Accounting can seem an intimidating task, especially for a small business just starting out. Before the advent of cloud computing, businesses had to rely on traditional accounting software on dedicated hard drives, that was often managed by an external accountant. This meant the data wasn’t easily accessible to anyone else in the business, and meant even business owners may only see the accounts annually.
Cloud-based accounting software has, however, helped to make the task of bookkeeping easier for businesses. Rather than each business needing an external accountant or specialist equipment to store their information, cloud-based accounting software has made it more accessible for businesses to balance the books themselves. It has also made accounting a much less time-consuming task as the software can update information automatically in real-time, if it is linked to your bank. Because of the “Open Banking” system, which allows regulated third-party systems to access your banking information, transactions can be automatically entered into your accounts which removes the need to manually enter each individual payment.
Furthermore, cloud-based software can be a more secure way for a business to do their accounts, although there is an added cyber-security risk. In the past, when data was stored on one device (and any backups the company kept), there was always a risk that it could all be lost should something happen to that piece of equipment. Cloud software has minimised this risk as the data is stored remotely on servers in the cloud and isn’t tied to any single device. Instead, the accounts can be accessed anywhere by anyone with the login details, whether you’re at work, at home, or even on the go, thanks to mobile apps.
Businesses both big and small can benefit from using cloud-based accounting software, but platforms don’t all offer the same features. They come with different properties that are suitable for a range of businesses, from freelancers, to self-employed individuals, to SMEs, to large corporations.
Who will be using the software?
This is one of the first questions businesses would need to consider, as the requirements and preferences of a qualified accounting professional within a larger company will differ to a small business owner running their accounts alongside their other duties. Some programmes are more suited to accountants who fully understand what they need to do and just want a functional tool to help them carry out their work. On the other hand, some platforms are more targeted at less-experienced individuals (such as small business owners) to help make managing their accounts less complicated and time-consuming.
Additionally, rather than one accountant being in charge of the accounts (as with the traditional software), you should bear in mind that cloud-based accounting platforms allow multiple people access to any relevant parts of the system. Different departments can use the cloud software for their particular roles, such as sales invoicing for the sales team and purchase ledger data for the office manager.
What are your business needs?
Businesses should also consider what they need from their cloud accountancy software. Not only will the size of the business affect what provider you might choose, but also the nature of your business. For example, a business offering a service will need different accounting tools to a business dealing with stock, so it is important to check that the cloud software has all the tools you need.
Features of cloud-based accounting software
There are some fundamental tasks that you can do on most cloud-based accounting tools, such as monitoring income, tracking cash flow, sending invoices, and filing expense reports. Most businesses would need these features as a minimum, even if they are a freelancer or a self-employed company of one, so all cloud accounting software will generally offer these services. Some cloud tools may also be able to help businesses with their auditing and VAT, something which is particularly pertinent with the recent introduction of Making Tax Digital.
Larger businesses with employees are likely to need a wider array of tools with their accounting software, such as a payroll feature and a time tracking feature. They may also want a more advanced software that enables them to create data reports and forecasts, to help them make future financial predictions.
Furthermore, businesses dealing with products may search for accounting software which has a tool to track their inventory, so they can quickly check how much stock they have left.
It is also an idea to look at how different cloud accounting providers can integrate with other platforms, like Slack or Salesforce. If your business already uses certain systems, it may be an idea to see if any cloud accounting tools specifically integrate with them as this will maximise their benefits.
The scalability potential of a cloud-based accounting software should also be something for businesses to consider, particularly if they are small and growing. Whilst a basic, easy-to-understand package may meet a small company’s current needs, they may find that, as they grow, they need extra features that their existing accounting software can’t provide.
So, depending on the confidence and aspirations of the business owner, they may find it more beneficial to choose an accounting software that is customisable and has the ability to grow with the business.
Cost is an obvious measure to compare the range of cloud accounting tools, with most of them offering a monthly subscription to access their different features. Some cloud-based accounting providers offer several grades of package, depending on what your business requires, whilst some allow businesses to simply pay for the features they use and add any further features for an extra price.
Businesses should make sure they look at the pricing structure carefully, as some providers restrict the number of transactions or invoices that can be made on that specific pricing package. They need to assess their current business needs, as well as their future development, to find a cloud accounting software that will work for their business in the long-term, as you do not want to move platforms too often.
There are a number of free cloud accounting software tools, but these are unlikely to offer anything beyond a limited number of essential features.
Making Tax Digital compatibility
Previously, businesses have had to manually send in their tax and VAT documents, but this is being replaced by digitised methods. The UK government launched the Making Tax Digital scheme as an attempt to make it easier and more efficient for businesses to get their tax and VAT statements correct, and cloud accounting can play its part in this.
Some cloud-based accounting software providers are compatible with HMRC’s systems, which means you can submit your information direct to HMRC. If, however, a cloud accounting provider is not currently compatible, you would need to transfer your information manually to HMRC’s online system. Over time, more cloud-based accountancy providers are likely to develop their compatibility with HMRC, but this will certainly be something for businesses to look at when choosing their software.
All cloud-based accounting tools can help businesses to automate their accounts and update their data instantly on any device. Whether they’re looking for a basic and easy-to-understand software or a full accountancy package that can perform numerous tasks, businesses are sure to find a cloud provider that will meet their needs and make the chore of balancing the books much quicker.