Moving your accounting function to the cloud can be a daunting task. In this article, we’ll take a brief look at the history, look at how it works, and look at the pros and cons of moving your accounting to a cloud-based software solution, and hopefully, you’ll have an idea of whether your business is ready.
First, how new is this type of software? Quickbooks Online was introduced in the UK in 2011. It was revamped in 2013, and has grown in popularity to become one of the most used cloud-based accounting software solutions for small businesses. Another popular cloud-based company is Xero. Xero was formed in 2006 in New Zealand, and entered the U.S. market in 2011. Xero officially entered the Canadian market in 2018, although it has been unofficially around for longer than that.
Second, what exactly does the process entail? A typical scenario would be for a business owner to have an app on their phone (like Receipt Bank) and take a picture of a receipt that they just purchased, for example, gas from Chevron. The receipt would be stored in Receipt Bank and the software would recognize the type of receipt (with a high degree of accuracy). The App would be connected to your Accounting Software (QBO or Xero, for example), and would post the receipt to the appropriate expense account (after you told it what the expense was, it would remember that Chevron is for Auto-Gas). At the outset, it would require you to tell the App what the expense was, but after that, the App would know and would post automatically. You could see how much time this could save if used properly. You could also see how this could go wrong if it was not set up properly!
Pros
- real-time accounting
- audit-ready receipts (stored and ready if CRA requests them)
- financial information that is more timely
- accessible from anywhere there is an internet connection
- allows business owners to make decisions in real-time to correct course before things become costly
- potentially cost savings by using data import function by using the latest software
To me, the biggest pro I see in this list is having access from anywhere, to your accounting data in real-time. Of course, this will mean having your accountant or bookkeeper stay on top of your accounting throughout the year, and not doing it all right before your company’s filing deadline!
Cons
- increase software subscription fees (can typically be mitigated by bundling with your accountant’s plan)
- security concerns (where is your info being hosted?)
- internet connectivity concerns (could be an issue in remote areas if the internet is not consistent)
- learning curve with new software/apps
Most of these can be overcome, but Cloud-based accounting is not for everyone (at least, not yet).
Commonly used accounting software
– Xero
Other tools you may want to utilize:
– Hub docs
– A Scanner (here is one we use)
– Smartphone to scan receipts and upload to Hub docs or Receipt bank
In closing, Cloud-based accounting is not for everyone, but it has the potential to improve the way business owners access their company’s financial information. It could improve the decision maker’s ability to act on the financial data to make better-informed decisions. Let us know if you have any questions about setting your business up with cloud-based accounting software, and whether your business could benefit from some or all of the latest tools available.