Today, internet connectivity allows many people to send emails, use social media platforms, listen to music, buy or access goods and services online. The fast-paced advancement in technology is indeed, changing the way we do business and stay in touch in the digital landscape. In this regard, many businesses are now leveraging on cloud computing to improve efficiency of operations. Cloud computing simply means storing and accessing data and programs over the internet. “The cloud” is essentially everywhere conversational expression to describe a remote computer (server) that stores your data in the “cloud”. Here, the cloud operates on software applications and programs via the internet and allows you to access your data or information at any time, from anywhere in the world. All that you need is reliable internet connection and a device (a computer, a laptop, a tablet or a smartphone) to connect with.
In a similar way, cloud computing in accounting is using internet-based computing services to store, manage, and process financial activities. The cloud enables you to store data virtually at servers while giving you full and remote access under strict or robust security protection. The cloud platforms make it possible to integrate a variety of third-party applications through its open application programming interfaces (APIs- a software with a distinct function and connected with another software to communicate with each other using requests and responses).
Why the need for a Paradigm Shift
The accounting industry like any other business enterprise also has its peculiar challenges to deal with. There is an issue regarding the conventional methods of storing huge volumes of financial data or maintaining tax reports which can be cumbersome. Some of the other experiences and challenges which necessitate the need to transition to the cloud include the following:
- Accountants work around the clock to maintain crucial financial data but they are often confronted with the inability to access accounting data on-the-go outside the office settings due to the traditional accounting software they have been using.
- The conventional on-premise accounting software take a longer time to set up and require frequent maintenance after installation as well as an upgrade to the latest versions at additional costs. While some firms may be well-resourced to handle the increasing operational expenses, others find it difficult to onboard advanced IT infrastructure for maintenance. This is bound to impact accounting processes negatively in the less resources firms in general.
- Accounting professionals are ethically bound to keep confidential accounting data or information. Any form of security vulnerabilities or loss of financial data can expose them to risks. That said, an outdated accounting software cannot counter cybersecurity risks when they occur. Moreover, older accounting software makes it difficult to recover data once lost.
- It is also true that out-of-date accounting technologies or software are prone to disruptions in business continuity resulting from technical malfunctions, system errors, or serious events like thunder and earthquake. These uncertainties if they arise can disrupt business activities for many hours or even days to resume operations. The downtime invariably impacts on efficiency and productivity since businesses are unable to meet work schedules in the normal office work setting or physical space. In effect, prolonged discontinuity can result in major financial losses.
Benefits of Cloud Accounting
Cloud computing is a transformational tool and has become a major catalyst for change in accounting practice to enhance operational efficiency and effectiveness. Other benefits include:
Value for Money/ Cost-saving
Many cloud applications offer several different accounting functions in the same place with regular updates periodically, so you don’t have to worry about downloading updates or buying different software for different functions with compatibility considerations at high cost. Cloud computing architectures and engineers are committed to innovation, and introduce new features regularly to improve cloud-based systems.
Cloud-based computing is a secure way to access and store data on multiple remote servers. Indeed, security threats exist in both the desktop and cloud environments, because hackers take advantage of any vulnerability in a system to attack. But the large networks which maintain cloud-based accounting software systems are built with high security firewalls, data breach detection, encryption software and are continually monitored for intrusions and unauthorized access (to accounting data). Reliable cloud providers are data-security conscious and, therefore, protect their servers both physically and digitally at all times.
Accounting is a document-driven profession. For instance, invoices, receipts, bank statements and other documents are a large part of any accounting activity and require some amount of storage capacity or space. Cloud-based accounting makes it easier to store documents in the cloud with automatic backups. That makes them easily accessible to anyone with the ability to use the accounting software. It makes document sharing easier, audits and research source documents an easier process. It also eliminates filing cabinets and storage units, which can save companies space in the physical office.
Cloud technology empowers 24-hour access to the cloud from anywhere while using any internet-enabled device thereby eliminating the need to work from one central office-based computer all the time. What is, however, required is an authorised access to the hosted environment and you can to share documents with others as well. Here again, you are not at risk of losing your documents or files if lose your computer or even when you forget to back them up.
Many new cloud applications are made to be more user-friendly and efficient but a conservative accounting professional avoids using cloud computing in accounting because they are either not tech-savvy or worry about data breaches (security of information in the cloud). The reality is that accounting professionals need to adapt to the changing dynamics to remain relevant not forgetting that cloud computing is trusted and being used by reputable businesses who are equally data-security sensitive in their operations across the globe.
Managing the Transition/Migration Process
Cloud computing in accounting is not a one-off project. It is an initiative which requires a continuous process of automation by re-evaluating and optimizing various aspects of the overall design, business operations model, security concerns and cost considerations. That said, in migrating conventional accounting processes into the cloud comes with some challenges which be must addressed to reap the full of benefits. Issues which need to be focused on include:
Change in Business Culture
It is worth establishing that cloud computing in accounting operations cannot succeed just by adopting new technological applications. According to Feng Liu, Cloud Transformation and Engineering professional, “it is rather a mindset shift of how you run your business on the cloud and how you leverage the capabilities at hand and be able to scale up and down, in and out.” This means that accounting professionals will need to adapt to a new culture of managing financial data in the cloud, including understanding the cost structure and pricing models to succeed.
Technical skillset other than culture changes is also imperative for cloud computing in accounting and calls for training programs for many accounting professionals to develop those competences. In addition, application integration issues may occur when integrating cloud-based financial systems with existing on-premises or third-party applications. This must be managed in a seamless process without any disruption. Aside from that the time and initial cost of investment required to migrate financial processes and data to the cloud can be substantial. Hence, the cost of cloud services, including subscription fees and data migration charges, must be carefully managed to avoid unexpected expenses and ensure cost-effectiveness. We should also not lose sight of security concerns and compliance with regulations around data privacy and protection when moving financial data to the cloud.
In closing, cloud computing in accounting will surely revolutionize the way accounting works by enabling individuals to gain instant analytical insights into financial data and accounts instead of the bulk of records thereby empowering them with relevant information for strategic decisions.
Original Source: B&FT