Cloud computing is fast becoming the norm and now bookkeeping software has gone up into the clouds too. Gone are the days of cumbersome cashbooks and files stuffed full of receipts. Cloud accounting is revolutionising the way small business owners manage their affairs.
Traditionally, bookkeeping software has been a ‘desktop product’ that you buy off the shelf and downloaded onto your Mac or PC. With Cloud accounting, you purchase the use of accounting software via an online provider and information is accessed over the internet.
Before we take a closer look at Cloud accounting, let’s just take one step back and address what HM Revenue & Customs (HMRC) needs from business owners.
If you have to send HMRC a tax return, the law says that you must keep all the records and documents you need to complete the return. If you don't have adequate records or if you don't keep the records for long enough, you may have to pay penalties.
You are required to:
- keep your records for about six years
- keep full and accurate records
- regularly update your records
- keep your records securely
- check with HMRC or an accountant/tax adviser if there is something that you don't understand
- have both the front and back pages of documents
- have easy access to them so you can pass them to HMRC
HMRC recommend you keep all the original documents you receive. But this does not mean you need to keep them on paper. Most records can be scanned and kept electronically on a computer or a storage device such as a CD or memory stick.
The features of Cloud accounting
Cloud accounting software should do all the things you would expect from a desktop product, such as raise invoices and keep tabs on outstanding payments, record receipts and keep an eye on credit limits with suppliers, prepare VAT returns and produce reports such as your profit and loss statement.
But there are a host of other benefits that come with Cloud accounting:
No initial large cash outflow
Normally when you purchase desktop bookkeeping software, you will have to pay for it all at once. Cloud accounting solutions are typically a subscription service, so you will pay a small, monthly amount which most business owners prefer because it doesn’t have such an impact on their cashflow.
Cloud accounts can be accessed anywhere; anytime and provided data entry is up-to-date, will show real-time results for the business.
No updates required
With desktop solutions, updates are usually made from a disk but with Cloud solutions updates will be done in the background without you even knowing and you should experience virtually no downtime whatsoever.
Desktop solutions store your data on the hard drive of your computer so you should back them up regularly. But with Cloud solutions, the Cloud software providers will make frequent backups of all of their data- normally every few hours. You can also back up to your own desktop computer should you wish to have the data held locally as another layer of security.
It doesn’t suit everyone, but if you have the time and inclination to keep your day-to-day books, you’ll have access to real-time information about your business which should allow you better-informed decisions and meet your reporting requirements quicker and more easily- such as the preparation of your tax return.
Cloud accounts solutions will often allow you to share your data with your accountant, so you could both avoid some unnecessary meetings.
Furthermore, a lot of the Cloud accounting solutions can bolt in with e-commerce applications like Amazon or eBay, payment handlers such as PayPal, payroll software and email marketing systems such as MailChimp- to name but a few.
Is it secure?
Yes. Cloud software should adhere to the requirements of ISO 27001, being the International Standard for Data Security. They should be encrypting the data- so you should see a small padlock icon appear at the bottom of your browser when you login. This means the data being transferred is encrypted.
The will also have security measures in place such as firewalls and ideally they’ll have multi-site servers, so that if the main data centre goes down, they should be back up and running within minutes.
Other considerations of Cloud accounting
Having an internet connection is usually critical to adopting a Cloud accounting solution, so ask the provider what the minimum internet speed required is, in order to have a seamless experience using the software.
Make sure you go for a solution offering a decent free trial. You need the opportunity to try-before-you-buy and ensure that it fits with your needs.
If you’re already using some desktop software or another cloud accounting solution, see if the one you’re switching to has a data conversion or data import function - and will their team be on hand to help?
We can help
As well as providing all of the regular bookkeeping and accounting advice you’d expect about what to keep and what to claim for, we also provide:
- Assistance with selecting the right solution for your bookkeeping needs
- Initial software set up support
- Bespoke training for your staff and you
- Discounts on the purchase price of software
Your local TaxAssist Accountant will give you peace of mind that your affairs will be handled accurately and in a timely fashion, which leaves you to concentrate on your business. Contact us today to find out more about our accounting and bookkeeping solutions tailored to your business on 0800 0523 555
By Jo Nockels
Last updated September 2013