Tax & Accounting13 June, 2024

Guide: What is cloud accounting and what are the benefits?

Did you know 38% of European businesses use cloud-based financial software?  

Cloud accounting is on the rise, and its adoption won’t stop here. Why? Because of the benefits it offers businesses of all sizes.  

You may have heard the term cloud accounting used among software providers, and while it is widely adopted, do you actually know what it is?

There’s still some confusion around cloud accounting, what it’s used for, and how to implement it. In this guide, we talk you through what cloud accounting is, how it works, the benefits, and how to successfully migrate to the cloud. Read on to become an expert.  

What is cloud based accounting software? 

Cloud based accounting brings your accounts software online, uniting your data and making it more accessible–in fact, employees can access their accounts from anywhere with an internet connection, instead of specific devices.  

Instead of each employee working on the same software, but installed separately on each of their computers, cloud accounting allows you all to access the same system, and share data with colleagues and clients with ease.  

Users log into a shared system that allows them to access one another’s most up-to-date data, while providing instant backups for security. Extra functionality is offered by APIs, meaning you can plug-in third-party software solutions to provide more business value.

What’s the difference between cloud accounting and traditional on-premise accounting?

While traditional accounting software is desktop-based—meaning it’s localised to each person’s computer—cloud accounting removes the desktop application and puts everyone on the same online system.  

The key differences between cloud accounting and traditional accounting include:

  • Cloud accounting data can be accessed anywhere, unlike traditional solutions which require access to the application itself.
  • Data is always up to date, and doesn’t require manual sharing between people as it does in traditional accounting.
  • Cloud accounting uses secure data encryption to prevent data loss and secure your clients’ private financial information online, helping you remain compliant. While traditional accounting exposes you to risk—for example, by sharing data over email.

How does cloud accounting software work? 

By migrating your practice to cloud accounting software, you’re enabling employees to access up-to-date accounts and data from anywhere with an internet connection, at any time.  

Cloud based accounting allows you to conduct everyday tasks, such as balancing books, submitting tax returns, and conducting KYC checks, on a shared system. The software enables you to manage payments and invoices (cloud payroll), share data (cloud data storage), and enable your accounting processes (cloud accounting) through faster automation.  

Practically speaking, instead of paying to install the software on each device within the practice, cloud accounting solutions let you to pay for what you need, and pay as you go. For example, instead of paying for a year’s licence for thirty employees, you pay month by month for what you need on the cloud, allowing you to scale and customise your software.

Wolters Kluwer uses integration features within CCH iFirm to enable you to connect with bans, HMRC, and clients, thrking systemough your online cloud software.

What are the benefits of cloud accounting?

We’ve already covered some of the benefits of cloud software for your accounts by comparing traditional vs. cloud based accounting. But this barely touches the surface. There are so many features and functionalities empowered by cloud accounting that the list goes on. These are our top seven benefits.

1. Automation

Automation is a key component of cloud software, as it speeds up your manual work and allows you to focus on the most important areas of your practice—your expertise and your clients. Automation is exactly what it sounds like: the software automatically carries out processes for you.

For example, personal tax automation tools automate the extraction and categorisation of tax data from client documents, slashing the time advisers spend on manual processes. Among the benefits are improved efficiency, reduced errors, and money saved.

2. Lower costs

Online cloud accounting software also comes with lower costs. Why? Because you only pay for what you need, unlike having traditional accounting software installed on each separate desktop, where you usually pay upfront for 1+ years.  

3. Accessibility

Cloud accounting solutions are accessible from anywhere. Your employees will be able to log in and see up-to-date data that may be shared by their colleagues or clients. Access your accounts anywhere, with real-time data. No need for re-keying data or sending Excel spreadsheets over email. Everyone can see what’s happening, enabling a smooth working environment, speed, and ease.  

4. Data security

While some people may assume cloud accounting is less secure than contained on-premise software on a desktop, it’s actually the opposite. Because isolated software doesn’t allow people to share data, it means they must send it via email, in files, or even physical copies. This exposes firms to far greater compliance risks than cloud accounting solutions.  

Cloud accounting platforms are encrypted and offer high-security solutions. Security is paramount in Wolters Kluwer cloud software, meaning we’re committed to safeguarding your data and intellectual property. A safe system means clients can trust in you.

5. Integration

Cloud accounting software integrates with third party solution providers, meaning that you can bring your tech stack under one roof—meaning one system for everything.

6. Data functionality

With data securely and immediately accessible in the cloud, there’s endless opportunities for accounting practices to grow and optimise their data.

For example, with real-time data available in the cloud, you can track, analyse and identify patterns that may indicate potential compliance risks or fraud following relevant regulations and standards. Beyond automated fraud detection, you can analyse trends and patterns to find client opportunities and areas for growth.

Analytics based on historical and real-time data may also help with predictive modelling, giving practices the ability to deliver better advice to guide strategic client business. This can inform pricing, resource allocation, and investments—helping you make smarter decisions grounded in data.

7. AI capabilities

Beyond data capabilities, Artificial Intelligence (AI) integrations can assist with tasks such as expense categorisation, invoice processing, and financial reporting. Hosting data in the cloud makes it available to automate repetitive tasks and streamline workflows using AI.

8. Scalability

As your business grows, so do your cloud accounting platforms. No need to keep adding users, with costs rising higher and higher. Instead, pay for what you need and add users in the click of a button. As your data and systems are all online you can easily add more people as needs change.

9. Automatic updates to functionality

With traditional accounting software, many features become redundant or outdated. This is because technology is moving so fast that functionality is always being improved and built upon, meaning that each firm would need their vendor to come to their office and physically install updates each time something changes, posing significant delays to using new features.  

Instead, cloud accounting solutions are online, so they automatically update while you use them, bringing all the latest features directly to you. 

Why should you move to cloud accounting? 

Cloud accounting is becoming more appealing to businesses of all sizes, as those who aren’t using cloud accounting platforms will fall behind.  

Picture this: you’re manually conducting KYC and AML checks, and laboriously filling out personal tax returns for clients.  

Meanwhile, your competitors are using automation to quickly, efficiently, and securely conduct AML and KYC compliance checks, and file personal tax returns.  

It becomes clear that clients will opt for the firms that can get the job done quickly and securely using cloud accounting software.

How to successfully migrate to cloud accounting 

You know what cloud accounting is, how it differs from traditional accounting, and what the benefits are. And you’re interested. But how do you actually begin implementing change?

These are our eight steps to migrate to the cloud

  1. Understand your business needs to help decide what software to choose.
  2. Plan your migration roadmap with your software vendor.
  3. Prepare your data, including deleting redundancies and duplicates.
  4. Assess your business readiness by seeing what you’re already using and how to move this to the cloud.
  5. Understand security considerations by reviewing your unique policies and ensure the cloud accounting software vendor you choose will uphold these.
  6. Consider business continuity by anticipating and preparing for interruption.
  7. Train employees and empower your team to make the most of the cloud platforms.
  8. Test your new systems, as constant testing and feedback is key for success. 

Want to learn more about migrating to cloud accounting? Read our whitepaper here

CCH iFirm

Cloud-based accounting

Elevate your accounting practice with CCH iFirm, a collaborative cloud-based accountancy solution.
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