1.0 What is Cloud Accounting
Bookkeeping is nothing new to businesses to record their income and expenditure in keeping track of their financial performance. Before Cloud Accounting Software was introduced, the traditional way of bookkeeping is to record financial information in the respective office computers where accounting software has to be installed and run through the hard drive of office computers. It requires constant backup by the users to ensure all database are secured.
On the other hand, cloud accounting software has the same functionality with the traditional accounting software, but with the database stored inside the cloud instead of the office computers. With cloud accounting, there is no need to install an application in the computer, users would only require logging in to their respective accounts to access to the database stored in the cloud. Cloud is a platform which enables both the data and software to be accessible to the users anywhere, anytime.
2.0 Benefits of cloud accounting
i. Savings on initial costs
Benefits of using cloud accounting software include savings on the initial costs as compared to using the traditional accounting software. Traditional accounting method would require business owners to invest in the purchase of the necessary hardware, servers to process and store database, and necessary computer equipment to keep copies of data. In addition, investment in the purchase of certain software licenses is also required.
Compared to cloud accounting services, it would save the business owners more from the initial costs as there is no requirement to invest in servers to process and store database, and also keeping data copies. Users are actually buying the use of the software from the cloud accounting software providers, but not the software itself. Furthermore, in terms of the maintenance of services, cloud accounting is able to help the business owners to save more, as they do not have to invest in the security of their database which, on the other hand, is required by traditional accounting software. For example, hardware maintenance services are required by the companies who use traditional accounting software to ensure their data is stored securely. Since cloud accounting software is provided via the Internet, this ensures that the users are always using the up-to-date version of the technology, providing the subscriptions towards the software is continuing.
ii. Flexible and reduce risk of data loss
Another benefit of cloud accounting is the flexibility it offers to the users, where the users are not restricted to access to the database only during working hours, or to the specific types of office devices. Cloud accounting provides users the opportunity to use its application using any devices, while the dashboard provided in the software also shows real-time business overview, which further improves the productivity and continuity of the business.
Moreover, business owners would face no risk of data loss in the event where there is theft or damage to the office computers, as the data is stored in the cloud. Owners could simply use other devices to log on to their account and find back their data.
iii. Improves workforce efficiency
In addition, cloud accounting also improves workforce efficiency where authorized users in the company are allowed to assess the data at all times, with any devices. Adding authorized users in the system can also be easily done, which further simplifies the process. It is also possible that the business owner could particularly allowing specific employee to access specific accounting data. For example, to allow payroll personnel in assessing the payroll data only, without granting them assess to bank information stored in the cloud.
iv. Save time
Moreover, by using cloud accounting, it saves the users time from manually backing up their database which is required by traditional accounting method. Cloud accounting will automatically backing up the database, removing the possibility of users to forget backing up their data in scheduled time. Besides, cloud accounting also provides automation services such as setting up payment schedule to automatically pay suppliers amount owed to them, sending out invoices to recurring customers at specific time.
3.0 Xero – Cloud Accounting Software
Currently, there are ready cloud accounting software providers in the market, such as Xero, Biztory, Financio, Sage. Business owners simply have to pay for the subscription fees to use the applications provided.
One of the Xero’s features include the Xero Dashboard. It allows business owners to keep in watch up-to-date key performance indicators regarding the businesses they own. Moreover, the dashboard allows users to easily review monthly cash in and cash out of the company to allow easy comparison with cash flow budget and keep track on how the company is doing. The dashboard also provides account watchlist which displays the accounts users wish to keep track of. Pending bills and payment from customers are also available on the dashboard for users to watch out for late payment.
Furthermore, Xero allows users to customize their own invoices by uploading company’s logo on it. Users are able to create many different styles of invoices and select the one they need to send invoices to particular customers.
Another feature includes an easier bank reconciliation provided by Xero. Xero will automatically provide suggestion on matching with bank statement lines at the side and transactions included in xero such as bills paid, sales received, expense claims. For instances where the bank statement line consists of more than one transaction, users are required to click “Find & Match” to find transactions that are related to that particular bank statement line.
Other instances such as amount received in split payment by customers or amount paid to suppliers in split, Xero also provides searches on the invoice where users can click on “split payment” to split the bills to match with the bank statement line.
Besides, Xero also provides feature where it can be set to automatically email payment reminders to customers. Users are free to choose on how often they want the reminders to be sent to the customers.
Online invoices allow customers to pay business owners straightway by clicking on the “Pay Now” button, using third-party payment services.
Given that the competitive environment in today’s world, companies would worry if their financial data can be kept securely when they choose to switch to cloud based accounting platforms. Another concern is that owners might have confidential data where they would want to hold tight control on it and would not want it to be accessed anywhere, especially with non-secured wireless network.
Although with some concern owners might have towards the safety of cloud accounting software, it still provides benefits to users as compared to the traditional accounting software, especially towards small companies with lower startup budget.