Over the years, accounting has evolved. From using manual methods in the early 70s to technology and automation in the 21st century. What used to be a backend part-time job has become a high-profile career, powering companies forward. And as the world transitions digitally, cloud based accounting will soon be known as basic accounting.
Accountants and business owners must be aware of the rapidly changing and evolving landscape.
Cloud accounting isn’t just for big companies anymore, small businesses must hop on, or face a slow death in the new economy.
20% of small businesses without accounting software, struggle to last in their first year. The shocking statistic is no surprise, though.
The technological breakthroughs in cloud accounting will let the average small business not only ensure financial health, but also save time, money and identify areas for growth.
The future of accounting is bright, let’s keep up.
What is cloud based accounting?
Cloud based accounting goes by many names. Cloud accounting, online accounting software, web-based accounting, the list goes on. They are all hosted on a remote server.
Because information is stored in the cloud, it makes accessibility and storage easier than ever before.
You might be interested in: The small business guide to cloud accounting
1. Cloud based accounting will take over desktop apps by 2025
With improved security and real-time updates, cloud based accounting solutions empower users to do business anywhere, anytime, on any device.
Collaboration is much easier, chances of human error are lower and data processing can be done within seconds.
All you need is to give other users in your company access and the entire team can be up-to-date on the business’ financials.
Besides, business in today’s world happens anywhere and transactions occur everywhere. Having your accounts stuck to the office computer and needing to manually enter new entries is grossly inefficient.
That said, it’s normal for SMEs to wonder if this new way of accounting can really do that much for their business. Well, McAfee reports 87% of companies seeing an acceleration in their businesses by incorporating cloud in their business processes.
So if survival is your concern you definitely need to get on the train. And if growth is your aim, it’s a good idea to start as soon as you can too.
2. More insightful accounting analytics and forecasts
The old problem: You have tons of accounting data – years, decades even, of money going in and out of the company. Revenue, profits, COGS, AR, AP, days sales outstanding, asset turnover, EBITDA, ROE. At some point, it’s just an impenetrable pile of numbers.
You have no idea what insights you should be looking for, or what business decisions to take based on those numbers. At best, you pick out a few metrics to improve and chuck the rest. There’s only so much you can do as an SME with your current resources and a short timeline, right?
The new solution: Emerging analytics technology and business forecasting software will tirelessly crawl through your data. And with a few clicks, deliver actionable insights in charts on your screen. You’ll see the correlation of your financial data with business activities.
Unless your second job is a data scientist, you’ll need technology to help you assess the situation.
For example, DashBod has a cash flow forecasting module. It tracks your accounts receivable, accounts payable, invoices, inventory etc, then syncs it with your payroll and other existing software to predict your next best course of action.
At a glance, you can see red flags that are causing your stagnant sales or signs of outstanding client payments.
As rich data becomes more and more available to everyone, we’re relieved of the time-intensive scrutinising. Your time can be better spent making crucial decisions that steer the company forward.
3. Better, deeper accounting integrations
The whole idea of digital transformation is to move things online. But if we’re going to spend the same amount of time doing things, just on a different realm, it makes no sense business-wise.
That’s why integrations are crucial. Integrations allow platforms to “Speak” to one another, sharing data seamlessly.
One of the most important things when choosing an accounting software is how will it work with your existing software (eg. your CRM, project management, payroll, inventory system).
Connecting at least one app can save users about four hours per week. That’s a massive improvement in terms of efficiency.
“As the capabilities of internet sales and online stores continue to evolve, the need for a multi-channel system will grow exponentially,” experts predict.
Fully integrated solutions that tie accounting, inventory, HR and banking together will be essential for firms in the coming years.
Just five years ago, without integrations, getting things done required several steps. Now, having all your platforms working together means you’re working with more accurate data and a more foolproof system.
For instance, you’ve got a customer who’s late on their invoice payment. Once they make the transaction, it’s recorded in your accounting system. The invoice is marked paid, the PO is matched, your CRM is updated, your accounts receivable is recalculated, your customer automatically gets a payment confirmation notification.
Cloud based accounting gives you the ability to concentrate on bringing the business forward without having to handle all these tasks separately.
4. Accounting automation that’s really automatic
In the past, you could formulate simple accounting processes such as updating P&L statements or reconciling your balance sheet on Excel. But with all the upfront work and formulas it takes, you may be better off doing it manually anyway.
Online accounting software takes that to the next level.
On top of generating financial reports, auto bank reconciliation and in some cases, fixed assets tracking, here’s what else can be automated:
- Direct submission of Income Tax Return (Form C-S) to IRAS
- Direct submission of Annual Return to ACRA
- Compute GST accurately with the transactions input from the accounting suite
- Create automatic and electronically processed e-invoices for ordering, invoicing and shipping
- Trace actions and changes made to the system transactions to ensure compliance
- Issue a credit note to your customers or suppliers
- Syncing with your HRM system
… and much more!
What else will the future hold for small business accounting and cloud based technology?
As forward as we think we are, we are still in technological infancy. There’s so much more to come. Every few years, we see new breakthroughs, new analyses, new insights that can skyrocket businesses.
For now, cloud systems and paperless workflows will drive productivity and improve the way we do accounting.
Review your organization’s financial management software. Is there room for improvement? Focusing on the following areas could help jump-start productivity: Moving to a cloud based accounting system, adding paperless workflows for approvals, or leveraging online software and the expertise of your current accounting team.
Want to try an online accounting software for small business for free? Start your free trial here!