Cloud accounting – the future or a fad for small businesses

In the UK most small businesses don’t use any form of formal computerised software, choosing instead to use manual record keeping or excel spreadsheets. Cloud based solutions are revolutionising the software market.

Posted by Judith Dugdale

Head of Cloud Accounting Moore and Smalley Chartered Accounts

  • T: 01772 821021
  • E: Judith.dugdale@mooreandsmalley.co.uk
Wed 25th, May

Background

Cloud accounting has been around for longer than most people realise and whilst is fairly new to the UK small business market it is well established in countries such as USA, Australia and New Zealand. In fact 40% of all business of New Zealand use a cloud based accounting software to keep their accounting records.

In the UK most small businesses don’t use any form of formal computerised software, choosing instead to use manual record keeping or excel spreadsheets. The reason for this is that traditional software such as Sage Line 50 can be expensive and complicated to use for very small businesses or startups. Most small businesses in the UK use Sage Line 50 if they do use a computerised system as it has been the market leader for two decades or more. Cloud based solutions such as Quickbooks Online, Xero and Free Agent are revolutionising the bookkeeping software market through the  use of new technology which allows the user to save time, keep records up to date on the move and doing so while being cost effective.

The benefits of cloud software

The main benefit is that the direct bank feeds into the software from your online banking facility mean that data input is reduced. The software uses intuitive, state of the art technology which actually remembers past transactions and tells you where they should be posted within the system. Many have the facility to raise invoices to customers from your phone or tablet to allow invoicing on the go, again saving time at the end of the day and allowing small businesses to raise invoices quicker, which in turn means they get paid quicker.

More established and well funded versions such as Xero and QuickbooksOnline incorporate payroll software for a minimal additional cost, further enhancing their appeal. The software is hosted on the cloud which means you can access the software anywhere, on any device so long as you have an internet connection.

For small businesses where the owner is having to run their business as well as keep all the bookkeeping up to date rave about the time saving cloud accounting software has brought them. They have been able to improve their work life balance while gaining better control over their businesses finances – a win win situation!

Cloud accounting software in general has been built with the business user in mind. Processes are easy to use and laid out in a clear manner. No course in bookkeeping is necessary to get up and running, just a few hours training which can be done via an accountant or by using the providers online training guides.

What does cloud based mean?

Basically it means the software is not hosted on your computer or internal servers, instead the provider has large data centres where your data is held, along with all other users of the software. They are accessed via secure hosting sites so that you can access the data where you have internet access. The provider does all the software updates at once, on their servers, so the down time is minimal and usually these updates are done while you are asleep. No more costly upgrades when government changes are introduced or when your hardware is using an older Microsoft platform. What is more because the software is accessed on the internet you can access it on both traditional hardware along with more modern laptop such as Imac’s.

What about security?

A question that is posed a lot to me is what about security of data? What happens if someone hacks in? In case of Xero and QuickbooksOnline, the two leading players in the UK, the security levels are greater than that of online banking. Therefore if you are happy to use online banking it should follow that you are happy to use cloud software. Moreover, the future of these companies depends upon them keeping everyone’s data secure. They spend a colossal amount of money on securing their servers knowing that any security breach could mean an overnight end to their business.

Another area linked to security that is often brought up is data protection. Again, the two major players in the market actually have their data centres in the US. Many people are aware that in the US the data protection laws are much less onerous than those in the EU. However, the UK market is such a key area that these organisations comply with EU-US data protection agreements to ensure they can attract UK customers.

Most of us, unknowingly, already have data in the US. If you have a facebook, twitter or gmail account to name just three, your data is already in the US.  

Is it here to stay?

The simple answer is yes. Cloud accounting software is the way forward and is not going to go away. It is still in its infancy and people making the switch now are the early adopters. SAGE have now enhanced SAGE One, which was a very poor Cloud offering, as they can see the trend for businesses switching to online software. In my opinion they still fall short of the biggest cloud players and have work to do which they are, and I have no doubt than in a few years they will have an excellent alternative within the market place. It is seen as such a huge change in the accounting industry that many accountancy firms now have a cloud based service which allows you to pay monthly for accountancy support and often at reduced costs to what businesses currently pay, particularly if they have manual or spreadsheet records at the moment.

Is it complicated to make the switch?

Switching to cloud software is easy, and can be done at any point in the year. I recommend that people initially speak to their accountant to find out which software they support to make it easier to gain help if it is needed. There are so many choices that it makes sense to get help from the experts to ensure you get the correct advice. It is also worth highlighting that your accountant can have real time access to your software so they can give you proactive not reactive advice.

If you are interested and want to find out more contact Judith Dugdale, head of cloud accounting at Moore and Smalley Chartered accounts. Judith can be reached on 01772 821021, via twitter @judithDugdale or via email Judith.dugdale@mooreandsmalley.co.uk.

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