Cloud-based accounting is a process in which you use an internet-based system to access your accounting from anywhere at any time. Three things are certain about this process:
- Cloud accounting has a long history that extends back multiple decades. In fact, it has been around since the late 1990s when NetSuite housed data on a separate computer.
- Cloud accounting is making a splash in the present. According to recent research, most (70%) businesses are using the cloud this year and planning to increase their investment.
- The future is looking bright for cloud-based accounting. The market is expected to increase by 14.2% in 2024 and is set to reach a value of $832.1 billion by 2025. To make the most out of your experience with the cloud, let a partner like Kaizen help!
Don't let the term 'cloud-based' scare you away before you learn more about its massive benefits and impact on your business. Here's everything you need to know about the past, present, and future of cloud-based accounting.
LIFE BEFORE CLOUD-BASED ACCOUNTING
Before cloud services became commonplace, there were manual processes and on-premise software. Although the two processes have since evolved into more efficient and effective forms of cloud accounting, they laid the foundation for what most businesses would later rely on.
Manual Processes
Since automation has changed accounting for the better, manual processes have been mostly or completely eliminated. This is because manual processes, like those in the beginning days of the cloud, had a heavy pull on small business owners and/or accountants if the company had them.
Tedious and repetitive accounting tasks done manually would take up hours of employee time, leaving little room for productivity and optimized performance. In fact, employees would actually spend much of their time doing the following over more important matters that needed their attention:
- Sorting through boxes of paper documents
- Typing in invoice data and manually linking to purchase orders
- Sending payments through the mail (required several steps, such as consulting the heads of their department, gathering all the supplies, checking/rechecking contact information, and more)
On-Premise Software
For the early adopters of accounting software, it was likely hosted on various servers that could only be accessed from the premises. All backups were manual, which had a heavy pull on IT and accounting.
The following features of on-premise software have since made it outdated:
- The software was installed and kept on-site (versus with the vendor where it is better managed).
- Costs added up quickly for hardware, server space, storage, software, and more.
- The company was expected to secure the data on-site through manual backups.
THE EMERGENCE OF THE CLOUD
Cloud-based accounting made all the difference to business when it emerged. The method refers to the process of backing up accounting data and managing basic tasks in the cloud.
The cloud is typically run by a third party, which means the storage and management of cloud software lifted a weight off the shoulders of IT staff and business owners by allocating the responsibility to the cloud provider.
It also provided businesses with a more cost-effective solution, charging companies monthly or annually for what they use, with the cloud provider helping to secure data.
Where it all started
The first cloud-based software stems back to 1999 when NetSuite (formerly under the name NetLedger) launched a package that allowed large companies to access the same data in multiple locations using cloud technology.
A few short years later, around 2004, QuickBooks Online followed suit with small business packages for the cloud. Unfortunately, the technology wasn't well-known or understood at the time, so it wasn't often pushed on owners.
Between 2006 and 2008, Xero joined the party in New Zealand and the UK as the other leading cloud accounting software under the name Accounting 2.0. They didn't earn substantial acclaim at first, but by 2017 they reported earning more than one million global customers.
Benefits of the cloud
The most important benefits of using cloud accounting are:
- Accessibility (Same data, same version — anywhere, anytime)
- Data Backup
- Efficiency
- Collaboration
- Security
According to All Business, "Online accounting software incorporates the upside of traditional desktop accounting software with the many benefits of the cloud."
Popular Cloud Applications in Accounting
There are a number of popular cloud applications that are imperative to modern accounting, including:
Combining these applications and more into your accounting infrastructure sets you up for automated accounting success with less manual oversight.
HOW THE CLOUD IS SHAPING THE FUTURE
The power and security of cloud-based accounting shouldn't be underestimated. More businesses are counting on the cloud for efficient management and access year over year.
In fact, the cloud is perfectly positioned to revolutionize accounting in the business world as we know it.
According to Just Total Tech, this is for three significant reasons:
- Labor costs are cut by 50% when using the cloud compared to in-house software.
- Businesses are already experiencing substantial success with modern technology — 58% of large companies and 78% of small companies rely on these solutions.
- Solutions are more efficient, onboarding nearly 5-times as many clients via easy access anywhere there is an internet connection.
What's more, as we previously mentioned, cloud spending and value are set to keep growing as the market expands its potential and continuously improves with technological advancements. This suggests that not only is the cloud making an important impact on accounting today, but it will only improve in the future.
PRIORITIZE CLOUD-BASED ACCOUNTING WITH KAIZEN
Keeping your accounting data safe and secure is essential to running your business smoothly and maintaining continued growth. A cloud-based accounting partner like Kaizen will help you prioritize the security of your accounting process while helping you navigate its complicated ins and outs.
As the saying goes, "Out with the old, in with the new." The cloud has already made a substantial impact on every industry, with nothing but good things in its future. There's no better time than now to make the important transition!
Eric Joern : May 16, 2023 3:40:02 PM
The Kaizen Team : Mar 28, 2023 9:08:35 AM
Eric Joern