# Inside the cloud
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2016-12-17
Category: TECHNOLOGY
Category URL: https://financedigest.com/category/technology
Meta Title: Is cloud-based accounting the right choice for your
Meta Description: Discover the benefits and concerns of adopting cloud-based accounting for small businesses. Find out if it's the right fit for your firm.
URL: https://financedigest.com/inside-the-cloudhtml

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By **Ian Lavis**, Praxity

**Is cloud-based accounting really as good as it sounds?**

Advances in technology have made cloud-based accounting more comprehensive and accessible than ever for small businesses.

But the decision toshift data onto the ‘cloud’ and carry out accounting and other tasks via the Internet isn’t one to be taken lightly.

The concept makes sense. Instead ofaccessing [accounting software](https://www.financedigest.com/is-your-accounting-software-holding-you-hostage.html "Is your accounting software holding you hostage?") on individual desktops connected to an old server in the office, users simply connect to the Internet.

This effectively does away with the need to install, maintain and upgrade accounting softwareat individual workstations. Moreover, users can access the same [data at the same time](https://www.financedigest.com/data-time-for-some-levelling-up.html "Data – Time for some “Levelling Up”") from different devices, which has significant potential cost savings.

Latest cloud-based services allow [small](https://www.financedigest.com/top-benefits-of-invoice-discounting-for-small-businesses.html "Top Benefits of Invoice Discounting for Small Businesses") businesses to access a ‘dashboard’ which gives a real-time view of how their business is performing, from their cash position to trends in web traffic.In theory, this should help start-ups and SMEs work faster, better and smarter.

Only it’s not that simple.

There are [several important factors to weigh up before deciding whether cloud-based services](https://www.financedigest.com/outbreak-of-the-covid-19-pandemic-is-expected-to-severely-affect-the-global-packaging-and-labelling-services-market.html "Outbreak of The COVID-19 Pandemic is Expected To Severely Affect The Global Packaging And Labelling Services Market ") are right for your firm, including your existing accounting procedures, IT system and security.

**Concerns**

Paul Hutchison, Associate at **Springfords**, a participant firm in Praxity Global Alliance, [says while cloud-based accounting](https://www.financedigest.com/midlands-accountants-say-its-never-too-early-to-get-financial-protection.html "MIDLANDS ACCOUNTANTS SAY IT’S NEVER TOO EARLY TO GET FINANCIAL PROTECTION") can work well for some businesses, is by no means for everyone.

“Using a remote server allows us to access data at the same time as the client,and it’s very useful for start-up businesses who do not have a capital cost in setting it up to begin with, but where we have to be a bit careful is a [cloud system is not always a step](https://www.financedigest.com/3-steps-to-combat-cloud-outages.html "3 Steps to Combat Cloud Outages") up. There are some concerns that are frequently not adequately addressed.”

These concerns include the speed of a client’s [internet connection and the fact that web](https://www.financedigest.com/from-implant-chips-to-green-web-hosting-heres-what-experts-believe-the-future-of-the-internet-will-look-like-2.html "From implant chips to green web hosting, here’s what experts believe the future of the internet will look like") browsers are not necessarily designed to handle vast amounts of data. For some firms, it could be quicker to input day-to-day entries using desktop software.

“It’s down to the technology being used. If a client is using an on-premises solution like Sage, for example, the internet connection is maybe not so crucial. If a client moves to an online system, the connection becomes much more important,” Paul explains.

There are also concerns over back-up, especially if the hosting company goes out of business. Similarly, if the client stops trading, who pays to keep records stored on remote servers?

Paul adds: “For some businesses it’s is a perfect fit, and small techie start-ups love it. I would advise clients not to switch to a remote server just because it’s a [cloud service](https://www.financedigest.com/can-companies-minimise-their-dependency-on-cloud-service-providers.html "Can companies minimise their dependency on cloud service providers?"). There needs to be an advantage when you have offset factors such as records, back-up, processing speeds and internet connection.

According to Gary Farrar, Chief Innovation and Technology Officerat Praxity participant firm **BKD**, **LLP**, the cloud has evolved and will continue to do so.  “Just a few years ago the cloud was touted as the [solution to all problems](https://www.financedigest.com/factbox-what-is-rishi-sunaks-solution-to-britains-problems.html "Factbox-What is Rishi Sunak’s solution to Britain’s problems?").  A lot of early adopters learned painful lessons, and some of the hype subsided.  Now we’re starting to see who the [winners and losers](https://www.financedigest.com/the-pound-gilts-and-stocks-likely-winners-and-losers-from-uk-budget.html "The pound, gilts and stocks: likely winners and losers from UK budget") will be.  I believe cloud is here to stay, but clearly it is not the best solution in all situations.”

**Dangers of DIY**

Another [factor to consider](https://www.financedigest.com/essential-factors-to-consider-before-purchasing-a-cobot.html "Essential Factors To Consider Before Purchasing A Cobot") is a client’s willingness and capability to use accounting software effectively. [Cloud computing](https://www.financedigest.com/the-future-of-cloud-computing.html "The Future of Cloud Computing") is aimed primarily at small businesses who often view accounting as a burden which gets in the way of running an enterprise. Some 40% of small business [owners say](https://www.financedigest.com/soccer-manchester-united-fans-want-more-say-under-any-new-owners.html "Soccer-Manchester United fans want more say under any new owners") bookkeeping and taxes are the single worst part of owning a business, according to SCORE, a small business mentoring organisation. If the cloud system is based on the same DIY model as traditional, on-site, or self-install accounting systems, it won’t solve inherent problems with data and accounting procedures.

