TT185: Cloud Bookkeeping
<h3>What is cloud bookkeeping?</h3>
Cloud bookkeeping is where a piece of software based solely online is used for bookkeeping. All data is stored online.
<h3>Who provides this service?</h3>
As with standard software, there are many different providers. Some companies, such as Sage and Quickbooks, also provide online bookkeeping software. There are also online-only companies – some of the most well known are Xero, Kashflow and Freeagent.
<h3>What are the benefits compared to standard bookkeeping software?</h3>
As the software is based online, you as the client can access the live data at any time, from anywhere, and we as the accountants can also access the data. This makes it much more efficient for us to advise you, as well as giving us instant access to the data when we need it, for example to prepare your year end accounts or management accounts. You may also want us to assist with your bookkeeping, which we can do remotely but which gives you 24-7 access should you wish to view financial reports.
All cloud bookkeeping can be accessed through the web browser on your mobile device; some providers even have apps which allow easy access tailored to your phone or tablet – meaning you could review your financials while on the move.
Also, scanned images of the supporting documents and invoices can be uploaded and linked to the accounting entries for ease of reference and storage.
Online software is usually paid on a monthly subscription, so it does not require a one-off outlay – you can spread the costs over the period you are using the software. You will also not need to purchase upgrades to the software as this will all be covered by the monthly payment.
The backup and disaster recovery will all be taken care of by the software provider, eliminating your need to keep offsite backups – however, this can also be a drawback!
Many of the online software providers will allow either direct integration with your online banking or import of excel format bank statements to streamline the bank reconciliation process.
<h3>What are the drawbacks?</h3>
You do not have a copy of the software on your computer so you will need internet access to access your data – if you have any ISP or internet connection problems, you may find yourself without access. You may need to spend more money on better internet connection services to reduce the likelihood of connection problems.
Online-only companies such as Xero allow you to print reports and export transactions, but often do not allow a backup file to be downloaded or accessed offline. Therefore you will need to ensure that you keep your own records sufficiently up-to-date such that were anything to happen to the online provider, your accounting data would be safe. You still need to comply with the legal requirements on keeping accounting records for 6 years. Having said this, the companies should have stringent backup processes in place such that your data should never be lost. There is also the consideration of how you would transfer the data to a new provider if that was required – can the download be converted for import into other software?
You will also incur costs in transferring over the existing bookkeeping records to the new system, and will need to train staff in the use of the new software.
Most cloud bookkeeping software is not comprehensive in terms of the modules (eg stock recording, payroll) that it offers. If you use or need these particular services you will need to know if the software provides it or if you can buy a third-party add-on which integrates with the software.
<h3>Whose responsibility is the data?</h3>
Keeping the accounting records of the company for up to 6 years will always remain the responsibility of the directors. It is up to the directors to assess whether the software provider’s backup and recovery safeguards are sufficient to ensure data safety. The company or a director will have a contract with the software provider which should cover the provider’s responsibilities in this regard.
Your data will be stored in the “cloud” on a server somewhere in the world. The USA has different data access laws than the EU, for example, so this may be a consideration, particularly if you hold data that comes under the Data Protection Act.
<h3>If you are considering transferring to cloud bookkeeping – speak to us and we can help you decide if it’s right for your business.</h3>
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