Why is cloud bookkeeping best for small businesses?
“The cloud” is a phrase that means something very different these days, due to the increasing use of cloud computing. But what exactly is cloud computing? And is it a good option for small businesses?
Without getting lost in ‘geekspeak’, cloud computing simply means both the software apps you use and your data are stored on remote servers on the internet, rather than ‘locally’ on your computer’s hard drive or your server(s).
That idea-of the data not physically being in the same place as you-used to sound scary to many. What about security? What about the risk of losing your data? Surely it’s best to have your data on a computer you can see and touch on your premises?
Well, that’s out-dated thinking these days.
Counter-intuitively, your data is likely to be more secure when stored in a cloud app, compared with storing it yourself on your own computer or server on your premises.
The history of bookkeeping
Computerised bookkeeping hits the scene (1955)
What better place to start our retrospective on the history of cloud bookkeeping than with the beginnings of computerised bookkeeping?
Yes, that date isn’t a typo – the first known example of computerised bookkeeping really is that long ago!
Staring in 1955, General Electric purchased a then cutting-edge UNIVAC computer to process payroll.
Capable of crunching thousands of numbers a second, UNIVAC made GE’s bookkeeping considerably faster and dramatically reduced error rates.
Of course, would take some time before computerised bookkeeping would take off outside of huge multinationals.
The first internet (1969)
And of course, we can’t talk about the history of online bookkeeping than with the beginning of the internet!
While online bookkeeping services have boomed in recent years, the internet has a surprisingly long history.
No, it didn’t first hit the scene in the early 2000s, the 90s or even the 80s – in fact, the first rough examples of the web go all the way back to the time of rock and roll and hippies!
Back in 1963, the US military provided funding to Joseph Licklider, an early computer scientist.
His top-secret mission? To create an interconnected network of computers that would facilitate instantaneous information-sharing.
Interconnected network… interconnected net… internet…
Essentially, ARPANET was the precursor to the modern web.
Now, computers could directly connect to one another and share information and files over great distances, without a central hub or database.
More importantly, for today’s subject, users were able to remotely access files stored on a separate computer – the beginnings of cloud storage.
Cloud computing emerges (the 1990s)
Storing files remotely is one matter – running a computer program remotely is an altogether different one!
Despite many theorising about the potential for cloud computing, it wasn’t until 1999 that internet connections and infrastructure reached the point where you could feasibly run a computer program via the web.
The honour goes to Salesforce.com, which launched in 1999.
Unlike other CRM packages of the time, Salesforce.com allowed sales staff to manage leads without installing anything on their computers, instead of accessing everything through an internet browser.
Salesforce.com proved that it was possible – it would only be a matter of time until someone decided to try taking it a step further by doing an online bookkeeping service.
Xero changes the bookkeeping landscape (2006)
We can thank our friends across the Tasman for the innovation that is cloud bookkeeping.
First launched in 2006, Xero is the world’s first cloud bookkeeping platform.
Unlike other online bookkeeping services, Xero started its life as a dedicated cloud bookkeeping platform, rather than being adapted for the cloud afterwards.
Xero grew rapidly in New Zealand, before quickly making the jump to Australia in 2008.
And almost as soon as it did, the team at Maximum Business Solutions started training with it, getting to know its various systems and intricacies so we could bring cloud bookkeeping to be small and medium-sized businesses all over Australia!
First founded in 1991, MYOB is an Australian bookkeeping platform that initially specialised in desktop accounting software. If you’ve ever done your own bookkeeping or accounting, chances are you’ve used MYOB at least once.
Of course, with more and more programs moving to the cloud, it was only a matter of time until MYOB followed!
Spurred on by the rapid growth of Xero, MYOB quickly started offering online bookkeeping services for small businesses alongside its flagship desktop accounting software.
Are you already familiar with MYOB and how it works? If so, MYOB Essentials might be just what you need.
QuickBooks may have been one of the world’s largest accounting and bookkeeping packages since it was released in 2002, and has transitioned along with technology, making its way to the cloud some years later.
Advantages of Cloud Bookkeeping
Cloud bookkeeping has created a significant step-change in efficiency for the accounting industry. At its core, cloud bookkeeping automates manual tasks, so there’s more time to spend on what matters.