Oneway round this is to [move away from the DIY model](https://www.financedigest.com/the-dressing-vinegar-and-condiments-market-to-move-towards-healthcare-models-of-convenience.html "The Dressing Vinegar And Condiments Market To Move Towards Healthcare Models Of Convenience") to a more sophisticated hosting solution where most if not all bookkeeping and accounting tasks are carried out on remote servers and where accounting firms have a more proactive role.

**Comprehensive systems**

BKD’s Farrar emphasizes that the capabilities of the [software are more important](https://www.financedigest.com/rd-tax-important-exemptions-and-upcoming-changes-for-the-it-software-industry.html "R&D Tax: Important Exemptions and Upcoming Changes for the IT & Software Industry") than whether it is cloud-based or not.  “Having an accounting system in the cloud certainly has advantages, especially for some types of businesses.  However, at the end of the day, the functionality of the software is the most important consideration; the fact that is or isn’t in the cloud is secondary.  If the software doesn’t [meet business](https://www.financedigest.com/japanese-businesses-pledge-uk-investment-ahead-of-sunak-meeting.html "Japanese businesses pledge UK investment ahead of Sunak meeting") needs, then it’s not a good solution, even if it cloud-based.  Fortunately, cloud-based [systems are offering more functionality](https://www.financedigest.com/innovation-at-periodic-intervals-to-upscale-the-functional-brain-imaging-systems-market.html "Innovation at periodic intervals to upscale the Functional Brain Imaging Systems Market"), but any business should thoroughly understand what a system can and cannot do before implementing it.”

Cloud specialists are now offering new features and functionality including full customisation, trial balance and snapshot capabilities, and comprehensive dashboards and alerts.

Large accounting [firms are beginning to invest](https://www.financedigest.com/toshiba-in-talks-with-four-investment-firms-for-strategic-ideas-sources.html "Toshiba in talks with four investment firms for strategic ideas -sources") heavily in cloud-based service offerings which combine functions such as record keeping and analytics. The new dashboards allow [clients to monitor metrics such as business growth](https://www.financedigest.com/impact-com-continues-momentum-in-the-first-quarter-fueled-by-client-growth-new-products-and-partnership-events.html "impact.com Continues Momentum in the First Quarter, Fueled by Client Growth, New Products and Partnership Events"), gross profit and sales on a daily basis, as well as non-financial data to get a more accurate picture of business performance.

The advantage of this type of solution is that it allows the accounting firm to perform tasks previously carried out by clients only faster and more effectively, such as paying bills, recording transactions, performing trail balance work, creating financials and managing clients’ cash flow and business finances.

The best [type of system](https://www.financedigest.com/turbo-compounding-systems-market-development-status-competition-analysis-type-and-application-2026.html "Turbo Compounding Systems Market Development Status, Competition Analysis, Type and Application 2026") will be flexible enough to enable different levels of engagement by the client. Some business owners will want to carry out some accounting work. For clients that wish to continue writing manual cheques, for example, automatic bank feeds can cut data entry time significantly. Some [systems claim](https://www.financedigest.com/meta-denies-kazakh-claim-of-exclusive-access-to-facebooks-content-reporting-system.html "Meta denies Kazakh claim of exclusive access to Facebook’s content reporting system") to reduce write-up time by up to 70%.

**Security**

Whether you decide to opt for a cloud-based system or not, and whether you go for core accounting or something more comprehensive, security should be paramount.

Advocates of the cloud point out that it removes the risk of a [company computer](https://www.financedigest.com/hackers-hit-italian-oil-company-enis-computer-networks.html "Hackers hit Italian oil company Eni’s computer networks") or laptop with critical financial information being lost or stolen. Access to data in the cloud is encrypted and password protected, while cloud providers should normally have backup servers in two or more locations, rather than on-premises and at [risk of being destroyed or damaged by fire](https://www.financedigest.com/incombustible-infrastructures-dousing-the-risk-of-spreadsheet-fires-in-the-financial-sector.html "Incombustible infrastructures: dousing the risk of spreadsheet fires in the financial sector") or natural disaster.

However, the 2016 Global [Cloud Data Security](https://www.financedigest.com/dont-let-the-promises-of-virtual-desktop-security-cloud-your-judgement.html "Don’t let the promises of virtual desktop security cloud your judgement") Study, compiled for digital security company Gemalto by the Ponemon Institute, reveals security is lacking. More than half of companies surveyed do not have a proactive [approach for compliance with privacy and security](https://www.financedigest.com/as-saas-grows-financial-services-must-rethink-their-security-approach.html "As SaaS grows, financial services must rethink their security approach") regulations for data in cloud environments while only a third of confidential data held on cloud-based systems is encrypted.

BKD’s Farrar adds: “Anyone considering using the cloud should look for independent assurance that the system is secure.  Reputable providers will have third-party security audits of their systems and will comply with [industry](https://www.financedigest.com/embedded-security-for-internet-of-things-market-2021-by-global-key-players-types-applications-countries-industry-size-and-forecast-to-2027.html "Embedded Security For Internet Of Things Market 2021 by Global Key Players, Types, Applications, Countries, Industry Size and Forecast to 2027") security standards.”


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