What is cloud accounting?
Cloud accounting is where a piece of software based solely online is used for bookkeeping. All data is stored online. The software is accessed through a web browser or sometimes a mobile app.
Who provides this service?
As with standard software, there are many different providers. Some longstanding desktop software providers, such as Sage and Quickbooks, also provide online bookkeeping software. There are also online-only companies – some of the most well known are Twinfield, Xero, Kashflow, Freeagent and Clearbooks.
What are the benefits compared to standard bookkeeping software?
- You can access the live data at any time, from anywhere (with an internet connection!) – meaning you could review your financials while on the move.
- We as the accountants can also access the data, making it much more efficient for us to advise you.
- Instant access for us to prepare your year end accounts or management accounts.
- We can assist with your bookkeeping remotely but with 24-7 access should you wish to view financial reports.
- Scanned images of the supporting documents and invoices can be uploaded and linked to the accounting entries for ease of reference and storage.
- It is usually paid on a monthly subscription, so it does not require a one-off outlay nor purchase of upgrades.
- The backup and disaster recovery will all be taken care of by the software provider, eliminating your need to keep offsite backups.
- Many providers will allow either direct integration with your online banking or import of excel format bank statements to streamline the bank reconciliation process.
What are the drawbacks?
- You will need internet access to access your data – if you have any ISP or internet connection problems, you may find yourself without access.
- Online-only companies allow you to print reports and export transactions, but some do not allow a backup file to be downloaded or accessed offline. You will need to keep your own records sufficiently up-to-date such that were anything to happen to the online provider, your accounting data would be safe.
- How would you transfer the data to a new provider if that was required – can a download be converted for import into other software?
- You will incur costs in transferring over the existing bookkeeping records to the new system, and training of staff in the use of the new software.
- Some cloud bookkeeping software is not comprehensive (eg. it does not offer stock recording, payroll). Check whether the software provides it or if you can buy a third-party add-on to integrate.
Whose responsibility is the data?
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.