Cloud-based accounting software for small businesses can improve accounting accuracy, optimize accounting processes, and grant access to real-time yet critical information.
Many are familiar with cloud computing and its utmost importance, without ever fully grasping the meaning behind the cloud-anything. Simply put, “cloud” refers to anything that you aren’t storing or hosting on your platform – and yet, you can use it!
So, whenever we say “cloud-based” – we are actually referring to the Internet.
In essence, cloud-based accounting software is a service that you don’t truly possess, but it can do wonders for your small business!
When talking about the importance of cloud-based accounting, the numbers are here to back us up: 78% of small businesses were expected to rely solely on cloud services by 2020 – and look where it all led.
Read on as we discuss cloud-based accounting software benefits, small business marketing, and how to choose the right software option for your small business.
Traditional vs. Cloud Accounting: A Comparison
Monitoring your small business’ revenue and expenditure in order to record its monetary success over time isn’t something revolutionary. In fact, it has been used for ages, allowing accountants to document and monitor the movement of funds, in and out of the business.
However, cloud accounting has proved to be a game-changer for small businesses, as well as corporate organizations.
The main difference is that traditional accounting revolves around a desktop, whilst cloud-based accounting software can be accessed from anywhere.
With that difference in mind, traditional accounting software requires separate storage to install the program, which means that you only get one point of access. Besides this, desktop programs require frequent software updates, which can be costly and rather inefficient. Albeit, there still are organizations that prefer traditional accounting methods.
In contrast, cloud-based accounting software comes with all the utilities of the desktop accounting program – but it is reachable through the Internet. This implies that you can simply use your credentials to log in and you’ll have access to your financial records – no matter where you are.
Moreover, the updates are no longer your concern, and you can most likely integrate other software solutions into the accounting program. This can unmistakably add even more worth to your business.
Benefits of Using Cloud Accounting for a Small Business
Transforming your already existent traditional accounting system into cloud-based accounting software for small businesses might seem like a huge deal. We are here to tell you that it definitely is – and by doing so, the cloud-based software will deliver actual and concrete value to your small business!
This is the list of all the cloud-based accounting software benefits:
System Access: Anytime & Anywhere
The greatest benefit of cloud-based software for small businesses is system access. You can access your financial statements and all the data you need from any device, as long as you know your credentials. Access the software through a web browser from your PC, laptop, tablet, or mobile phone and sign in! Cloud-based accounting has come especially handy during the Covid-19 pandemic, as it allows you to work from remote places. Neat.
Availability of Real-time Data
The availability of real-time data is pivotal for any organization that needs accurate information at any given time. The cloud-based accounting software for small businesses allows you to get a quick snapshot of your business’s financial state in real-time – rather than looking at expired data. Naturally, to be able to know your current financial state, you will have to log your records and bank reconciliation as they come.
Access to Bank Feeds in Real-time
Numerous cloud-based accounting software packages include live feeds for your business bank account, allowing you to combine your banking and bookkeeping together. Rather than having to enter every individual item from your financial statements or submitting a CSV file from your online banking interface, a live feed puts your bank data into the records, at once. This expedites bank reconciliation and provides a far more precise picture of your cash book.
Utilizing the Latest Version of the Cloud-based Accounting Software
One of the greatest cloud-based accounting software benefits is the fact that you’re no longer responsible for the updates of the system you’re using. The cloud-based accounting software will be the backbone of the financial advances of your small business; therefore, it is of utmost importance for the system to always be up-to-date. And by choosing a cloud-based solution, the responsibility to update the system falls on the providers, which not only cuts costs for you, but it allows you to work in a safe, secure, and solid environment.
Connecting Utility Modules
You can connect other modules through the open APIs most cloud-based accounting programs have. This gives you the opportunity to extend your system with third-party programs, which will enable online payments, cash flow forecasting programs, and a variety of business management packages that are just as useful to pick from. These technologies allow you to save even more effort, cut expenses, anticipate difficulties, and overall alleviate the burden of unneeded paperwork that is holding your business back.
Safe & Secure Data Sharing
With the help of cloud-based accounting software, you can quickly offer access to your bank accounts or other reports to those that need to work with the said data. You will no longer have to use emails, USBs, or any other memory-sharing devices in order to give others access to your database. Cutting the time needed for sharing sensitive data can result in faster results, better insights, and support from your financial managers.
When Should Your Small Business Use Cloud Accounting?
It certainly makes sense to take advantage of the increased digital connection and real-time data possibilities that cloud-based accounting provides us today. Cloud accounting’s expanded real-time data features make it perfect for businesses that need quick access to accurate accounting breakdowns, reporting systems, and KPI metrics.
The following are some of the crucial sectors where cloud accounting can be beneficial for your small business.
