Are you looking for a way to streamline your Accounts Payable (AP) process? Reduce costs, increase accuracy, and improve security? Cloud based accounting software can be a great solution to achieve all these goals, helping you to manage your Accounts Payable process efficiently and accurately. In fact, while the combination of accounting and technology is still a relatively new trend in the world of finance - a far cry from the days of bartering, manually bookkeeping, and on-premises accounting software - the International Federation of Accountants (IOFM) estimates that cloud-based accounting will be worth around $4.25 billion by the end of 2023 and only continue to grow.
But what are the benefits of cloud based accounting software? How can it help streamline the AP process? What are some of the challenges that a company may face when implementing cloud-based software?
What is Cloud Based Accounting Software?
A cloud based accounting system means storing, accessing, and managing your business books and financial data online. In other words, it is similar to the traditional on-premises accounting except the software is hosted online on a remote server. Data is sent to a centralized "cloud" where it is processed, stored, and returned to the user. No more software installed on desktops or manually maintained ledgers and books, and far less maintenance than the traditional individual computer-based counterpart.
As of 2022, 94% of companies were using cloud service. While this number was partially fueled by a massive shift due to the COVID-19 pandemic and resulting remote work environment, the adoption is still growing.
Will Accounting in the Cloud Save Me Money?
Think about all the times that you get a new employee who requires both hardware and software. Cloud based accounting software means that there is less infrastructure needed to process and store data, less technical staff to maintain and update required, a significant reduction in overhead expenses (less paper and filing cabinets required!), less overtime to resolve errors from manual data entry, and an easier monthly and yearly reconciliation.
Cloud based software is also typically more affordable than on-premises software, without the need for a company to purchase hardware or hire staff to maintain the system. Software-as-a-Solution (SaaS) is typically a license or subscription-based service, one that allows customers to pay for what they need and scale up or down depending on business needs.
8 Benefits to Cloud Based Accounting Software
Cloud based accounting software offers several benefits in addition to saving money, including:
Cloud based software is designed to be more secure and reliable than the traditional desktop software, encrypted so that only relevant parties receive login credentials to access the system. All changes are tracked and stored in a detailed activity log, forming a digital audit trail.
- How often do you experience data breaches or cyber security attacks?
Cloud based accounting software is much more accessible and flexible, enabling users to access and view data from anywhere at any time from a mobile device. All you, your team, clients, or contractors need is an internet connection and login credentials. This makes the software easily adaptable to a mobile, hybrid, or remote workplace. In addition, cloud software can be accessed by multiple users at the same time, making it an ideal platform for business that have different users and location.
- Do you have to go into the office to view or approve documents? How fast can you switch approvers now if necessary?
Manual data entry is fraught with errors, causing delays and sabotaging the entire accounting process. Cloud based software means that you can upload and quickly compare digital files to ensure accuracy, improve service, and link directly to backs to speed invoice payment.
- How good is the data that you work with?
Not only is cloud based software faster (if your internet connection is working), but information is provided in real-time. Management will easily be able to stay organized and on top of your financials, leading to improved reporting, planning, and even customer and vendor relationships.
- Are you spending too much time gathering material or creating reports? Trying to find the answer for vendors?
With cloud based accounting software, everybody is accessing the same data and the same version of software. Teamwork is improved and no more worrying about software licenses or updating individual computers.
- Do you have trouble keeping up with the latest version of documents, let alone software?
Cloud accounting is eco-friendly, contributing to a company's environmental Corporate Social Responsibility (CSR) efforts. Working off the cloud means eliminating excess overhead such as paper (and paper waste), less use of electricity, and less transportation emissions (either from cars going to work or transporting documents between locations).
- Business is about more than just a profit; are you concerned with your impact on the planet?
7. Easy to start up
Choosing the right cloud-based software vendors means having an experienced IT that will have your system up remotely and be available to answer any questions. There is no having to find contractors to install, others to train, and possibly yet others to upgrade and maintain. However, as you will note below, a phased implementation is often the best approach.
- How much time have you wasted trying to set up or fix IT systems?
An additional major benefit of using cloud-based accounting software is that it can help streamline the Accounts Payable process by reducing manual processes and eliminating errors. Data is automatically posed, meaning no more time-consuming, manual data entry and better use of resources. Thanks to a digital "paper" train, automation makes it easy to track and manage invoices, automate reconciliations, and in some cases even automatically pay vendors. Often cloud-based software programs also contain additional features and options including automated data backups, customized reporting, and automated reminders.
- What would you do with all the time freed up by automating your manual processes
Common Challenges of Cloud Based Accounting Software
While cloud based accounting software can be a great solution for streamlining the Accounts Payable process, there are some common challenges that you may face. For example, cloud based software may require a learning curve for users who are used to the traditional desktop versions or who are simply hesitant when it comes to new technology. Other possible challenges include:
- Additional security measure to protect your data, including on the mobile devices.
- Unnecessary cloud expenses, such as additional costs resulting from poor planning.
- Inter-system connectivity, such as that between multiple banks or the existing Enterprise Resource Planning (ERP) software and the new accounting software. After all, there is a direct link between inventory and cash flow.
- Migrating data to the cloud, mitigated with a phased implementation plan and an experienced vendor.
- Government regulations and compliance, whether local or when doing business globally, such as with the e-Invoicing regulations and tax requirements.
- Lack of awareness, especially among small business owners or micro-enterprises such as a sole proprietorship.
- Investing in adequate infrastructure that results in compromised software performance.
- Multi-cloud management can lead to conflicting vendors, increased architectural complexity, and complex disaster recover (yet according to Virtana Research's The State of Multi-Cloud Management 2022 more than 80% of enterprises have a multi-cloud strategy and 78% are using more than three public clouds)
And of course, to operate any cloud-based accounting solution, you need to have a reliable internet.
What Is My Take-Away
Cloud based accounting software can save you time and money, as well as free up resources that can be used elsewhere in the business. It can streamline your Accounts Payable process ensuring that you pay on time, eliminating late fees and possibly gaining additional revenue through early or on-time payment rewards.
While finance - and accounting in particular - may be slightly behind in technology adoption, shifting to a cloud-based accounting solution may just be the key to future-proofing your business in today's rocky, unpredictable environment.