Computer hard drives are like car engines. It’s not a question of if they will ever break down, but rather when they will break down. That’s why we all diligently do daily data backups, right? And we all take these backups off-site each day, don’t we? And we all do weekly tests where we restore the backups to ensure the backups are working as intended?
No? Really? Potential for disaster!
And yet it’s precisely what most small businesses fail to do.
That’s another great aspect of cloud computing—no more data backups to do. The cloud app providers back up your data automatically, and they simultaneously store your data in multiple locations around the globe. This means that if one of their buildings were subject to, for example, a catastrophic earthquake, your data would be safe because it is also stored in different cities, on different continents.
But even if technology got to a point where computer hard drives never failed, there’s one thing they always do, eventually: fill up. They run out of space.
And that’s a major inconvenience with the old-school approach of storing data locally rather than in the cloud: You have to (or you have to pay IT providers to) move data across to new hard drives or servers, and reinstall the various apps and databases. It’s an expense and a disruption.
With cloud computing, you can kiss that inconvenience goodbye.
Support More Clients in Less Time
Cloud bookkeeping and automation go hand-in-hand. Automation is taking manual tasks and having software do them for us. The cloud enables this at a scale previously unheard of.
For example, in cloud accounting solutions, transactions are created without data entry. In the past, data entry was incredibly manual. Accountants and bookkeepers would spend hours entering transaction data from paper bank statements.
These types of productivity gains are not exclusive to the accounting software you use. Many of the larger accounting platforms have a vibrant add-on ecosystem. These add-ons integrate directly into their software. There are solutions for automating everything from document workflow to forecasting cash flow.
Cloud bookkeeping makes it possible for advisors to support more clients in less time through automation. They can also focus on higher-paying work.
With all the automation that come with cloud bookkeeping platforms like Xero, MYOB and QuickBooks, you’ll never have to open a spreadsheet or whip out your pocket calculator ever again!
With all inflows and outflows recorded in real-time, you’ll be able to save hours that otherwise would have gone into your bookkeeping.
And that means more time to spend on your other responsibilities as a business owner!
Real-time Financial Reporting
The ability to efficiently manage cash-flow is the holy grail of financial success for many business owners.
Entrepreneurs often don’t have real-time insight into their business’ finances. They have to conduct day-to-day operations blindly. The lack of key timely financial information can make or break a company.
Cloud bookkeeping solves this. It puts business owners back in the driver’s seat. It provides them with auto-updated, real-time information about the financial health of their company.
They no longer have to wait for the latest version of their QuickBooks file before checking their income and expenses. Business owners can now see where their money is going and where it’s coming from, 24 hours a day, 7 days a week.
Collaboration Made Easy
With the cloud, business owners and their advisors have the information they need, when they need it. This makes collaboration a cinch, whether on the go, at home or in the office.
Today, advisors living in a pre-cloud world are spending up to 35 per cent of their time chasing down documents and answers from clients.
Cloud advisors and business owners can leverage solutions like Hubdoc to centralise key financial docs automatically. This reduces the friction of audit-proofing a business’ books and simplifies collaboration. Documents are secure in the cloud and accessible from anywhere. This means accountants and bookkeepers have the documents they need when they need them. It also gives them greater control over their time.
Take control of your financial data with easily accessible and real-time collaboration with your staff, financial advisor and bookkeeper in Melbourne.
Since cloud bookkeeping is web-based, all of you will be able to collaborate on your bookkeeping… without the need to travel to your bookkeeper’s office or arrange a meeting.
Cloud Software is Always Improving
One of the magical parts of cloud software is the ease with which providers can push updates. This is different from desktop software where the version you buy is the version you’re stuck with. And where upgrades only occur when you purchase an updated version. Cloud software updates happen on the fly and without extra cost to the user.
Many cloud software companies ask their customers for feedback. They use that feedback to contribute to their product roadmap. This means customers see the results when the software is updated.
Experience better cash flow with cloud bookkeeping
Live inflow and outflow monitoring
One of the hardest parts of cash flow management is keeping on top of your inflows.
Say you’ve just had a bumper crop, so to speak. This is good news – however, it can also make it hard to separate customers who’ve paid upfront with those paying on credit.
