Accounting is a dynamic field, constantly following operational and technological trends and innovations. In the past, accountants have no option other than manually collecting and tracking finances. However, the arrival of digital tech, such as cloud accounting services, has given rise to efficient systems that make financial management much safer and more accessible.
So, how do these new systems make your process more efficient? Read more about the core difference between traditional and cloud accounting and how the latter can strengthen your business operations.
Traditional Accounting vs. Cloud Accounting
Traditional accounting uses desktop-based accounting systems to manage company finances. This platform doesn’t require an Internet connection since financial data primarily runs on a computer’s hard drive. However, it’s difficult to access data remotely or retrieve it quickly in case of data loss.
Cloud accounting offers a solution to this problem. Cloud-based platforms generally use the software-as-a-service (SaaS) model, letting users perform tasks on remote servers on the cloud. Aside from remote access to data, cloud connection makes accounting an automated, secure, and scalable operation that may significantly improve efficiency.
7 Benefits of Cloud Accounting
1. Accessibility
Traditional accounting systems store data on a computer’s hard drive, which means there’s no easy way to access it if you aren’t physically with the computer.
Cloud accounting eliminates this drawback by storing data in a readily accessible location. Since it securely saves information online, you may access it anytime and anywhere as long as you havean internet connection. And you can do so without downloading any software!
Cloud-based software also delivers real-time updates even within the confines of your home or overseas. This way, you’ll have an easier time sharing reports, processing documents, and making decisions on the go.
2. Allows collaboration
Accounting teams typically need to be in the same place to collaborate using traditional systems, whether in a meeting room or a conference call. However, collaboration is often challenging when circumstances don’t allow it. Some examples of this may be long distances or pandemic lockdowns.
With cloud accounting, you won’t need to be physically present or hop on a call to work with your team. Moreover, you won’t have to pass around thumb drives or multiple versions of a single file for each team member to make changes.
Cloud accounting allows authorized users to access the same file and data anywhere. As mentioned, changes reflect in real-time to help you stay updated on the latest developments.
3. Security
A common concern with cloud-based systems is security. After all, you have zero control over your data’s safeguards from looming cyber threats. However, rest assured that cloud accounting services secure their storage with multiple encryption levels to keep them safe from breaches. Most also let you set access permissions to protect sensitive files from perpetrators.
Besides cybercrime protection, cloud accounting prevents data from corruption due to hardware malfunction. Hard drives generally run the risk of getting corrupted or damaged. You’ll need to implement backups to keep files secure, which are usually time-consuming, especially with large file sizes.
Cloud accounting eliminates the need for backups since data automatically saves online. You can easily retrieve files without fuss, even if your work computers fail.
4. Automation
Another problem with traditional accounting is the repetitive work needed for simple operations, like recording transactions. Your team can spend the time on more critical work like forecasting and financial analysis.
Fortunately, cloud accounting significantly reduces monotonous tasks. Many applications can automatically import financial transactions, send invoices, and create journal entries. Some may also flag invoice and transaction inaccuracies to reduce accounting errors. Other platforms even calculate international taxes to make overseas transactions seamless.
These automated features aim to minimize unnecessary workload and provide more time for company-building tasks.
5. Scalability
The limited functionalities of desktop-based applications, like spreadsheets,become challengingto use as your enterpriseexpands. Such barriers caneasily make data management tedious and hamper company growth. As such, you’ll need a tool that provides flexible and scalable infrastructure.
One of cloud accounting’s primary selling points is its scalability. For instance, you may start with a subscription that features essential accounting functions, which is particularly helpful for startups with no prior accounting teams. As your enterprise grows, you can upgrade and add more functions, eliminating the need to adopt larger systems.
There’s also no need for software updates. Since cloud accounting provides services online, you can be sure you’re using an updated version every time you enter.
6. Integrability
Desktop-based accounting services typically exist in a vacuum, making it difficult to connect and automatically share data with other software. You’d have to input data manually if you need data from a spreadsheet to reflect on the company payroll.
On the other hand, cloud accounting is flexible. Aside from being scalable, it also supports seamless integration with other platforms. For example, you can connect payrolls, customer relationship management (CRM) service, inventory management, and other essential tools to the accounting application, making data entry and analysis effortless.
Syncing data across your business’s systems help minimize errors, eliminate duplicate entries, and solidify your team’s reporting capabilities. Doing so allows you to build a network of interdependent programs that strengthens your management operations.
7. Cost-effectiveness
A service’s cost often makes or breaks your decision to purchase. So, it’s helpful to know that cloud-based systems save the company’s resources more than traditional ones.
Again, cloud accounting is modular, letting you add features as needed. Meanwhile, traditional software applications often have more functions than required, which means you’ll be paying for unnecessary operations.
Traditional accounting is expensive when you factor in its IT infrastructure. It will typically include a computer, server, and software, along with the general upkeep, repairs, and updates of the entire setup.
On the other hand, cloud-based services operate entirely from the web, so there’s little need for hardware. All you need to pay for is the subscription, which is often significantly cheaper than traditional platforms’ overhead.
Simplify Your Operations with Cloud Accounting
Accounting is constantly evolving. Failing to keep up may mean wasting valuable time and resources, which you can use to strengthen your business. Maximize your company’s resources by leveraging software that performs quickly and with minimal errors, such as cloud accounting.
This technology makes financial management more effortless by providing functionalities, such as a scalable infrastructure, secure storage, and automation, to help streamline your processes. Stay on top of your company’s finances by taking advantage of a platform that does the job effectively.
