Accountancy has experienced a paradigm shift driven by market demands like generational changes, industry regulations, digitization, and client preferences. In response, many accounting firms embraced cloud-based software—with over 60% using cloud accounting technology—alongside business owners handling their own books.
This transition offers tangible benefits, as cloud platforms lower operational costs, improve efficiency, enhance data security, and facilitate better access to data—demonstrated by Quickbooks Online more than doubling the net revenue of Quickbooks Desktop in 2023. And, per Xero, up to 75% of accountants using its cloud software reported profit increases the same year.
As businesses and accounting practices increasingly adopt cloud solutions, it’s vital to demystify this transformative technology, highlight its value, and understand its functional limits.
What Is Cloud Accounting?
Cloud accounting uses cloud software solutions and services to perform accounting tasks and manage a company’s books. The software allows your staff or third-party accountants to manage accounts receivable, accounts payable, the general ledger, and other accounting processes online.
Unlike traditional, on-premises accounting systems, cloud-based software is hosted and runs on a cloud provider’s infrastructure, enabling access to your data using any device at any time. These systems provide powerful features like real-time data updates, accessibility, security, and integrations to streamline and simplify small business accounting.
How Cloud Accounting Works
In cloud accounting, the software is hosted on remote servers, allowing vendors to offer it as part of a Software-as-a-Service (SaaS) business model. This model enables accountants and firms to access powerful features and tools at a subscription fee, eliminating the need for local installation and in-house maintenance.
Accountants only need login credentials to access the software via a web browser or mobile app. They can upload their books to the cloud, using integrations to unify data and automate or streamline various processes, such as customer relationship management (CRM) software, payment gateways, and inventory. The data is stored in the cloud on a secure server, and you can review statements, collaborate with others, and create invoices however you access them.
These cloud accounting platforms further improve upon data security with features like:
- Encryption
- Security audits
- Firewalls
- SOC2 certifications and other compliance efforts
- Intrusion detection systems
- User-based access controls (UBAC)
Looking forward, cloud accounting platforms have already begun incorporating artificial intelligence (AI) and machine learning (ML) to carry out repetitive tasks and identify patterns within the data.
The Benefits of Cloud Accounting
Cloud accounting solutions deliver several benefits to business owners and accounting firms—with the six among the most impactful.
1. Accessibility and Convenience
Cloud-based accounting is accessible from anywhere if you have an internet connection. Whether you want to create an invoice, upload a statement, or review a file, you can log into your account on your computer or mobile device to complete a task.
This benefits companies with global operations and remote employees. Finance teams can access data anywhere and collaborate on different tasks, ensuring a cohesive working environment that boosts productivity.
2. Real-Time Financial Insights
With all financial information collected in one platform, cloud solutions provide robust tools for mining that data to uncover actionable insights. For example, most platforms provide a dashboard containing an overview of key data to ensure prompt actions and sound decisions.
These dashboards show real-time insights, allowing you to track, analyze, and identify patterns in your cash flow, revenues, and expenses. When paired with historical data and customizable reporting, real-time data helps with predictive modeling, which is crucial for strategic finance forecasts.
3. Improved Collaboration
This is where desktop solutions truly can’t compete with cloud accounting systems—they bring together all stakeholders, including CFOs, managers, accountants, bookkeepers, and analysts. They can access and work on financial data simultaneously, regardless of location.
The software eliminates the need for paperwork, emails, and physical document transfers, which cause siloed workflows. Teams can access real-time data and work together on a single file or from the same ‘single source of truth,’ improving team management, productivity, and accuracy.
4. Enhanced Security and Data Protection
In a world where cybercrime happens every 39 seconds, data security is imperative for accounting firms and businesses. Cloud-based accounting software makes this easy with advanced measures and features like automatic backups, data encryption, firewalls, and access controls.
Plus, data and files stored in the cloud have a reduced risk of data loss compared to physical records and local servers. This is because all processes and workflows occur within the software, eliminating manual data entry and physical document transfers, which increase the risk of data loss.
5. Cost Savings and Scalability
A cloud-hosted accounting software solution helps reduce operating expenses considerably. One expense it eliminates is the in-house server maintenance cost—with everything in the cloud, you don’t need to manage, maintain, or upgrade on-premises servers. This also reduces your HR and utility costs by knock-on effect.
Even better, cloud solutions are highly scalable—you simply switch to another plan when your accounting tasks and business needs increase. You only pay for what you need—perfect when managing accounting for startups. You can add more users (or remove them) with a click of a button, offering long-term business value and sustainability.
6. Automation and Efficiency
Accounting tasks, such as data entry, can be time-consuming and prone to costly errors. A cloud accounting solution can address these concerns by streamlining business processes and automating workflows. For example, automation can be applied to invoicing, report generation, reminders, bank transactions, and tax deductions.
By automating these processes, businesses can eliminate repetitive and tedious manual tasks, reducing the likelihood of human errors while enhancing efficiency and saving time. This approach accelerates activities like expense tracking, reporting, and reconciliation, providing real-time insights that help companies identify trends, risks, and opportunities.
Challenges of Cloud Accounting (and How to Overcome Them)
Despite the benefits of cloud computing, you might experience several challenges with the technology. Such problems (and their remedies) include:
- Data Security: Cloud solutions are online-based—this attribute means an increased risk of data breaches and attacks. Ensure you pick a solution that offers advanced security measures—like encryption, firewalls, and multifactor authentication— and configure them accordingly to stay safe.
- Steep learning curve: Depending on the selected software, it can take time for your team to embrace and understand it. This is typical with new systems; you must provide adequate training to ensure a smooth transition.
- Internet dependency: Cloud-based services require reliable and fast internet access for effective performance and productivity. Slow internet connections can reduce the service’s efficiency, hurting workflows.
- Compliance: When you move data to the cloud, you must comply with new laws and regulations. The good news is that most software solutions support automated compliance processes to reduce risk and save time. Be sure to check for SOC2 compliance, in particular.
You can avoid these challenges by picking reputable cloud accounting providers. When looking for a software provider, consider factors like scalability, usability, security, customer support, and industry integrations. Ensure the software offers all the necessary features, such as accounts payable and accounts receivable tools.
Embrace Cloud Accounting With Nimbl
Digital transformation has accelerated the transition from traditional accounting software to cloud-based solutions. Accounting firms and businesses of all varieties already embrace this shift, aiming to streamline workflows, save costs, and boost productivity. The best cloud accounting software options provide data security, efficiency, and scalability—all crucial attributes in today’s business landscape.
But picking the right platform shouldn’t be difficult.
With Nimbl services delivering top-notch cloud accounting solutions and strategic finance guidance for your business, it isn’t.
Our vendor-agnostic experts implement the cloud accounting technology that delivers the most impact to your business—backed by a full-service team comprising accounting specialists and integration experts. After we establish your cloud accounting foundation with the basics—ensuring efficient automation and streamlined processes—we’ll help you analyze that data.
Because as crucial as cloud accounting software is, it can’t provide the CFO- and controller-level strategic finance insights to help you grow toward your goals.
Contact us today to get Nimbl with your cloud accounting and unlock strategic finance solutions tailored to your individual business needs.
