of ownership, as well.

 

Reasons to use cloud accounting:

1.      Cheaper to own and operate: A cloud accounting system is generally a cheaper option than the on-premises alternative. There’s no need to buy hardware, nor does the business have to worry about bills adding up from upgrades and maintenance, as the vendor takes care of all of that. Additionally, the company doesn’t have to purchase VPN software or any other type of middleware that allows employees to work away from the office.

2.      More predictable costs: Since the company doesn’t have to worry about the costs mentioned above, it’s much easier to know how much it will likely spend on the accounting solution annually. With SaaS in particular, everything is packaged into a single price, and the cost for additional users or functionality is clear. That will keep your IT budget from cutting into other areas of the business.

3.      Take advantage of the latest technology: Frequent and regularly scheduled system upgrades mean users can realize the advantages of more advanced and emerging technologies that can bring additional business gains. A small or midsize company may be unlikely to invest in machine learning or robotic process automation (RPA) to boost the efficiency of its financial operations on its own, for example. But an upgrade might add that functionality, and the organization can benefit without any additional investment.

 

V.S.Srikrishna (20UCM091)

P.V.Ranjith (20UCM083)

III B.Com ‘B’