The future is in the cloud: cloud accounting
16 May 2018
In recent years the cloud accounting market has exploded, with a vast array of options now available. In essence, when you are using cloud accounting you are using the internet to access your accounting software and the data you have stored on it.
Unlike traditional accounting software that is installed only on a business’ servers, data stored in the cloud can be much more easily shared with others and can automatically pull in information from other sources. Our experience, from working with clients who have adopted cloud systems, is that they can bring real business benefits. So, if you have yet to be persuaded, this article looks at some of the benefits that moving to cloud accounting can bring to a business and its finance team.
The biggest advantage, and main purpose, of cloud accounting is the time savings that it brings, making businesses more efficient by freeing up time for value added activities. For many businesses this may well translate into a cost saving in terms of lower bookkeeping costs. The two most widely used features inherent within cloud accounting products are:
By linking your business bank accounts to your cloud accounting software, much of the effort of posting banking transactions is removed. The software will download transactions (usually overnight) from your bank, and these will then await reconciliation. Any items matching a sales or purchase ledger invoice will be identified, with a simple confirmation required by the user. Rules can be set up to ensure that default treatment is implemented, meaning that the bank reconciliation can take minutes rather than hours. The software has in-built artificial intelligence (AI), learning from what has happened in the past to suggest possible actions and save further time.
Optical character recognition (OCR) software is able to read your receipts, purchase invoices and bank statements. The most well-known product is Receipt Bank, another is Auto Entry. These products enable users to upload data in a variety of ways, from taking a photo via an App on their phone to sending these via email, Dropbox and PayPal. The software populates the transaction, picking up pertinent information such as supplier, date, invoice number and amounts. The user can choose to manually or automatically publish the data directly into their cloud accounting software, cutting down processing time and ensuring transactions are virtually error free.
Ease of use
For the first time these are products aimed directly at businesses rather than accountants or bookkeepers, making it easier for business owners to control their own processing and have access to up-to-date information. The look and feel is designed to appeal to those seeking a visual representation of accounts, with a dashboard style landing page. Terminology has been carefully aligned to be less technical, and as mentioned above, the software is intuitive and makes the user experience easier than ever before. This approach means that many businesses have been able to get their accounting system up and running very quickly, and without too much input from their accountant. They are also able to access it from anywhere, using a laptop, tablet or mobile device.
With up-to-the-minute processing comes more effective reporting, making it easier for businesses to make decisions with live data at their fingertips. All cloud accounting software has in-built reporting, but there are also a whole host of bolt-on products, such as FUTRLI, which can take reporting to the next level, linking the financial data to standard or tailored reporting packages, enabling easy benchmarking, metrics and much more.
A move towards the ‘software as a service’ (SaaS) model has driven prices down, as products compete for market share. Gone are the days of heavy investment in accounting software for many businesses. Pricing models mean that many can pay as little as £20 per month for software that is constantly updated, secure and hosted externally.
Accountant, technical and advisory support
Cloud software enables multiple users to be added at no extra cost, including the external accountant. This means that any technical support can be provided easily and quickly, with no emailing of backups and waiting for it to be returned. In turn, this leads to opportunities for your accountant to provide value-added services, for example assistance with technical matters such as VAT, dividend and tax planning, business advisory work, forecasting and so on. All of this can be provided using live data, rather than having to wait until the draft accounts have been prepared, by which time opportunities may have been missed.
Digital tax reporting
If these benefits aren’t enough to tempt your business into the cloud, HM Revenue & Customs’ (HMRC’s) Making Tax Digital (MTD) programme could offer an additional incentive.
From April 2019, businesses with turnovers over the VAT threshold will have to submit their VAT returns using MTD-enabled software. Digital reporting for income tax and corporation tax are likely to follow, possibly as soon as April 2020. Perhaps the most significant change, however, is that MTD will require business records to be kept digitally, and, where separate software systems are used to prepare and submit a tax return, transmitted digitally between those systems.
Businesses trading over the VAT threshold only have a year to assess what the MTD changes will mean for their record keeping systems and processes. If your current systems will not be MTD-compliant, the cloud might offer the answer.
What is the best cloud accounting option?
The main players in the market are Xero, QuickBooks Online and Sage Business Cloud Accounting, however there are at least 40 other products also currently available in the same basic price range. With such a wide range of choice available, it can be difficult know what route is best for your business.
We have been watching the market with great interest. Our policy is that one size does not fit all, and accordingly we have stayed away from aligning ourselves with any one provider.
We do, however, have considerable experience of using cloud products on behalf of our clients within our Outsourcing Team. If you are starting to think about which cloud product could be right for you, we would be happy to talk to you about the options available.