Cloud accounting - does it really have a silver lining?

By David Fairbank 

The last year has seen a huge impetus behind the cloud accounting software market. Fuelled by the requirements of Making Tax Digital (MTD), businesses and accountants have been bombarded with media articles and advertising about the benefits of cloud accounting.

Setting aside all the media hype, what is cloud accounting? Is it the shape of the future? And does it really have a silver lining? 

Cloud accounting describes the situation where the software and data are hosted on a remote server and are accessed via the internet. This means that there is a reduced requirement to have storage and backup facilities on the local system. It also means that the software and data can be accessed from any compatible device from any location that has an internet connection. 

Anyone who has a smart phone or tablet will be familiar with cloud storage and software. It seems only logical that accounting will go the same way, allowing the same flexibility of access and processing that we all enjoy with our mobile devices. It is this flexibility and mobility that will overcome any traditional resistance to cloud accounting and will see a huge take up within the SME market.

So what are the risks involved with cloud accounting? Data security has got to be the single biggest risk. The fact that the data is no longer under the physical control of the user can present problems and, with potential fines being introduced with The General Data Protection Regulation (GDPR) in May 2018, it is crucial that the security of the data in the cloud is given very careful consideration. Other potential risks include; users adding erroneous entries; internet failure; expensive contracts; change of working practices; compensation for loss of data; and, what happens to your data if you wish to change software provider.

Cloud accounting does offer SMEs the flexibility and advantages previously only available to larger corporates thanks to a wide range of “apps”, designed to enhance business efficiency. Coupled with the advances in processing and automation that have already arrived and are due to come in the future, accounting outside of the cloud will not be such an attractive proposition in the future.

So pick your cloud accounting software carefully, take advice from your accountant and make sure that you assess and deal with the known risks. Then your accounting cloud really will have a silver lining!

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