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Cloud Control

Richard Graham walks us through the strategic benefits that cloud accounting offers to incubators and their clients

Cloud accounting systems are revolutionary. How do I know? Well, my accounting practice has been using the cloud for a number of years, and we have shared this passion with many of our business clients. 90 percent of our clients now use cloud accounting systems too. We have seen first-hand how the cloud accounting systems impact our business clients’ lives. How? The cloud solution has reduced or eliminated redundant, time-consuming work that - let’s face it - is the bane of most businesses. Mostly, cloud accounting allows greater access to real-time data, which increases engagement with businesses financials and assists in making decisions. You have probably seen or heard yourself about all the cloud accounting systems that are now available for you to utilise in your business, including Xero and FreeAgent.

So now I would like to share with you some reasons clients and accountants love working in the cloud. I have grouped these into three key areas:

1. Software, Security, Support and Time Savings

The software is designed to be used by business owners – which means it is incredibly easy to use and intuitive. I have clients who have been able to get up and running in less than an hour, with logos on invoices, automatic bank feeds, etc.

Cloud Accounting is Software as a Service (SaaS) and is charged as a monthly subscription, thus avoiding the large upfront capital investment needed for PC-based accounting systems. This makes it ideal for several start-ups I advise whose cashflow is tight.

Cloud Accounting systems, in general, are far more secure than online banking, and also PC-based software, which have a high risk of viruses. Files are automatically backed up - so even though one of my clients spilt coffee on their PC, they did not have to re-input all the data. Also, nearly all online cloud accounting software updates are free of charge, whereas previously desktop vendors would have charged for an upgrade. I have several owners who like to travel and so they are really glad they can keep tabs on their sales, invoices payable and receivable, and pay or receive monies on the move with their laptop, tablet and mobile devices.

2. Your Virtual CFO

The really significant benefits of cloud accounting are in your ability to work closely with your accountant, management team and other stakeholders (for example, banks and tax authorities) knowing you have an up-to-date set of financials that reflect the very latest position in your business. Several of my clients are now much more proactive in contacting me and have access to me wherever I am in the world, and on a 24/7 basis. As most of the cloud accounting systems have a user-friendly financial dashboard (graphs, pie charts, cashflow, profit and loss, aged debtors/creditors, etc), I often find I can have an educated conversation in real time. I can drill down into details of the data quickly. Compare this to traditional accountants of yesteryear, who would have spent several weeks requesting information from you, taking up your valuable time and then sending you an invoice for several thousand pounds. This helps business owners in three key areas.

Financing the Business: One of our clients required a restructure of his finances, as we identified his business was incurring high finance charges as it was being funded through working capital sources. The bank insisted on receiving the latest profit and loss, balance sheet and cashflow financials, as well as other key performance indicators before they would lend. The Cloud Accounting system allowed, us as chartered accountants, to quickly update the accounts, pull out the relevant numbers and produce accurate business projections on future sales, gross margin, overheads, breakeven and cashflow forecasts. Such was the bank’s confidence in the numbers we were able to negotiate better financing terms by one percent which was a saving of £5,000 in interest per annum for our client

Strategic Tax Planning: The robust financial projections also allow forward-looking tax planning. taking advantage of research & development tax credits, personal tax allowances, inheritance tax and extraction of cash from a business through dividends and salary, and tax-efficient staff payroll incentives, to name but a few. It is essential if an owner-managed business has accurate financial projections, most good accountants can save them tax.

Strategic Business Planning and Real Time Decision Making: As part of all the above, a good accountant can now help you write a detailed business plan, setting achievable, yet stretched, goals. This can help you monitor progress against your quantitative KPIs and take corrective action before it is otherwise too late. Many small businesses who have seen the advantage of cloud accounting were previously basing decisions on their accounts which were at least twelve months out of date, without the support of a commerciallyminded accountant.

3. Significant Cost Savings

In many cases, there is no need for a bookkeeper at all, nor an in-house finance manager. Most of my clients have saved between £10,000 and £30,000 in staff salaries. There is no need for a large upfront capital spend on servers within the business as everything is in the cloud, paid for on a monthly subscription. This also reduces overheads on IT staff and repairs and maintenance on an ongoing basis. Remember you are also creating a paperless office (within the accounting function at least) which will reduce stationary bills – it is not unheard of – again I have a client who is now saving £3,000 per year.

So could your small business afford not to be considering Cloud Accounting Software. If you also like the idea of having a cloud accountant to refer to for key decisions, then this is a nobrainer. Ultimately your business will increase profits, improve cashflow and reduce taxes.
Published on 29-05-2014 15:08 by David Tee. 768 page views

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