Why Cloud Accounting Software Matters
Cloud accounting tools support remote collaboration, help ensure business continuity, and provide real-time visibility into cash flow and other vital accounting metrics. And that’s especially important during times of financial uncertainty.
There was a time when cloud technology was available only to enterprise-level companies. By 2018, however, almost three-quarters of Canadian organizations had moved to the cloud in some capacity. Today, some 5.6 million businesses rely on QuickBooks alone for their cloud accounting software requirements.
We explore the basics of cloud accounting software for small businesses and non-profit organizations (NPOs) in Canada. Advantages include increased security, improved collaboration, enhanced financial clarity, and real-time updates to bookkeeping data. Overall, cloud accounting software is a time-saving and cost-effective bookkeeping solution for small businesses and NPOs. Cloud computing processes are here to stay. So, if your business has yet to take advantage of cloud accounting software's benefits, here’s what you need to know.
What is Cloud Accounting?
Before discussing cloud accounting, we need to clarify what cloud technology is.
In practical terms, the cloud is simply another name for the Internet. So, data and software programs you’d normally store and access from your desktop computer’s hard drive are stored and accessed online instead. Basically, cloud accounting software is a software application hosted on remote servers, where data is sent into "the cloud," processed, and then returned to the user. This software allows users to access software applications remotely through the internet or other networks via a cloud application service provider. With traditional desktop accounting, you install software directly onto your computer with a disk or download and perform all your accounting functions on your computer rather than online.
Cloud accounting software offers a comprehensive solution for small businesses, helping streamline financial management processes through automation and real-time data access. Let's walk through its features, benefits, popular providers, and considerations specific to Canadian businesses. With a cloud-based version of the software, all your accounting solutions and applications are virtual and are hosted by remote servers that:
- Process your accounting data,
- Store it securely and
- Provide users access to it only with your authorization
Cloud accounting delivers a range of options for navigating your bookkeeping functions more efficiently – from small business accounting software like Xero and QuickBooks Online (QBO) to receipt management solutions like Receipt Bank.
Seven Reasons to Use Cloud Accounting Software
So, let’s look at some of the top reasons why so many small business owners choose to keep their books in the cloud instead of relying on traditional accounting software. The biggest benefits of cloud accounting include:
- Enhanced security,
- Greater convenience,
- Increased efficiency, and
- Bigger cost-savings
1. More secure data
Cloud accounting software stores and backs up your financial data across several data centres. It uses password-protected login, firewall-protected servers, and bank-level encryption technology. Providers typically offer robust security measures to protect sensitive financial information, including data encryption and secure data centers. Since remote data centres have better security than most small businesses, you stay better protected against data loss and privacy issues.
2. Better financial clarity
Financial data is updated in real time, allowing for up-to-the-minute reports and financial statements. Cash flow visibility is crucial at the best of times, but never more so than when your business’s financial health is at risk. During an economic downturn, for example, remote access to the same data means you and your accounting team can make important decisions any time, from anywhere, such as:
- Where to quickly reduce company expenses, or
- How to best shore up cash reserves
Immediate access to your company’s accounts receivable listing lets you stay on top of which clients you should collect payment from as soon as possible.
3. Automated workflows
Tasks such as bank reconciliations, invoice processing, and payroll can be automated, reducing manual input and the chance for human error. You can integrate your cloud-based software with any number of automated cloud accounting solutions, including apps like:
- Receipt Bank
OCR (optical character recognition) technology lets you use a mobile app to scan receipts and invoices, extract relevant data, and export it directly to your cloud accounting software. - Plooto
Do away with cheques by sending and collecting payments digitally, automating recurring payments, and syncing payment data with your cloud accounting software.
4. Scalable business growth
Cloud software easily scales up with a business, accommodating growth and changing needs without significant infrastructure changes. With a virtually unlimited capacity for transaction data, cloud-based online accounting is ideal for helping you meet your expanding financial needs as you scale up your business.
5. Improved collaboration
Team members can access financial data simultaneously from different locations, enhancing collaboration. Because you can grant and control access to your cloud-based data from anywhere, your team can work from home when needed. You can also share your financial information with your accountant remotely.
6. Time and cost savings
Cloud accounting software can save your business time and money by:
- Automating bookkeeping workflows to reduce manual data entry and
- Eliminating the need to maintain and upgrade desktop-based bookkeeping programs
You’ll also minimize your cash outlay by trading a large, upfront investment in software for a subscription-based, pay-as-you-grow accounting expense that lets you add storage space, users, and advanced features as needed.
