CLOUD ACCOUNTING  vs TRADITIONAL ACCOUNTING

 
Just like all industries that have experienced significant improvements due to technology, the world of finance is no different. In recent years we have seen a lot of fintech companies coming up with cloud-based technology designed to streamline accounting processes and minimise human intervention. More and more accounting practices have adopted these new technologies including us here at The Accounting Village. Although our counterparts in the rest of the world have been using cloud accounting since its introduction around 1998 (NetSuite), in South Africa we only started to ride the cloud wave around 2007/2008.
As a businessperson, your finances are your top priority, therefore it’s important to continually assess whether you, your finance team and your accountants are using the latest systems that add the value that you need to run your business efficiently. That is solely your decision to make, not your accountants.
 

What exactly do we mean by Traditional Accounting?

 
Simply put, it is accounting that is typically done using software that is hosted locally on a desktop computer or a server. The problem with these systems is that they limit the accounting function to just the accountants and you as a businessperson are removed from your finances until you hear from your accountants at month-end or at year-end.
Traditional accountants generally:
Draft reports and send them to you once a month. You have to wait for the report to be sent to you and in the meantime, you have no insight into your business financial information.
They use cumbersome data capturing processes which delay the availability of financial information. So your numbers are always delayed.
Usually you receive the same report every month with limited information.
You are not able to integrate your billing systems or data storage systems with those of your accountant. Which means that every month you have to submit bank statements, invoices, receipts, etc to your accountant.
 

What is Cloud Accounting?

 
In simple terms, it just means using accounting systems that are executed using software hosted online (‘in the cloud’). This means that your financial information is stored and accessed over the internet instead of your accountant’s hard drive or server.
Before we look at the benefits of cloud accounting, let’s address the question on your mind right now. Is my financial information secure on the cloud? Is the cloud really safe?
Firstly think about how you store your financial data now. Is it on your computer, is your computer backed up, where is your computer backed up? What will happen if that hard drive, USB or server were to be lost, flooded, in a fire or stolen?
Given the nature and sensitivity of data that is associated with cloud-based accounting systems (eg links to banking and other financial information), you can rest assured that security is a top priority. Cloud applications use encrypted connections when data is being transferred so your data can’t be intercepted and read by a third party. Think about it, no bank will allow integration with systems that will compromise their client financial data.
The current risks that come with theft, loss, damage, etc of your current storage system is completely eliminated with cloud-based accounting systems. If you were to lose your computer, hard drive, USB or server, you will still have access to all your financial information. This is because all your data is automatically backed up and remains up to date. No one can access it unless they have your access credentials.
 

Now that we know its secure, what are the Benefits of using Cloud Accounting for your business?

 
Cloud accounting integrates your manual bookkeeping and accounting processes. The same system that you use to run your finances (quotations, invoicing, etc) for your customers, is the same system that your accountants have access to, to prepare your management reports.
Cloud accounting means that you do not have to wait for month end to access your financial information. It allows you to have your financial data at your fingertips anytime, from any location and any device as long as you have access to the internet. You can make informed decisions much quicker and without calling your accountant for data.
Cloud enables automatic feeds from your bank which means your financial information is always up to date. There is no need to be downloading statements and submitting to your accountants every month.
Your finance department can finally say goodbye to paperwork. With all your receipts and invoices safely stored on the cloud, you do not have to worry about storage of financial information, SARS and other compliance.
Finally because less time is spent by your accountants in getting the numbers ready to you, typical cloud accountants add more value through the analysis of your financial data and provide better advice in the running of your business.
 
There are a lot more benefits from cloud-based accounting systems and we will be exploring these further in other blogs. For now, if you are interested in exploring with cloud-based accounting and have more questions, please contact us here and we will be happy to hear from you.