Some small businesses are holding back from the switch to cloud accounting systems because they’re not sure of the benefits in their specific circumstances. Many others are fully convinced of the benefits, but find the transition process off-putting because they feel they have neither the time nor the resources to devote to a complicated switchover.
In this guide for small businesses, I want to take a look at some of the advantages of cloud accounting software and just what’s on offer in terms of some of the most popular packages out there.
What is Cloud Accounting?
Cloud accounting has a distinct advantage over traditional accounting options. For one they can be accessed on multiple devices anywhere in the world where there is an internet connection. Traditional accountancy software is installed on to individual PCS, or an office network server and you log in locally. Although remote desktop access means you can technically access this software anywhere in the world, the process and user experience are nowhere near as smooth.
Another major advantage of cloud accounting for small businesses is the security aspect. Your sensitive data is all stored securely online on the servers of the software providers. So for people running small businesses, this is both a major time saver and a way to remove the headaches associated with safeguarding customer data and running in-house applications.
With cloud accounting, there is no upfront cost and no cost or time associated with upgrading or backing up files. You pay a monthly fee, and all your files are securely stored at a data center, rather than you having to back them up and keep them secure yourself. All updates are done automatically, meaning you are always running the latest version. Oh, and it’s all HMRC compliant.
What does Cloud Accounting offer Small Businesses?
Cloud computing and other disruptive digital technologies have often benefited smaller businesses by creating a more level playing field. This is particularly true of cloud accounting systems. They give a small business the kind of flexibility and financial oversight that big businesses have long enjoyed.
You may have one office, or none at all – with cloud accounting that doesn’t matter, because you can access your systems remotely at any time, from any place. Because small business owners are often out with customers, on the road, or working from home, the always on and always accessible nature of cloud accounting systems is incredibly empowering.
And this is real-time information. All the industry standard cloud accounting systems (more about these in a bit) put you in the driving seat so that you can drill down and get a snapshot of the current situation.
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Keeping on top of HMRC Requirements
HMRC has insisted that businesses that turn over more than £83,000 (in effect, all VAT-registered businesses) use accounting software that is compatible with HMRC’s own systems. Many small business owners operating below the VAT threshold have breathed a sigh of relief because they don’t need to do anything. However, it’s likely that HMRC’s final objective is that all but the tiniest of businesses will eventually be covered by this regime.
The most popular cloud accounting software systems are completely aligned with HMRC’s requirements and simply adjust to any changes as they occur. This means that businesses using these software suites don’t have to worry about HMRC compliance. So moving to cloud computing can future proof a small business, ensuring that there are no worries about HMRC compatibility in the future.
Making the Transition
Transferring your business accounts to a cloud-based system needn’t be a laborious or disruptive process. Some cloud applications will also offer a free transition process for 24 months of accounts, to help you move online and get started.
It’s important however to work with an accountant or accounting firm that has experience in transitioning businesses to cloud accounting and working with the specific solution you opt for. Many accountants will advertise that they work with specific software, and many software providers award accreditation to qualified accountants looking to partner with them.
Popular Cloud Applications on the Market
There are a lot of cloud accounting software solutions out there. Some of the most popular are Xero, Freshbooks, QuickBooks, Sage 50 and Wave. These all cover the accounting basics like double-entry bookkeeping, accounts payable and receivable transactions, online invoicing and VAT.
Cloud accounting packages like Xero, Sage 50 and QuickBooks all cover payroll, bank reconciliations and no longer need to be a manual or spreadsheet-based task. It’s worth finding out whether the package can take a direct feed from your bank, as this helps integrate and speed up accounting tasks, such as bank reconciliations.
Sage 50 and QuickBooks don’t integrate to customer management (CRM) systems, whereas Xero does. Sage 50 doesn’t have multi-currency support either, which both QuickBooks and Xero do. One of the major drawbacks to Sage 50 is the lack of mobile access which is surprising in today’s mobile-driven world (people don’t want to carry their laptops everywhere and now expect to access applications via their mobiles).
Cloud accounting software can save a small business time, worry and money – a definite win for owners. The final key point is that by transitioning now, you are protecting the business from future changes to the tax regime and HMRC requirements.