Running a small business can be challenging. You’re supervising the daily operations and the ins and outs of your business’s financial matters, such as sales, profit, and transactions, all at once. This is why digitalization is a substantial innovation for businesses’ financial tracking.
By now, you’re probably using digital technology to conduct market research and promote your business. These are not the only things you can do on the internet for your enterprise. Thanks to cloud accounting, even your bookkeeping can be streamlined into a comprehensive online database.
Cloud technology has been helpful for many companies. According to Statista’s 2020 survey, 48 percent of industry experts believe this integration’s most significant benefit is increased efficiency.
If you’re still using traditional bookkeeping methods, it can be easy to struggle with keeping up with your financial records. To understand cloud accounting, keep reading to learn what it means, its advantages, and the disadvantages you must comprehend for better usage.
What is cloud accounting?
Cloud accounting utilizes accounting software with cloud computing technology to host a secure remote server for finance tracking. This structure allows small business owners like you to store, access, and manage financial systems, reports, and documents anytime and anywhere, as long as there’s an available internet connection.
At the same time, cloud accounting can enable multi-user access, so every team in your organization sees the servers and is constantly updated regarding financial matters. It can also streamline financial processes, so you can focus on other essential company growth matters.
You can manage your cloud accounting using the four types of cloud computing: public, private, hybrid, and multi-cloud.
Public clouds – Managed by third-party providers, these clouds are accessible to anyone. Other businesses can share similar server and database integrations when you use them.
Private clouds – This IT infrastructure is the one to go if you don’t want public clouds because they are only accessible to a single user or organization. They have two divisions: managed and dedicated.
Hybrid clouds – The most common cloud type used by businesses. They mix public and private clouds for more flexibility and scalability.
Multi-clouds – When you outsource different cloud providers, they are multi-clouds. They’re not to be confused with hybrid clouds.
These servers are available in the following cloud service models: software-as-a-service (SaaS), platform-as-a-service (PaaS), and infrastructure-as-a-service (IaaS).
Advantages of Cloud Accounting for Small Businesses
Cloud accounting is beneficial for boosting productivity in your organization. Considering the workload you must manage daily, cloud accounting can help ease its financial aspect, allowing you to set and align more growth goals without worrying about your financial records.
Let’s look at the other cloud accounting advantages your small business can leverage.
The first key cloud accounting feature is accessibility. Its internet compatibility allows you to use it anytime and anywhere. Rather than storing your financial records on your office server, you have a cloud system readily available on internet-compatible mobile devices. That way, you and your team can access the company’s financial data whenever needed.
This accessibility can maintain consistency between your teams because they work on a central database that syncs information on various devices to create the most updated versions. This is how you and your team can minimize the likelihood of manual mistakes.
You may mix your business and personal financial records when relying on manual processes as a small business owner.
While the cloud software syncs your business’s financial data across devices, it can also categorize them based on your customizations. These categorizations can streamline your bookkeeping process, allowing you to separate your company’s financial records from personal expenditures.
When you have a central database solely for your business’s expenses, you can better manage your personal bookkeeping, including home mortgage loans, utility bills, and daily expenses, without confusing them with your enterprise’s financial transactions.
Collaboration and information sharing can be straightforward and proactive with cloud accounting. Since you and your team can access the cloud system anytime, real-time updates keep everyone on track. Moreover, you can efficiently outline the budget pitches for business collaborations without creating too many textual documents, providing organized information sharing to secure the partnerships.
Business operations often involve tons of paperwork that can be time-consuming. When dealing with them, hard copies are typically required. The printing process can be slow, especially when a document has many pages that need hard copies. This paperwork-reliant operation can affect your productivity.
With cloud accounting, you can reduce the paperwork associated with your financial bookkeeping. You can quickly scan financial documents, manage bills, store receipts, and facilitate payment processes in one accounting software instead of printing them on paper.
Buying and maintaining hardware for business bookkeeping can be costly. Although you’ll still spend on cloud accounting, it can be much more cost-efficient than hardware.
Cloud accounting can be a cheaper investment than building a dedicated in-house tech team for financial management. Cloud providers allow you to only pay for what you need based on offered plans and packages. They come with monthly or annual contracts that are manageable with proper budgeting.
Traffic spikes can happen when many users simultaneously make transactions on your website. These demand surges can be challenging if your tech infrastructure is not scalable enough. This is how cloud accounting boasts scalability that can cater to this unpredictable, high transaction traffic.
With scalability, you can increase or decrease your cloud system’s processing to efficiently handle traffic spikes. That way, your financial tracking keeps working during the high-volume surges.
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The Downsides of Cloud Accounting for Small Businesses
Cloud accounting is imperfect, as it has its fair share of negatives. Although this technology has limits, awareness and understanding of these drawbacks can help you better manage them. Here are the potential downsides of cloud accounting you can encounter.
Cloud accounting is a digital solution that requires an internet connection. Without it, the cloud systems will not work. Additionally, you will have trouble accessing your financial records when you experience unstable, weak, or low-speed connections, resulting in downtime and errors.
Even power outages can cause you to lose access to the internet. To mitigate this risk, ensure your teams use high-quality internet connections with optimal speed.
Prepare electric generator backups for power outages, just in case.
Although cloud systems are often more secure, inadequate cloud security measures can threaten data privacy. As technology evolves, hackers are evolving, too. They can compromise your financial records through malware attacks, ransomware, or phishing and use them for personal gain.
Minimizing your cloud security risks means choosing a cloud provider that transparently details its contingency plans for data breaches. Ensure that they implement robust data encryption and authentication features to protect your financial records.
Cloud computing systems are subject to regulations and cloud law compliance. Many small businesses consider this the most challenging rule of using cloud software.
Although cloud providers are accredited, the responsibility for cloud law compliance lies in your hands. Regular compliance audits on all your cloud providers are how you can ensure your business is ethically using cloud accounting.
Keep Your Business Finances on Track With Cloud Accounting
Cloud accounting is excellent for managing your business’s financial bookkeeping. Despite its drawbacks, it can still work to increase your bookkeeping efficiency.
It may sound heavy, and it’s possible to think it’s not affordable, but there are cloud providers tailored for small businesses like yours. You just have to pick the right one—one that has the best value, can scale your financial tracking, and guarantees data protection.
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