The Benefits and Pitfalls of Cloud Based Accounting

June 16, 2016 11:11 am Published by

Cloud based accountingCloud based computing’ is a term that has surged in popularity over the last decade , the ‘cloud’ simply refers to the internet and ‘cloud based computing’ refers to the action of storing data on the internet as opposed to your computer’s hard drive.  Cloud Based accounting is simply keeping your accounts online to be easily accessible from where ever you are.

The improved ease of use and affordability of cloud accounting software has seen many businesses migrate to the cloud. It is similar to traditional accounting packages, only it’s hosted on a remote server allowing accessibility via the internet for users from multiple devices and locations.

What are the benefits of using cloud based accounting?

Ease of use

  • Data stored in the cloud is accessible anywhere, anytime from most devices with an internet connection.
  • Elimination of paperwork; most programmes allow you to import your expenses, receipts, invoices and any other paperwork that might be cluttering your desk directly into the cloud.
  • Data is easier to retrieve and view making the use of cloud based accounts an effective way to manage  your payroll, payment processing and make audits easier.

Cost

  • Less expensive than stand-alone accounts packages, most cloud based software will invoice you on your monthly usage; this can particularly benefit small to medium sized businesses.
  • Using cloud based accounting can save time, and in business, time is money.

Storage

  • Storage limits surpass that of a computer hard drive, additionally, suppliers will implement any software or security updates without disrupting your business.
  • If your laptop or hard drive is damaged, lost or stolen, you will still be able to access information on the cloud from another device, which might have otherwise been lost.

What are the drawbacks of cloud based accounting?

As with anything based on the internet, there are security concerns that arise, especially considering the nature of the information that is stored within accounting software.

Cybercrime

  • Cloud based software has been flagged as a growing high-risk area for hackers by the EU European Cybercrime Centre.
  • If your business cloud accounting was compromised by a third party, they would have access to sensitive information regarding you and your client’s personal details.
  • Servers that host these systems may be targeted more due to the nature of the information stored as part of business accounts: banking details, payroll details, staff names and addresses, this is all valuable information to a hacker.

Data Protection

  • Leaving your customers data in the hands of another supplier poses a potential risk in itself; however, the prominent suppliers of cloud based accounting software are trusted worldwide and have invested in cyber security.

 Lack of Internet or slow Broadband

As with any cloud based system problems with your internet connection will prevent you from being able to access the data or process your accounts.  If your business has slow or poor and disrupted internet connection cloud based software may not be the best option.

How do I prevent risks whilst using cloud based accounting software?

Research

Research the accounting software company you’re going to be using before you commit to a purchase. Do some extra research into where the cloud is based – just because you purchased from a UK company doesn’t mean the cloud will be based there. Other countries have different laws on data protection which could compromise the security of your information.

Security

Make sure you have antivirus software on all your devices, there are many programmes to choose from, some of which are free. Contrary to popular belief there are also basic apps available to secure sessions on mobile phones.

Set policies and levels of restriction for staff using the cloud, this might include restricting access for personal devices unless approved. Most software programmes also allow you to set a level of access for each user, meaning your most confidential information could only be seen by selected users.

Insurance

Ensure you check your business insurance policy includes cloud based asset protection.

Plan

Ensure your business has a contingency plan should your service provider fold or you are unable to use the service for any reason. Your provider should announce any expected downtime or scheduled updates to allow you time to plan; however loss of internet connection will leave you unable to access your data.

Industry leaders have also warned against the risks of cloud accounting, including the head of ICAEW IT faculty who said,

‘Businesses need to be aware that the likelihood is that they will be breached, and plan accordingly, prioritising protection of their key assets’

Should my business consider using the cloud?

Even with the potential risks that come with it, cloud based accounting services are becoming more commonplace. The benefits can greatly outweigh the drawbacks if you ensure good practice is undertaken in selecting a provider and whilst using the service.

Need A Hand?

If you have any questions  regarding cloud based accounting, or best practice when choosing software for your business accounts or payroll call our team on 0117 3790810.

Steph Roffey

Steph is a Chartered Accountant with many years’ experience working in audit compliance and general accountancy. She is a Fellow of the ICAEW and has extensive knowledge of accountancy and tax for the self employed.

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This post was written by Steph Roffey

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