What is Cloud Accounting, and What is the Big Deal?

UPDATE: HMRC’s Making Tax Digital will be going ahead. As of April 2018 sole traders and buy-to-let landlords will need to comply with the new reporting requirements and report quarterly to HMRC. A pilot will be launched this April; however, the exemption threshold is still up for review.

So what is the big deal about doing business on the cloud and why is it beneficial for businesses to embrace this technology?

I get asked by clients all the time why they should change their systems, which have been working fine for all these years, to a new way of working. Firstly, cloud technology is not that new, internet banking and Dropbox have been around for a while now, yet we take this for granted within our business.

Secondly, security has developed. In the past, security has been an issue for a lot of clients; however I came across this great quote the other day, which says it in a nut shell:

"Cloud computing is often far more secure than traditional computing, because companies like Google and Amazon can attract and retain cyber-security personnel of a higher quality than many governmental agencies." - Vivek Kundra, former federal CIO of the United States

Many software applications run through the cloud without you really noticing it, with the main benefits being:

1. No need to download the software on to your server
2.  Upgrades carried out automatically in the background
3.  You can access the software from any device at any time
4. You have more flexibility and the option to use add-ons to improve your processes and efficiencies

I have a great example of a client who has truly taken on board this new technology. They were using a desktop bookkeeping system - timesheets were manually completed, expenses were completed on a spreadsheet by the salesmen and purchase invoices manually entered into the system. With cloud technology all of these admin tasks take place virtually automatically, saving a huge amount of admin processing time each month.

Consequently:

• Timesheets are now completed using Tsheets where the employees use their mobile phone to record the hours they work
• Expenses are now recorded by simply taking a picture of the receipt, which the software then reads and allocates to the relevant cost account
• All purchase invoices are now either scanned when received in the post or forwarded to an email address where, again, software such as Receipt Bank or AutoEntry reads all of the information contained in the invoice and process it into Xero (without having to manually type in any data whatsoever)
• Finally, their CRM software is integrated with Xero, meaning that all of the company’s client’s data is kept in one place and there is no need to keep multiple databases.

In addition, clients who have moved over to the cloud have seen an added advantage in the way they now see their financial information, which is real time, up-to-date and in a graphical format. There is also the ability to prepare financial forecasts to include ‘what if’ analysis to see what the impact is on the business if certain actions are taken. These can be done on a regular basis and at a fairly low cost.

This is all very relevant for all businesses of all sizes as the introduction of Making Tax Digital (MTD) from April 18 will force a lot of SME businesses to adopt cloud systems into their way of working. This may seem daunting, but I think the benefits that they will obtain by converting to the cloud will transform their businesses.

For further information on cloud software and how it can benefit you, contact me at lee@raffingers.co.uk.