This article is written to highlight the advantages and disadvantages of cloud accounting because the time is now ripe for us to stop pretending that we cannot see the emerging accounting trend where cloud computing is constantly changing the way accountants and business owners process and exchange accounting information.
Take it or leave, cloud accounting is gaining more grounds in business and will continue to do so in the foreseeable future. Businesses of all size and type now rely on one cloud based accounting service or the other.
Benefits or advantages of cloud accounting
Speedy processing of information and relatively easy access to information: we now live in a world where speed is everything. Decision makers rely on information that is produced on timely basis. Cloud accounting serves the need of managers in this regards. With the right tool and an internet connection, a manager quickly process information from any part of the world.
Reduction in overhead cost: accounting as a service function adds to the overhead of running a business. The main cost here is the cost of hiring someone with the right skillsets. When outsourced to internet accounting vendor, this cost that would otherwise be spent on hiring and training accountant will be saved.
Reduced licencing fees: some traditional accounting software entails making periodic payments. This expenditure will be avoided if the accounting function is outsourced to a cloud accounting vendor.
Access to the best talent: as experts, cloud accounting companies are a able to pool the brightest minds together. You won’t be wrong if you tap into this pool knowledge.
Pay as you use: you don’t have to worry about buying that expensive accounting software if you engage the service of a vendor. All that is required of you is to pay for the amount of time you have used the service.
Benefits from the use of advanced features: small and medium sized businesses will struggle to afford paying to get full version of financial processing software. Because the financial service provider will have many clients that subscribe to their services, the cost of getting a full fledge accounting software will not be felt by their customers.
Access to real-time accounting information: having accounting software in the office sometimes restricts new generation managers from acting as swiftly as they would love to. It is now common practice for people to work from home and providing this access would be too cumbersome and expensive for a small company to provide. By Subscribing to the service of any company of your choice, you will be giving your company the invaluable chance of surviving in this ever competitive business environment.
Automatic upgrade: using the service of a cloud accounting service in your business will remove the burden of having to keep your accounting software up to date. This is really handy when it comes to installing patches that is required to keep your accounting information system safe. Also, the time that would have been invested in designing and implementing software change policy can be used in performing other management functions.
It improves overall efficiency: the overall efficiency of a company will be improved if all the above benefits are taken. Fast decision making combined with reduced overhead for example will no doubt increase the productivity and efficiency of a company.
Drawbacks or disadvantages of cloud accounting
Most of the potential drawbacks of cloud accounting comes from the fact that small businesses might not been ready to handle the consequence of over reliance on business technology. Below are some of the most common disadvantages of implementing an accounting system on the cloud.
Potential Loss of sensitive data: one danger of cloud accounting is the fact that control is technically lost. Control is lost in the sense that as a company, you have no control over your data that is in the cloud. The good news is that there are good practices that when followed can significantly reduce the risk of losing your data in the cloud. At the very least, due diligence should be carried out before entrusting your accounting data to the care of a cloud vendor.
You can potentially be frustrated if anything happens to your internet connection: I sometimes imagine what would happen to us if anything should go wrong with the internet. From the perspective of a business that relies on cloud accounting, it will affect the smooth running of operations if there happens to be an issue with getting the network to work.
Still characterised with lots of myths: considering the fact that cloud computing, the technology that cloud accounting is based upon is relatively new, there are still grey areas where people still have half-baked knowledge on. I remember an incident which took place in Northern Island where an influential government official argued that the data from his county if going to be stored in the cloud should be on the cloud above the county as they have persistent cloudy weather LOL. Until people become fully educated on the mechanics of the concept of cloud accounting, the possibility of significant drawbacks cannot be ruled out.
Laws and legislations can be broken: most accounting vendors in the cloud operate from jurisdiction where the laws are significantly different from the one that operates in the home country of the client company. The danger here is that uninformed managers or business owners could potentially act in a way that violates the laws of the country where they operate. This problem can easily be overcome by engaging the service of a lawyer who is experienced in the company’s industry.
In conclusion, in as much as there are some potential disadvantages that can be posed by cloud accounting, the advantages that cloud accounting can bring to a business outweighs the downsides of cloud accounting.
Just like every worthwhile innovation, there would always be some drawbacks. Cloud accounting is not an exception. The good news is that businesses are seeing sustained improvements as a result of their investments in technology– cloud accounting included.