The accounting industry is facing major change in the years ahead. Technology like AI and automation are looming specters, threatening to steal jobs and render accountants obsolete. Or they’re harbingers of innovation, signaling a shift to more advisory roles.
Depending on how you look at the upcoming changes, you may be terrified—or excited. But no matter how you feel, the changes will come. And it’s up to every accountant to determine how they’ll fit in to the new accounting landscape.
Adaptation is necessary to stay relevant in an industry where so much transformation is happening. To that point, this series will examine topics that will change the way accountants do business.
First up? Cloud accounting.
What is cloud accounting? With a traditional accounting system, the software is located on the hard drive of your computer. With the cloud, the software is stored online, not on your private server. You can access the software from any internet-connected device and log in to your account. Cloud accounting is analogous to online banking, Netflix, or Dropbox—instead of having an application on your desktop, you go online and log in to access your account.
Cloud accounting came on the scene in the mid-2000s and has been growing ever since. According to Robert Half’s 2017 report, Benchmarking the Accounting and Finance Function, 51% of Americans surveyed were using cloud accounting, up from 42% in 2016 and 24% in 2015.
Today, cloud accounting is considered essential for many businesses. But accountants may be reluctant to make the switch. Traditional accounting software has worked so far—what’s so great about the cloud?
While not perfect, the cloud does offer some benefits over traditional accounting software, benefits that your clients may find compelling.
The benefits of cloud accounting
Software as a service
The software as a service model is attractive to businesses for many reasons. First, there are no long-term commitments and oftentimes no contracts. For small businesses or startups, this freedom is very appealing. And because cloud accounting is often modular and flexible, businesses pay only for what they need—the exact number of users, space, and features they need right now—and can add on as they grow. With traditional accounting software, businesses have to predict the future and buy software that will accommodate their projected growth, leading companies to pay for unnecessary features until they grow into them. For that reason, cloud accounting can be a cheaper option.
Cloud accounting offers cost savings in other areas, too. Because businesses aren’t hosting the software on their own servers, there are no costs for setting up and maintaining a server room. Best of all, cloud accounting automatically gives users the latest software updates without any manual install or added costs.
The monthly subscription model is disrupting countless industries, from shaving to entertainment to food. Across the board, consumers and businesses are turning to subscription-based products for their convenience and cost savings. As an accountant, be prepared for your clients to make the switch to cloud accounting.
Cloud accounting skeptics are often most doubtful about security. They may not want to trust their data to an outside company that could go belly up. What if they lost everything? But cloud accounting providers specifically take action against this eventuality by backing up data in multiple locations. If one server goes down, there are always more to take its place. And data is regularly and automatically backed up in the cloud, a process that’s usually time-consuming and manual with traditional accounting systems.
Cloud accounting actually gives businesses better security by keeping sensitive data off their private systems. Unlike a traditional accounting system stored on a hard drive, the data on a cloud accounting system can’t be stolen from the office or spirited away on a thumb drive. The data is stored off-site and safe from sticky fingers.
Cloud accounting also protects businesses from the potential loss of a natural disaster. If a fire, flood, mudslide, or other disaster caused damage to an office, the accounting system would still be intact and accessible from any internet-connected device. With cloud accounting, business can keep moving even when disaster strikes.
Perhaps the biggest advantage of cloud accounting is its convenience. Businesses choose the cloud because it’s agile, easy to use, and enhances collaboration and workflow.
Because cloud accounting systems are online, their data is constantly updating, giving users real-time data to drive decisions and strategy. Unlike traditional accounting software, cloud accounting is always up to date. This responsiveness gives businesses better reporting capabilities and the ability to make faster decisions with more accurate information. As an accountant, you can see the possibilities—you’d be able to give your clients real-time analysis and insights.
If you have an internet connection, cloud accounting is always accessible. This easy access gives businesses the option to check their accounting software on the go.
And because cloud accounting allows multiple users, employees are able to collaborate in real time and communicate more effectively. Instead of an annoying back and forth, waiting for another user to log out of the system, or using outdated data, employees can easily collaborate in the system with the most up to date information. This option gives accountants the opportunity to communicate with their clients directly in the accounting software, cutting down communication time and giving everyone access to the same data.
Finally, cloud accounting allows businesses to automate previously manual processes. By syncing their cloud accounting system with their bank accounts, businesses can reduce human error and data entry errors and spend less time on the accounting process. From an accountant’s perspective, this automation allows you to spend less time on drudgery and more time on analysis, delivering insights, and developing strategy with your clients.
What cloud accounting means for accountants
For all these reasons, more and more businesses are making the switch to cloud accounting, and as use grows, accountants will need to be literate in cloud accounting. Not just that—they’ll need to embrace it. According to research from Xero, accounting firms with 100% of their clients using cloud accounting saw a 15% increase in their revenue year over year, compared to 4% for more traditional firms. These results illuminate the growth opportunities available for accountants who adopt a future-ready mindset.
Cloud accounting may not be every accountant’s cup of tea, but it can’t be denied that cloud accounting offers a number of benefits for accountants and their clients. Accountants can take advantage of cloud accounting’s strengths—real-time data, easy collaboration and communication, and automation—to give their clients better analysis, information, and strategy for the road ahead.
Change is in the air
For most people, change is uncomfortable and adaptation is challenging. When new technology and workflows sweep through an industry, it can leave everyone a little disheveled and disoriented. But if you persist, these changes will become a new normal. Just in time for the next big thing to knock you out of your seat.