Quick Summary
We explore the basics of cloud accounting software for small businesses and non-profit organizations (NPOs). 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 in Canada.
Cloud Accounting Software: Why It Matters
Cloud accounting tools not only support remote collaboration and help ensure business continuity, but they also 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.
Cloud computing processes are clearly here to stay. So if your business has yet to take advantage of all the benefits cloud accounting software has to offer, here’s what you need to know.
What is Cloud Accounting?
Before we discuss cloud accounting specifically, we need to get clear on 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.
With traditional desktop accounting, for example, you install software directly onto your computer by way of a disk or download and perform all your accounting functions from there. 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 Great Reasons to Use Cloud Accounting Software
So let’s take a 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 takes advantage of password-protected login, firewall-protected servers, and bank-level encryption technology. 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
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, meanwhile, lets you stay on top of which clients you should collect payment from as soon as possible.
3. Automated workflows
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
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
Because you can both grant and control access to your cloud-based data from anywhere, your team can work from home when they need to. You also have the option of sharing 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. Real-time updates
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 a number of different cloud-based accounting software packages to choose from. Here is an overview of some of the top options that are best suited for small and medium-sized businesses, and ones that we have worked with a lot in the past.
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 that have a technology budget and can take advantage of the many features it offers.
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 that need to use and access a wide range of features have a lot of success with Xero. Additionally, its expansive network of advisors help 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 a number of team members that 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’s known to work 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 who have very specific needs can take advantage of those features to create their own unique environment. Sage is best suited for companies who aren’t averse to desktop software (a more traditional or old school software approach) and can adapt to having remote employees connect using its integration with Microsoft 365 Business.
- Bottom line: Sage hasn’t kept up to its competitors in terms of cloud-based functionality or mobile access, but its wide range of features and advanced accounting programming does lend itself well to clients who need something more custom or complex.
Is Moving to the Cloud Right for Your Business?
The first thing you should know if you’re considering making the move to cloud accounting software is that programs like QBO were designed to accommodate businesses of all sizes, with a variety of bookkeeping needs.
Secondly, if you’re concerned about how safe cloud accounting really is in terms of processing and storing your financial data, rest assured that it offers equal if not greater security than desktop-based software:
- Encrypted data centre storage means never having to worry about losing your accounting information to fire, flood, or physical theft.
- Information loss resulting from file corruption or missed data back-ups 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 so many bookkeeping apps, tools, and solutions are designed to merge seamlessly with QBO and similar programs.
Plus, most accounting software that is hosted remotely comes with a free trial period so you can 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 you need to. So if you’re keen to make the move, but you can’t seem to make the time, Enkel can help with that.
How We Select and Evaluate Our Recommended 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.
