Are Cloud Accounting Applications Right for You and Your Clients?

They seem to be everywhere! I’ve seen them at trade shows and association meetings. They have been seen advertising in accounting profession journals and their promotional emails have probably reached your mailbox. They are making a lot of noise!

They are the vendors selling cloud accounting solutions.

Are cloud accounting applications right for you and your clients? In this article, we’ll define cloud accounting and look at the risks and benefits.

What is cloud accounting?

Cloud accounting applications provide much of the same functionality as desktop accounting software with one major difference: Cloud accounting apps run on remote servers and are accessed via a web browser.

Cloud accounting applications are typically offered in one of these two formats:

Hosted applications – The hosted solutions involve your desktop or client/server accounting application running on a remote server. You gain access to your accounting software using a remote session via the Internet. This solution allows you to use your existing software and data.

Software as a Service (SaaS) – In this format, the accounting software and your data are stored on the vendor’s servers and are accessible via a web browser. If you have ever used a social media site or online banking, you have used a SaaS solution.

What are the benefits?

There are numerous benefits to cloud accounting and progressive business owners are enjoying them. Here are a few of the benefits:

Anytime, anywhere access – Your accounting software and operating results are available to you from a browser or mobile device. This is something that you can’t do with today’s desktop accounting solutions.

Better security – Most cloud accounting software is run from a data center, which offers multiple levels of security to protect the software and your data. The typical data center has significantly better security than most small businesses.

No installations or updates required – Cloud accounting vendors maintain the software and install the updates.

Automatic backups – The cloud vendor assumes responsibility for system backups. Your data is often stored in multiple data centers that are in geographically diverse locations.

No startup costs or long-term commitments – Cloud accounting applications are rented not purchased. They do not require a small business to invest in servers or software.

Platform agnostic – Do you prefer a Windows PC or Mac? What’s your choice, Chrome, Internet Explorer or Firefox? In the world of cloud accounting, it simply doesn’t matter. Cloud accounting applications are delivered via a web browser and typically support all popular platforms.

What are the risks?

The world of cloud accounting is not without risk. These solutions are new and require that you perform the necessary due diligence to determine if the solution is right for your business. Here are a few of the risks:

The vendor goes away – Over a decade ago, we experienced a tech bubble where vendors were here one day and gone the next. The same risk exists with cloud accounting vendors. It is important to have a contingency plan.

You don’t have Internet access – Cloud accounting vendors are accessible from anywhere and anytime assuming that you have a connection to the Internet. If you find yourself without internet access, you will not have access to your accounting data.

Security breach – Cloud accounting software and your data both live on the Internet. There is a risk that someone could gain access to your data.

What’s next?

We are just beginning to see the impact of cloud accounting applications. It will take time to determine if they will be the next major paradigm shift in the world of accounting. There is so much more to learn about these products and their impact on the small business community.

Stay tuned!

“Reprinted with permission by the Massachusetts Society of CPAs.”