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The Year of Cloud Accounting

richardgrahamA leading US commentator on technology for accountancy practices recently commented that “if you choose not to embrace the cloud you are retiring in five years”. Scary stuff, which is not just the preserve of our transatlantic colleagues. In December, no lesser figure than Sage Group's Chief Executive felt the need to comment at their 2012 results announcement; “I wish we had been there earlier in North America. We're coming to the market for cloud-based solutions in time in Europe.”

What has changed

In the UK, cloud accounting usage has been doubling each year since the emergence of packages such as KashFlow and Xero in the middle of the ‘noughties’, when a small base of a few hundred users became a few thousand and then a few tens of thousands - Xero itself now has over 200,000 users globally and intends to grow that number by 80 percent in just twelve months. Sounds like a stretch? Around half a million new companies will incorporate this year in the UK alone and hundreds of thousands of sole traders will also commence trading. Most of these will be adopting a cloud ecosystem, with accounting at the heart of it.

Cloud moves to the mainstream

It was around 2011 that we began to see the true advantages of cloud really begin to emerge. It was not from inside the software (there's only so far that entering transactions and running reports can be differentiated, regardless of where the data sits), but rather that cloud accounting enables far better collaboration with external partners. This is the truly revolutionary idea. Let's consider some examples.

With cloud software it's far easier to sync bank account data straight into your accounts (bank reconciliations are remarkably fast when you're working from the same source data). Xero are notable for the focus they put on this feature, but we've also recently seen FreeAgent and QuickBooks Online deploying authorised data feeds from bank partners.

Another benefit is that accountants can collaborate online with clients in real-time and on the same live data, meaning that small businesses can receive simple, jargon-free functionality with their accountants discreetly doing the 'heavy lifting' like charts of accounts.

There's even a service called Receipt Bank that allows firms to take a picture of a paper receipt with a smartphone, then for it to be automatically transmitted into the cloud and remotely entered into their accounting software (no more 'shoebox accounts' from that client!).

So we're in a period where a new type of accounting is saving small firms and their accountants from pain with data entry, reconciliation and errorchecking, freeing them up to spend more time on more profitable tasks. This can only be a good thing, but it is just the beginning.

A world of possibilities

Already firms that use the cloud to manage their finances are twice as likely to be fast growing as those that don't. Let's take two of the top challenges faced by small firms - getting finance and getting paid - and let’s look at the way that cloud accounting addresses them:

Getting Finance - It's no secret that banks struggle to finance fast-growing small businesses, which are often so hungry for working capital that they resort to using personal credit cards to fund expansion. This is due in no small part to the challenges lenders have in getting the quality and quantity of information they need to extend appropriate finance.

Getting Paid - Cloud accounting will finally drive mass-market adoption of electronic invoicing and payment among small firms, eliminating many exceptions, and making it far easier to manage and finance trade and cash flows.

Implications for Accountants & Bookkeepers

For accountants currently working in business management, I personally believe that we haven't quite reached the point where most firms will see a compelling reason to switch to the cloud (although there are many instances where they will). However, I do think that by the start of 2014, many accountants in business will face hard choices. They will have to decide whether or not they are hampering their firm's competitive advantage by not bringing these new and powerful capabilities to bear.

For accountants and bookkeepers in a professional services firm, it's much more simple - embracing the cloud right now is a pre-requisite for sustainable growth. If you want to attract new start-up firms to your practice, you need to recognise that even the global giants of small business accounting are now trying to sell their cloud solutions to your potential client. If you want to attract fast-growing established firms, these potential clients will already be twice as likely to use cloud accounting software as their slower-growing peers, and won't deal with you unless you talk their language.

The emergence of cloud accounting solutions will transform the way that small firms manage their finances just as radically as the emergence of desktop accounting software did two decades ago. Though this creates challenges for accountants both in business and in practice, it's also tremendously exciting, as more than ever finance professionals will be right at the centre of solving the key issues faced by small firms.

For further details go to www.cloudaccountingni.com to discover for yourself the benefits of having your business finances online.
Published on 21-10-2013 13:58 by David Tee. 921 page views

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