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What Is Cloud Accounting?

Accountants who work in the "cloud" still crunch numbers in traditional brick-and-mortar offices. What differentiates cloud-based accounting from traditional accounting is where the data is processed and stored. While traditional accounting might use software applications like QuickBooks and Quicken located on a user's desktop, cloud-based accounting uses software stored on remote servers through the internet.

There are many advantages to cloud-based accounting as well as drawbacks. Cloud accounting is poised to restructure accounting practices across the country in the coming years. The business software company Intuit predicts that nearly 80% of small businesses will rely on remote servers for accounting by 2020.

Advantages of Cloud Accounting

Technology-driven advances often have key advantages over traditional models. Cloud-based accounting is no different.

  • Real-time reporting and collaboration: Cloud accounting allows real-time reporting and greater visibility throughout an organization. The online nature of cloud-based accounting helps promote collaboration between business departments.
  • Subscription-based payments: Many cloud accounting programs are subscription-based, meaning there are no up-front costs. Subscription services offer the advantage of automatic updates. Online software does not require businesses to handle their own maintenance, upgrades and on-site tech support, which can help them cut costs.
  • Online security: On-premise servers are vulnerable to theft, unauthorized logins and other security breaches. Cloud accounting software typically includes state-of-the-art measures like encryption and multifactor authentication to ensure that sensitive data remains secure.
  • Opportunity for automation: Many manual accounting and bookkeeping processes can be automated once services are networked through the cloud. This frees up staff for other tasks. Data can also be updated automatically, speeding up decision-making for business leaders. Moreover, automatic updates make information less prone to errors arising from manual data entry.
  • Scalability: Businesses that expect rapid growth can make scaling up easier by transferring accounting storage to the cloud. Online accounting software tends to be better equipped to handle growth compared to in-house software platforms.

Cutting down on paperwork, IT support, software purchases and manual data entry can lead to significant cost savings for companies.

The main drawbacks to cloud accounting relate to data security and control. Businesses have to be willing to send sensitive information off-site for storage. While server failures are rare, there is the possibility of network issues delaying access to important information. In those cases, any business that uses cloud accounting would have to rely on its cloud service provider to remedy the situation. Despite these limitations, more and more businesses are finding that the benefits of cloud accounting outweigh the costs.

Stay Ahead of Accounting Trends With an MBA from Pittsburg State

Cloud accounting is not a passing trend — it is becoming the way of the future, with forward-thinking organizations already taking the leap. It is important for today's accounting professionals to understand key trends and shifts in order to maintain a competitive edge.

The online MBA in Accounting from Pittsburg State University prepares accounting professionals with a broad base of business courses along with concentration courses that cover financial statement analysis, auditing and taxes, among others. The online courses are taught by Pittsburg State faculty and can be completed in as few as 12 months.

Learn more about Pittsburg State University's MBA in Accounting online program.


Sources:

FinancialForce: What Is Cloud Accounting?

Hubdoc: Cloud Accounting FAQs: What Your Clients Need to Know

SlideShare: The Dawn of the Cloud-Powered Small Business


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