Not to mention, the extra work will also take away time you otherwise would have spent on your bookkeeping, making it even harder to keep on top of your cash inflows!
Struggling to sift through all your invoices?
Tired of making follow-ups via calls and emails chasing those who’ve paid on credit?
In addition to recording transactions, cloud bookkeeping platforms integrate with a wide range of systems and accounts, including your bank account.
The upshot? Real-time, live updates to your cash inflows and outflows.
You’ll be able to see each dollar that comes into your accounts, as well as every single expense, giving you real-time insight into how your overall cash flow.
Using this information, your cloud bookkeeping platform can generate on-demand cash flow reports and display your expenses in real-time. You’ll be able to adjust your spending and respond to cash flow problems before they turn into major issues.
Many business owners find themselves having to rush through their bookkeeping, just to avoid getting swamped by the amount of work on their hands.
In other cases, business owners may simply not be math whizzes.
There’s always going to be a certain degree of human error when bookkeeping is performed manually.
This can result in false alarms regarding cash flow, or worse, cash flow problems lying undetected:
- Debts being misreported as received
- Typos and other errors
- Expenses being overlooked or left out
Since cloud bookkeeping platforms automatically receive and process data from your accounts and programs, it’s able to eliminate human error virtually.
This leads to more accurate cash flow reports and a healthier business.
Automated debt tracking
One of the biggest threats to good cash flow? Bad debts.
Say a debtor doesn’t pay on-time. That’s cash that you’re not receiving, which directly impacts your cash flow.
Alternatively, say a debt slips between the cracks. You might simply forget that a certain customer is yet to pay, negatively impacting your cash inflows (and therefore, your cash flow).
Debt collection is one of the most challenging tasks a business owner can perform. Nobody wants to be known as an overbearing creditor.
Cloud bookkeeping makes debt collection easier with automated updates and reminders. This will remind debtors to pay and can help improve your cash flow.
What’s more, it will also ensure that your accounts receivable aren’t forgotten about, or incorrectly classified as cash received.
Secured data backup
Worried about your financial data and records being lost?
With traditional bookkeeping, a fried computer or a waterlogged filing cabinet can result in all your vital records (such as cash flow) being lost.
When most of us think of backing up our data, we often delay it because something “more important” came up. Manually backing up data is a pain.
With cloud bookkeeping, all of your data is stored off-site on a secure server, with advanced security measures and multiple backups and redundant systems.
All of this ensures that your data is backed up and secure. What’s more, you’ll never have to worry about having to perform a manual backup!
Thanks to the cloud and the deep integration between bookkeeping software and their add-ons, backup is automatic. In the best of cases, it happens as part of your workflow.
Your own IT security is likely to be far less robust than that of a cloud app provider. If you access the internet and use email, then you’re vulnerable even if you don’t use any cloud-based apps. Hackers can access the data on your computer or local network simply due to the fact that you have Internet access. It’s like a door. And they often know how to pick the lock.
Reputable cloud app providers, on the other hand, use solid security measures such as SSL certificates that support-sorry, some geekspeak coming to up-256-bit SSL (Secure Sockets Layer) encryption. This is the same level of encryption used by online banks.
Let’s face it: This bank-grade security protocol is likely to be far more secure than your own computer and IT security protocols.
Another advantage of having your apps and data stored “in the cloud” is that if your computer, server, smartphone, tablet or other device you use is lost or stolen, your data is safe because it’s not on the device. It’s in the cloud, stored securely behind encrypted passwords.
And your data is far more valuable than hardware. Hardware is easily replaced. Data is not.
This same “you can relax because your data is in the cloud” factor also applies to disasters such as flood and fire. A business using cloud-based computing could have its premises burn to the ground overnight and continue “business as usual” from another location as long as they had access to the internet. (At least from a customer, financial, accounting, human resources/personnel and other business data perspective. It does not apply to physical, operational aspects of a business.)
There is not a single business person or company who wouldn’t benefit from having a detailed bookkeeper. And when you are hiring a bookkeeper online, you can have a much wider choice and be certain to find the best person for the job for the most competitive price. Because you’re picking from a larger pool, you’ll have more relevant, highly qualified professionals to choose from.