Advantages and disadvantages of cloud accounting
There is a growing trend for businesses today, whatever their size, to move to the “cloud”. The cloud is an online platform to make data and software accessible, anytime, anywhere and from any device. Gone are the days of being chained to your desk in a small cubicle. Now, with your data in the cloud, you can be fully flexible and enhance collaboration both within your business and with others. When an accounting system is cloud based, all transactions and entries are processed immediately. This however has both its pros and cons.
A primary advantage is that larger volumes of data can be stored compared to traditional in-house servers, and a backup of historic information will always be recoverable. The cloud stores information on multiple servers, so data is saved in more than one place. In an emergency situation when paper records are lost, backups are immediately available. This can make or break a business, especially in situations such as the Christchurch earthquakes: cloud based companies were able to get back to ‘business as usual’ far quicker than those operating traditional in-house server based systems.
Cloud accounting also offers greater accessibility than traditional methods. Users can connect to the internet and access their data from anywhere, any time of day. Business owners and employees can work away from the office, yet still provide input to their teams, enhancing collaboration with their staff. The ability to access real-time information can also enhance efficiency by speeding up the decision-making process.
Cloud based accounting packages are often cheaper than purchasing software, allowing businesses to reduce overheads. They can also be updated in real time so no more waiting around for a new version to be installed. Cloud based programs are constantly developing increased functionality, all available to the end user straight away.
However, there are some disadvantages which are worth considering before adopting a cloud based system. The primary downside of storing your data in the cloud is the risk of hacking. Although cloud providers are continually striving to prevent hackers entering their system, there is no guarantee that your data is 100% safe. This leads to questions around where your data is being stored and ensuring adequate security measures are in place. Greater accessibility to your data increases the risk of outside parties being able to illegally gain access to your sensitive data.
Having your data in a secure environment with limited access points ensures you know who is accessing it and you can control that access. It is common for Inland Revenue for example to require banks to provide information regarding a taxpayer. Imagine, Inland Revenue requiring a cloud based provider to provide all of your data or a log-in to your account to enable direct access. Whether that data is provided or not could be outside your control and you may not even know it has been provided.
Cloud accounting is the way the accounting industry is heading. This is no surprise due to the benefits offered though user accessibility, efficiency and safety. To make the best decision for your business, ensure you evaluate all the options available and ensure your data is sufficiently protected before heading straight to the cloud.