Workload Reduction Through Automation
The cloud-based accounting software for small businesses enables automatic reporting, payment processing, and bank reconciliation. Each of these modules significantly reduces your business’s administrative effort. Therefore, if you need to speed up and make your workflow more optimized, you should no longer question the need for cloud-based accounting software.
Better Glance at the Accounting Transactions
You will have your whole business insight available and you’ll be able to access real-time logs and financial information whenever you want. If your business depends on making wise and educated choices based on real-time and accurate data, this is your affirmative sign that you could use such software.
Work From Anywhere
If your business had to go through the office to home shift, you are aware of the advantages of remote operations. However, if you hadn’t used a cloud-based solution before, things were probably tricky. Even if you haven’t experienced this, but you’d like the flexibility of remote working – this is worth considering. Cloud-based accounting software for small businesses will allow everyone within your organization to access the data they need by simply having an Internet connection.
Obtaining MTD Compliance
If you’re a UK citizen, Making Tax Digital (MTD) necessitates compulsory electronic logs and tax documentation. By using a cloud-based accounting software solution, your business will be digitally capable and prepared to deliver tax returns in the needed iXBRL format faster than ever.
Online VAT and GST payments
Using cloud-based accounting software to pay your tax shares is much faster and easier. Your payments are going to be documented instantly, and you’ll be able to quickly convert them into the appropriate tax return forms and send them to the IRS immediately. This is a handy feature that goes hand in hand with working remotely –
you can file your tax report from anywhere!
Cloud Accounting Software Options
If you are no longer questioning whether you should use cloud-based accounting software, but you’re wondering what are your software options, you’re on the right track of things. There are plenty of cloud-based accounting software solutions for small businesses. The right one for you is the one that will best suit your organization’s needs.
These are some of the available cloud accounting software packages:
• KashFlow: If you’re a small business owner that needs very basic accounting options, KashFlow will most likely do the job. Integration of third-party programs is not always possible with KashFlow.
• QuickBooks Online: A small-business-focused system that includes all of the accounting features of QuickBooks’ conventional desktop edition. A robust programs marketplace is included as well.
• Exact: No matter if your business is small or big, Exact will most likely cover your business needs. It offers various financial support systems, which serve more than just accounting purposes. Exact may also provide you with small business marketing strategies.
• ClearBooks: ClearBooks provides a free package under the name of Micro, which could suit newly established businesses. The cloud-based accounting software can connect to other third-party programs, but the choices are not vast.
• Xero: Xero is known for its enormous ecosystem, which will allow you to connect many third-party modules to its base system. It enables basic finance logs and detailed insights.
• QuickFile: If your small business is really small, QuickFile will let you use their cloud-based services for free. Once your business expands, you will be able to subscribe to a paid version of their service.
• Sage 200Cloud: You will get cloud-based accounting software for small businesses and all the perks it comes with it. The utilities are the same as you would expect in a desktop solution.
A Glossary of Cloud Accounting Terms
Not everyone has wrapped their head around the lingo of cloud-based technologies and accounting. That’s why we’ve prepared a glossary of cloud accounting terms for you:
API – stands for Application Programming Interface. An open API allows one application or a program to connect with another. Open APIs in cloud-based accounting software for small businesses enable the program to connect with other modules or systems.
Bank feed – a bank feed connects your online banking to your cloud-based accounting software. By doing so, it provides you with the option to view all of your financial information online.
Cloud services – cloud services could be any kind of software utility that is stored somewhere on the Internet. In terms of cloud-based accounting software, cloud services are the accounting programs themselves.
CSV – stands for Comma-Separated Values. It is a delimited text file that has values separated by a comma. Each line of the file is a data record. CSV files are commonly used for exchanging data.
Forecasting programs – forecasting programs in the accounting world extrapolate your present accounting info forward in time to estimate your funds’ situation in the future. Forecasting programs are used to help make better business decisions.
Integration – Connection of the programs with your credentials through the open API of the software.
Interface – Interactive parts of the cloud-based accounting software that allows you access to various functions.
KPI – stands for Key Performance Indicator. It is used to assess the value and worth of your small business.
MTD – stands for Making Tax Digital. A UK initiative for all VAT-registered enterprises to use digital tax accounts.
Real-time data – information that is gathered and available as soon as it is present.
Reconciliation – an administrative process of comparing your money transfers to your sales invoices and vendor payments.
Third-party programs – Applications that are different from the cloud-based accounting software, that can be integrated through the open API. They can add value to the system as a whole.
XBRL – stands for eXtensible Business Reporting Language. A global framework for sharing business data.
The Verdict
Cloud-based accounting software for small businesses has proved its value over time.
Over 80% of Australians are using paid cloud-based accounting systems while managing their businesses, while more than 45% of European small business owners make the most of cloud-based accounting solutions.
By implementing a cloud-based solution for your small business, you will be able to work from anywhere, have access to real-time data, and manage your finances better!
