What's cloud accounting?

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1st January, 2020

Cloud accounting 101: What is it and who can benefit by using it?

Cloud accounting may sound like more tech industry jargon, but the concept behind it has caused huge and overwhelmingly positive impacts for business owners over the past decade.

Also known as ‘online accounting’, cloud accounting generally makes managing your finances and tax affairs easier, faster and safer for business owners.

Just as is the case for Netflix, which made a name for itself as the brand that took physical, DVD films and made them available ‘in the cloud’, MYOB specialises in developing accounting tools that can also be accessed, and used, online.

In this sense, cloud technology is making services from movies to bookkeeping and accounting available anywhere, anytime.

Ryan Lazanis, CPA, who recently published a list of the 131 best cloud accounting software apps from around the world (which includes MYOB), had this to say about cloud accounting:

“When I ran my accounting firm, our whole value proposition was centered around making our clients’ lives easy and pain-free,” said Lazanis.

“Cloud accounting played a massive role in helping achieve this. You just can’t beat anywhere, anytime access to your data and the automation benefits of eliminating tedious, time-consuming tasks.

“Cloud accounting was a game-changer for my clients.”

To help you understand cloud accounting software better, we’ve prepared a brief FAQ to cover all the main concerns people have when they first learn about cloud accounting.

But first, a definition:

When someone mentions ‘the cloud’, they’re referring to a network of remote servers hosted online that store, manage, and process data in place of local servers or personal computers.


1. What is ‘cloud computing’?


It’s simply using the internet to access software and storage, rather than physically installing it in a computer.

Cloud computing and ‘the cloud’ are used interchangeably, so you can use the same definition as given above.


2. Did you know that you’re already using cloud computing?


Many people, especially in its early days, weren’t aware they had access to cloud-based tech, with obvious examples being online email services such as Gmail. These services meant people could access their emails from any device as long as they had access to the internet.

Similar technologies for storing large amounts of data, such as Dropbox and Picasa, soon followed.

But did you know the concept came about far earlier than that? The Virtual Machines (VM) operating system, which since evolved into VMWare, first came into being in the 1950s, becoming a foundational idea for cloud computing long before the internet came about.


3. What is cloud accounting?


Cloud accounting, or online accounting, serves a similar function as cloud computing, but specifically as it relates to accounting and bookkeeping software.

You might install the software on your computer (but this is becoming less common), and it runs on remote servers, so you can access it with an internet connection.

READ: 7 ways online accounting can improve cash flow

In some instances, you won’t need to install the software on your computer and can access it via web browsers. This is becoming the more common scenario.


4. Why is cloud accounting good for your business?


Cloud-based accounting software offers a number of benefits for businesses including:

  • It alleviates the need for businesses to store and manage data, or maintain expensive computer hardware
  • In some cases, all you need is a mobile device with internet connectivity, making cloud accounting far cheaper than desktop-based solutions
  • The information can be updated and accessed from any computer anywhere in the world, offering true flexibility in a highly-connected world
  • There’s only one ledger kept and that is your file in the cloud, which improves the accuracy of the information and therefore minimises errors at BAS and tax time
  • Ledger owners can interact with their tax agent in real time instead of having to collate information and send the data file manually on a regular basis
  • The software is automatically kept up-to-date by the provider, meaning you don’t need to download updates such as new tax rates where the payroll module is used

MYOB provides cloud accounting solutions

An increasing number of businesses, especially new and startup businesses, are choosing to use cloud-based accounting software such as MYOB Essentials to process their day-to-day transactions, manage cash flow and also keep track of purchases and payments.

MYOB Essentials is suitable for:

  • Small businesses with simple accounting needs
  • People new to accounting or accounting software
  • Businesses that need to transition from manual recordkeeping

5. What about security?


Any discussion of cloud technology inevitably brings up concerns regarding security and data privacy, as people quickly realise they’re no longer ‘owning’ their data (and sometimes, their customers’ data).

Being aware of these security concerns is particularly pertinent today, as we see data breach after data breach impacting the world’s biggest brands and the privacy of their customers.

The good news? Your cloud accounting software provider is responsible for this and, in the case of MYOB, spends significant time and resources making certain that their servers maintain a higher level of security and integrity than its customers could maintain of their own accord.

Features like two-factor authentication, among others, are examples of how the security of data held online continues to evolve with the times.


6. What does this mean for your accountant or tax agent?


Accountants, bookkeepers and tax agents have become more and more comfortable with recommending cloud accounting software to their clients, except when extenuating circumstances prevent them from doing so.

This is because, not only do they recognise the benefits online accounting offers your business, they also reap the rewards themselves.

For bookkeepers, cloud accounting means faster documentation, less time spent doing data entry and more time spent offering advice on how business owners can reduce costs or improve their systems.

For accountants, cloud accounting means a more efficient compliance workflow, reducing the chance of duplication or other errors, and allowing them to spend more time advising their clients on how to maintain and grow their business.

To give you a practical examples, accountants who have clients using MYOB Essentials can easily login to their online files come tax time, processing their end-of-year adjustments, which gets updated in real time, and with no major interruptions to the clients.

Throughout this process, there’s no need to send files back and forth, or verify figures from various sources; it’s all just done.

Another benefit of using the cloud for advisors is they can review clients’ operating results at any time (including in April or May each year for tax-planning purposes) and provide proactive, timely advice on issues impacting their business (such as falling margins or a looming super payment). This adds more value to the advisor’s service offering by helping to keep the business on track and comply with tax obligations.

 

If you’re in Australia, you can find out more about how online accounting software can make your business life easier here. If you’re in New Zealand, click here.