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How does cloud accounting work?

by Chloe Baird

What is cloud accounting software?

‘The cloud’ is the name given to data that lives in remote servers, as opposed to being downloaded onto your computer, your phone or any other device you use.

An example of the cloud in everyday use is your email account. Your emails aren’t saved onto your device—they’re located on the host’s (Outlook, Google, Hotmail, etc) server.

Cloud accounting software is any kind of accounting software that is hosted on remote servers. All the functions of the software are not performed on your desktop, but by accessing the cloud through the internet. What this means is that not only is the accounting software not taking up space and processing power on your desktop, but you can access this software from any device, anywhere, so long as you have an internet connection.

Work the way you want. You can access the cloud from anywhere, from any device, so long as you have an internet connection.

6 Reasons to use cloud-based accounting software

Here are some of the benefits of using cloud accounting software over installed accounting software:

1. It frees up space on your desktop

As cloud accounting software is accessed through remote servers, there’s no need for you to download and store large files to your hard drive. This frees up space on your desktop and won’t slow your device down.

2. You can access it anywhere, at any time

So long as you have a compatible device and an internet connection, you can check up on your accounts just about anywhere. While it’s convenient to check on things while you’re out and about, this is also a huge bonus if something urgent pops up and you need to follow up immediately. There’s no need to run back to the office—you can just use your smartphone to access your accounts.

3. Cloud accounting is secure

One of the most common questions people ask around this topic is, ‘Is cloud accounting safe?’ Most software as a service (SaaS) providers will have best-in-class cyber security that goes with their product. This is simply the nature of the industry. If you’re going to offer a cloud-based service, then your customers need to be able to trust that their data is protected. Many cloud applications also use encrypted connections while transferring data, which helps to lessen the chances of it being intercepted as its transferred from your device to the cloud.

For example, Xero has numerous security measures that help towards making it safe, secure and reliable: such as two-step authentication, data encryption, secure data centres in enterprise-grade hosting facilities and multi-layered network security.

Of course, part of the responsibility lies with you, the user. But if you’re concerned about whether cloud accounting is safe then the answer is yes.

4. Automatic back-ups mean your livelihood is safe

In all honesty, how many of us can say that we regularly back up our files (even though we know we should)? If your computer was stolen, what would happen to all the data and files saved on it? With cloud accounting software, everything is backed up automatically and saved in the cloud. So even if your computer is stolen, damaged or infected with malware, you’d still be able to access your accounts.

5. Collaborating is easy

Because the cloud can be accessed anywhere and from any device, it’s easy for other people in your network to log in and update information as necessary (so long as you have cloud accounting software that facilitates multiple users). This point does fall back to the point about security, however: you should only give access to those employees or third parties that require it.

6. You’ve always got the latest update

With cloud accounting software, there’s no need to waste time waiting for the latest version to download. You’ve got updates and security improvements happening in real time.

With cloud accounting, you can track inventory, send invoices and check your accounts in real-time wherever you are.

Are there any downsides to using cloud accounting software?

Like anything, there are some disadvantages to using cloud accounting software, but there are far more pros than cons.

The biggest drawback, and conversely one of its biggest selling points, is accessibility. The nature of the cloud means that it can be accessed anywhere, at any time, so long as there’s an internet connection. But the catch is that if you find yourself without an internet connection, you won’t be able to access it.

What is the best cloud accounting software?

As far as cloud accounting software goes, you have more than a few options. But which is best?

This depends on a few factors. Such as, whether you’re a small business owner, a financial professional, how big the company is and what industry you’re in, among other things.

Some of the most popular cloud accounting software in Australia are:

  1. Xero: one of the most popular options in the cloud accounting space, given its intuitive design, its support for third-party apps and smart workflow processes. It’s also designed specifically to grow with your business, with different subscription options depending on your needs.
  2. QuickBooks Online: considered to be good value for money, this cloud accounting software also hosts a wide range of features most small- to medium-sized businesses will find helpful.
  3. MYOB Essentials: includes most of the basic features for a small business and has an easy-to-use payroll function.
  4. Reckon One: popular because it has a customisable dashboard that many people find convenient and easy to use.
  5. Wave Accounting: one of the best features of Wave is that it’s completely free, but still provides all the basic features sole traders or freelancers are looking for.  

If you’re looking for more information on the best accounting software, then read our blog: ‘The best sole trader accounting software’.

Where can I learn more about cloud accounting software?

If you’re thinking of investing in cloud accounting software and want to learn more about it, one of the best ways to do this is study an online course.

Through our partner The Career Academy, Open Colleges offers the Certificate In Xero short online course. This course will teach you all the basics of Xero so you can make sure you’re getting the most out of this cloud accounting software.

Whether you’re a small business owner or a financial professional, this course will help you better understand the features of Xero and how it can work for you.

Enrol today and start studying.

1 Response

  1. Maria Nelson says:

    This is very helpful blog. I really appreciate the efforts you’ve done for the information. Thanks for sharing.

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