Cloud accounting has exploded in popularity in the past few years. Online accounting software company Xero has over 1.38 million subscribers and rival QuickBooks has over 2.55 million subscribers. Another main player is Sage Business Cloud Accounting, and there are a growing number of software companies offering a wide range of cloud accounting choices to the business world.
With HMRC’s digitalisation of tax reporting due to be phased in from next year, there’s never been a more pressing time for businesses to review their current accounting requirements. Choose cloud accounting and you will most certainly be future proofing your business accounting processes.
What is the cloud?
The ‘cloud’ is short for cloud computing and is essentially a vast global network of servers, which are linked together as a single ecosystem. The services cloud computing delivers includes storage, databases, networking, software, analytics, intelligence and more.
The Microsoft Azure beginner’s guide to cloud computing is a good read for further insight.
What is cloud accounting?
Cloud accounting is accounting using software accessed over the internet that is hosted remotely on the cloud. All functions are performed off-site and users access the applications remotely through the internet.
What’s the difference between cloud and desktop accounting software?
Desktop accounting software is installed onto and run on your computer. With desktop software all data relating to your accounts is stored on your computer’s hard-drive. Cloud accounting software runs on the internet. Cloud accounting is more flexible because it can be accessed on any device with an internet connection, whereas desktop accounting is only available on the on-premises computers where it has been installed.
Cloud accounting can also update financial information automatically enabling real-time reporting. There’s also far less maintenance required with cloud accounting as back-ups and updates occur automatically.
Which cloud accounting software is best for my business?
Almost certainly cloud accounting is the way forward for any business looking to update their accounting processes. PC Magazine has a review of the best accounting software of 2018. There are many online accounting software services to choose from.
Consider ease of use, the facility for multi-currency transactions, how easily you can integrate the system with other business software, system flexibility, customer support and pricing. Also consider the availability of add-ons or modules, such as payroll and connecting to your eCommerce system.
The benefits of cloud accounting
- Data in the cloud can be more easily shared, for example with HMRC and your accountant
- It’s more efficient, which means cost savings
- Cloud software can download transactions from your bank. With a few simple set-up requirements your bank statement can be reconciled in minutes, rather than hours
- Easy to use
- Effective reporting
- Software as a service (Saas) offers huge cost savings and enables businesses to scale accounting requirements as they grow
- Quick and easy technical support
- All ready for Making Tax Digital
Why accountants love the cloud
“Cloud accounting streamlines certain tasks, enables accountants to access client data in real-time for accurate forecasting – and also offers a significant reduction in data discrepancies. With time saved on number crunching, we are able to offer better value to clients and focus more on business strategy and advice.” OS Accounting
Why your business should make the move: Making Tax Digital
In the UK, the government’s plans to end the paper tax return under its ‘Making Tax Digital’ proposal is forcing UK businesses to look at the compatibility of current accounting systems for future tax reporting. As part of this move, businesses will be required to keep digital records and submit quarterly updates digitally to HMRC.
Making Tax Digital is due to be phased in from 2019, with the mandatory reporting of VAT for those with a taxable turnover above the VAT threshold. As for further implementation, Brexit may interfere with project release dates. HMRC are scaling back digital projects to support EU exit work, such as the frictionless movement of goods and revenue collection at the border between the Republic of Ireland and Northern Ireland.
But, despite possible delays, the UK’s tax system is getting an overhaul and in the very near future is expected to be one of the most advanced tax reporting systems in the world. For this reason alone, cloud accounting should be a serious consideration for businesses of all sizes.
By Mike James
Mike James is a UK-based writer for a few small companies and organizations, as well as numerous print and online magazines. Specializing in technology developments and business matters, Mike is best known for articles based around how best to integrate the two – particularly concerning cyber security, where he has been published in some of the leading authorities online.