What is Cloud-Based Accounting Software?

As the government’s Making Tax Digital initiative continues to expand its remit, more tax reporting requirements are moving online. Cloud-based accounting software refers to solutions that integrate with HMRC’s platform and enable businesses to more easily file their tax returns. These software packages also provide a host of other advantages for modern businesses over traditional bookkeeping methods.

Unlike accounting software that is installed and hosted locally on a business’ computer system, cloud-based software is hosted on servers that are located offsite. Authorised devices can access the software from anywhere, and in most cases, more than one person can work on the same program at once. This means that you can remotely access accounting data that is accurate, up-to-date, and secure.

In the following guide, the expert accountants at Monetta will explain the benefits of cloud-based accounting software and how you can use it to improve your accounting and reporting processes.

How does cloud-based accounting software work?

Cloud-based systems and the data they contain are hosted on private servers controlled by data management companies. This allows data to be accessed over the internet from anywhere in the world. With this functionality, businesses can hire third-party accountants to work off-site without worrying about oversight, and take advantage of remote working capabilities and real-time updates. Cloud storage also functions as an automatic backup to prevent data loss in the event of a device failure.

There are several software packages available that provide cloud-based accounting services and integrate with the Making Tax Digital platform to optimise tax and accounting reporting. These services are delivered and maintained by third party providers and may be free to use, or require a subscription payment. You should ensure you invest in an up-to-date, HMRC-approved service that fulfils your reporting requirements, as this will ensure high data security and future-proof compatibility. Each brand of cloud-based software has different strengths, so you should seek expert advice if you intend to change or upgrade your software to make sure it meets your specific requirements.

What are the benefits of cloud-based accounting?

There are many reasons why more and more businesses are switching to cloud-based solutions, including the following: 

Data security
Cloud computing providers maintain a lot of data, which means that they need robust security protocols. Storing your data on a heavily encrypted cloud server that is operated by another company means you do not have to develop or maintain your own security protocols, which can be much more cost-effective.

Remote and collaborative working
Cloud-based accounting software allows multiple employees to view and edit data at the same time, enabling real-time and remote collaboration that can improve productivity and reduce logistical issues. It can also enable you to grant or revoke access to your data to third parties on a temporary basis, without the risk of data being duplicated or stolen.

Fast access
Because data is stored on powerful external servers, businesses will not need to invest in their own storage servers or high-performance computers. The only requirement is high-speed internet, which is already utilised by many businesses to underpin their telecommunications services.

This central access point also means that everyone is working with the same information at all times, optimising your financial operations.

Reliable maintenance and software updates
Your third-party data storage provider will provide any necessary updates and maintenance to their servers, which means that there is no need for engineers to visit your premises. For businesses, the only consideration is updating software to ensure continued compatibility, but this often happens automatically and with limited disruption to services.

If the service is expected to be unavailable for a short time while it is fixed or updated, your provider will typically notify you of this in advance to enable you to plan around the downtime. Because updates happen automatically, there is very little to manage and you can usually continue to use the service as normal without interruption.

Automatic compliance
Compliance with reporting regulations is vital for businesses, and up-to-date software can make this easier than ever. Cloud-based accounting platforms can automatically check for errors and perform calculations which reduces the risk of simple mistakes. Using a system that integrates with HMRC’s Making Tax Digital platform can also help you to make sure that you include all of the information you need when you file your tax returns.

Real-time reporting
Cloud-based software enables live reporting of figures, meaning you can benefit from better tracking of your business’ performance. You can view your current financial position and how it has progressed with minimal manual input of data, and be certain that information is up-to-date whenever you access it. This has many applications - it enables you to monitor finances as they change, which can influence business plans, help you to make informed decisions and enable better financial planning.

Simplified data input
In many cases, integrations with other software packages or platforms can enable much easier data collection within cloud-based accounting systems. For example, some solutions can be linked to bank accounts, credit cards and online payment services to collect data about transactions automatically, saving time on bookkeeping and data input. 

Easier and more cost-effective to upgrade
Installing new software or hardware can be expensive and time-consuming, and result in significant disruptions to business and accounting processes. Cloud-based accounting reduces the impact of this as there are very few requirements for installation. If you decide to switch to a different software package or provider, you can often migrate data without the need for manual input.

Customisation
Every business has different needs from its financial reporting, and the right software package can enable you to customise processes, workflows and output to better serve your business’ needs. In turn, the advantages of real-time reporting are enhanced when you can change metrics or visualise data differently to find the exact information you need at the touch of a button.

Should I invest in cloud-based accounting?

Cloud accounting is suitable for businesses of all sizes, and with HMRC’s Making Tax Digital (MTD) initiative, using accounting software is becoming essential. Switching to cloud-based software sooner rather than later will benefit businesses, as it is set to become the industry standard over the next few years. By incorporating this software into your accounting processes now, you will have time to optimise your reporting before it becomes mandatory. You can learn more about your legal obligations in our Making Tax Digital guide.
How Monetta can help
At Monetta, our accountants have extensive experience working with all of the most popular software packages, and can provide bespoke advice on which package will meet your specific needs. Our experienced team can also support you with setup and training for cloud-based accounting software, and with implementing new processes to take full advantage of its capabilities. 

Call us today or fill out our online contact form and we will return your call at your earliest convenience. Alternatively, visit our Cloud Accounting page for more information about how we can help you.

Please have a look at these links for advantages that we may have missed:

15 Benefits of Cloud Accounting | NetSuite
clear-books-10-benefits-of-cloud-accounting (clearbooks.co.uk)
8 Reasons to Use Cloud-Based Accounting Software - QuickBooks (intuit.com)
7 Key Benefits of Cloud Accounting (envoice.eu)