7. Integration
Many cloud accounting solutions integrate with other business tools and systems, such as e-commerce platforms, CRM software, and expense management tools. Because it connects directly to your bank and credit card accounts, cloud accounting software can help you pull bank feeds and run your business more efficiently by letting you track real-time changes in inventory, expenses, and income.
Options for Cloud-Based Bookkeeping Solutions
There are several different cloud-based accounting software packages to choose from. Here is an overview of some options suited for small and medium-sized businesses.
QuickBooks Online
- What it’s known for: QuickBooks Online (QBO) by Intuit has been the accounting software to beat for many years. It combines highly effective accounting features and functionality with industry-leading user experience.
- What users like about it: QuickBooks Online offers robust customization functionality and offers users multiple versions depending on their needs. Additionally, it has an entire library of integrated apps and offers a great mobile user experience.
- Bottom line: QBO appeals to a wide variety of users and business types, from inexperienced bookkeepers to more sophisticated accounting teams. It’s not the cheapest option on the market, so it’s best suited for companies with a technology budget and can take advantage of its many features.
Xero
- What it’s known for: Xero offers a wide range of features and functions to support everything you would expect in a small business accounting solution. This includes bills and expenses, purchases, sales, inventory and payroll. The platform offers impressive reporting and analytics capabilities, including functionality to track projects.
- What users like about it: Users who need to use and access a wide range of features have a lot of success with Xero. Additionally, its expansive network of advisors helps put it in the category of the best small business accounting packages available today.
- Bottom line: Xero is a great option for small businesses with several team members who need access to the platform. The platform is easy enough to use but isn’t typically recommended for sole proprietors or independent contractors.
Sage 50 Accounting
- What it’s known for: Sage 50 (also known as Sage or Sage business cloud accounting) is a comprehensive accounting program offering a wide range of features that may be more than most small businesses need. It works well for companies that need powerful inventory tracking and advanced accounting capabilities.
- What users like about it: Sage offers a lot of customization potential, so users with very specific needs can take advantage of those features to create their unique environment. Sage is best suited for companies that aren’t averse to desktop software (a more traditional or old-school software approach). It can adapt to having remote employees connect using its integration with Microsoft 365 Business.
- Bottom line: Sage hasn’t kept up with its competitors in terms of cloud-based functionality or mobile access, but its wide range of features and advanced accounting programming do lend itself well to clients who need something more custom or complex.
Is Moving to the Cloud Right for Your Business?
Here are the benefits of cloud accounting software for small businesses and NPOs.
- Cost Efficiency: Cloud accounting software often operates on a subscription model, reducing the need for large upfront investments in IT infrastructure.
- Accessibility: Financial data can be accessed from anywhere, at any time, as long as there is internet connectivity, supporting remote work and mobile management.
- Compliance: Many software options are updated regularly to comply with changes in financial regulations and tax laws, including those specific to Canada, such as GST/HST reporting.
- Enhanced Decision Making: Real-time data and analytical tools help business owners make informed decisions quickly.
Programs like QBO were designed to accommodate businesses of all sizes and with various bookkeeping needs.
Secondly, if you’re concerned about how safe cloud accounting is in terms of processing and storing your financial data, rest assured that it offers greater security than desktop-based software:
- Encrypted data centre storage means never worrying about losing your accounting information to fire, flood, or physical theft.
- Information loss from file corruption or missed data backups is no longer a problem.
- You retain full access to your data even if you misplace your laptop, smartphone, or other synced device.
Finally, you don’t need to worry about integration issues with your existing system when you switch to the cloud because many bookkeeping apps, tools, and solutions are designed to merge seamlessly with QBO and similar programs.
Plus, most remote accounting software offers a free trial period to explore its compatibility with your everyday bookkeeping needs.
Transitioning your business to the cloud is simple. And as a bonus, using cloud accounting software makes it easy to outsource your bookkeeping duties to a back-office specialist like Enkel when needed. So, if you’re keen to make the move but can’t seem to make the time, Enkel can help.
How We Select and Evaluate Software
We thoroughly research and test the apps we include in our regular workflow for Client bookkeeping services. After deciding on criteria for evaluating the software and then researching the app itself, we tested the app, noting its strengths and weaknesses. We then work with the app for at least a few weeks before deciding whether to recommend it to our readers. We use the software as it was designed for its intended tasks. For a detailed walk-through of how we select and evaluate software, please see the details of our process.
