How Cloud Accounting Software Has Changed Accounting

Originally organised and filed through paper-based means, digital software has revolutionised accounting, and with the introduction of The Cloud, this has only improved things further. This guide will assess how cloud software has changed accounting processes over the years, detailing the many applications and tangible benefits for firms considering the shift to cloud-based accounting software.

Pre-accounting software

Prior to any accounting software coming to market, all accounting data was recorded on paper and needed to be held in storage, be it a warehouse or within an accounting firm itself. In line with UK law, records needed to be securely stored between five to seven years, posing storage challenges for firms with limited space or those handling high volumes of clients.

The physical storage of files also posed challenges around the timely retrieval and overall protection of client data. In the common case that the data was stored off-site, retrieval could take a considerable amount of time - a process that would take just minutes today. In the case of a fire, a leak / flood, or even something as nominal as spilled coffee, data could also be easily lost or permanently destroyed. 

Data input was also completed manually, leaving records open to typos and general data input errors. 

Accounting-specific software

Still a staple in many businesses, Microsoft Excel was the first software to be widely adopted by accounting firms, as it allowed for the storage and sorting of very large amounts of data. For firms that were previously paper-based (which everyone was at the time), this brought drastic improvements to almost every aspect of accounting, even before cloud computing existed.

Digital accounting removed most of the above problems outright. Currently, a Microsoft Excel spreadsheet - with a limit of 1,050,000 rows and over 16,000 columns - can store about 16 billion cells of data on a computer harddrive approximately the size of your hand. This is an extreme example, but it demonstrates the power of the program to virtually mitigate physical data storage challenges and dramatically reduce human error.

While Microsoft Excel was (and remains) very useful for data management and accounting, new software specifically catered towards accounting was created which narrowed down the applications of spreadsheets and general databases to be more intuitive and directed. 

In 1978, Peachtree by Sage Software was introduced as the first accounting-specific software, sharing many of the most useful features that Excel has. 

There are now countless variations of this, with Quickbooks being the most commonly used among larger firms, Xero recommended for smaller ones, and Wave as a free option for those looking to dabble.

Cloud computing and accounting

Undoubtedly, the introduction of digital software improved accounting in nearly every way, but the creation of the cloud would do this once again, improving efficiency and organisation exponentially.

Despite its massively reduced storage requirements, prior to the cloud, digital data still needed to be stored somewhere physical and posed its own complications. Simple things such as file uploading and sharing were still limited by hard drive and disk space as well as connectivity considerations like bandwidth. 

Unlike its digital predecessor, cloud data is stored on ‘The Cloud’ - a virtual storage space that can be accessed from anywhere with an internet connection. Not only has this reduced businesses’ need for maintaining hard drives, it has also reduced costs around data storage.  Further, cloud-based accounting software has enabled multiple accountants to access, edit, and share files in real-time, opening the door to collaborative working like never before. 

Much like the leap from paper to digital, cloud-based software has further increased efficiency by removing minor (but essential) busywork associated with maintaining large volumes of data. Specifically designed for accounting, these programs also offer sophisticated accounting capabilities and analytical tools to further improve efficiency, accuracy, and reporting.

As an extra bonus, companies can also use cloud accounting to reduce their carbon footprint by going paperless. While cloud storage banks use a lot of electricity to stay online constantly, technology has and continues to improve this situation.

The challenges of cloud storage

A risk that comes with cloud storage is the way in which data is left ‘up in the air,’ meaning damage to the cloud servers could result in a severe loss. However, this is very rare, and data can still be backed up onto the firm’s own hard drives, which is recommended by experts.

With information accessible through the web, there is also the underlying threat of hackers accessing private and commercial data. However, the methods of combating this are usually well-documented and of utmost priority for cloud-based software companies. Additionally, firms should take care to have their own cybersecurity protocols in place to prevent any data loss. 

Of course, the option to store and calculate data in paper-based or localised systems still exists, but by weighing up the options, there are many reasons why it is better to opt for a cloud-based solution. 

Considering cloud accounting software? Monetta can help.

Cloud computing is an integral part of accounting and has a wide range of benefits. If you are an accountant or a firm owner and are looking to improve the accountancy within your business, contact us for consultation. The friendly experts at Monetta can advise you in more detail on the different cloud accounting software, breaking down which would best suit your needs. 

Contact us now or fill in our contact form and a member of the team will be in touch.