Understanding where a file goes when you save it to your PC is a fairly simple concept. It lives on your hard drive in a set of folders that you have most likely created and organized yourself. Those files are only stored on your computer, in your home or office, under your control. What about saving files onto the cloud? Where do those files go? Who controls them? Who 'owns' the data?
Cloud accounting software is an online Internet-based solution used for business and its accounting. With cloud-based accounting software, you can work from anywhere with an Internet connection. Cloud accounting often operates from both computers and mobile devices.
But first things first.
What Is the Cloud?
At the most basic level, the cloud is a network of connected servers. When you save information to these servers you can access your data from any computer that is connected to the clouds network. Data can also move from server to server 'through the cloud' without the need to download then upload large chunks of data.
The concept of the cloud is one that has been developing over the past 50 years. The idea was introduced in the sixties by J.C.R. Licklider, who was responsible for enabling the development of ARPANET (Advanced Research Projects Agency Network) in 1969.
J.C.R. Licklider was an American psychologist and computer scientist and is being considered one of the essential figures in computer history.
His vision was for everyone on the globe to be interconnected and accessing programs and data from any site anywhere. This later became the basis of what we now know as the internet. The term Cloud Computing, however, was not coined until the late 90s and early 2000s as it started to become available to the masses.
The Power of Cloud Accounting Software
Cloud accounting software uses powerful servers to perform the accounting calculations remotely online. Cloud accounting software encrypts the data as it travels from and to the user’s computer or mobile device. Cloud providers have virtually unlimited server capacity available in a distributed network. They provide as-needed computer resources to software users like you. Multiple users from your small business can use cloud-based accounting software at the same time without having to worry about having too old data. Data are automatically updated in real-time for all users of the account.
What are The Benefits of Cloud Accounting?
One needs to understand the reasons why cloud computing in the accounting industry is so beneficial:
Hardware, Backups, and Security
- Cloud providers like Amazon’s AWS, Microsoft Azure, and Google Cloud own and maintain the hardware equipment, including servers.
You don’t need to make expensive lump-sum capital expenditures for fixed assets. And you don’t need to hire IT employees or consultants to keep computer equipment functional.
- Cloud providers store your data, so it’s not located on your computer hard drive.
You don’t need to fear the loss of all your data from a hard drive crash or a stolen computer.
- Cloud providers automatically backup your data online.
Don’t worry about forgetting a backup or getting a corrupt backup. Those backup disasters would take extra time and cost you money. You should be storing backup data offsite if you’re not using the cloud. A fire or another natural disaster could cause significant problems with no recent backup available.
- Cloud providers have a very high level of expertise to provide excellent security. Cloud accounting software uses identity and access management (IAM) security. Cloud providers create encrypted data on their servers. The data passes from the cloud server through the software's API to your computing device.
Read Deloitte Consulting LLP's blog article, Three cloud security problems that you can solve today. Of course, you need to establish security on your end too. Business security includes using strong, unique passwords that each user creates. Users change the passwords often.
How Safe Are My Data In the Cloud?
Cloud servers are well secured, but what are cloud companies doing to protect my data?
Among basic safety measures that cloud companies implement we can find:
- Advanced firewalls. Not just any firewall, but advanced systems checking for data packets, examine the source and destination data and also verify packet integrity.
- Intrusion detection. It can happen - intruder breaks through first lines of defence and gets into the system.
- Event logging. In case it is already too late to stop the intruder, it is important to proceed with the analysis of the system, see what happened, how did it happen, and to release safety patch to patch the path. This seems like a far-too-late solution, but it happens quite often that intruder chooses for his first attack so-called poking attack. This attack is meant only to poke defence systems to see whether a full-scale attack would be possible or not.
- Internal firewalls. In the cloud, similar to other systems, are layers of access, where some accounts may access and some not.
- Encryption. Encryption is fancy applied math applied to a secure system. Encryption works in a way that every user gets generated (literally calculated) key. Encryption complexity rapidly increases, and as of now, there is standard encryption of 256-bits. The most advanced being AES encryption system. To break this system (to calculate all possible outcomes) it would take, to the most powerful supercomputer in the world (MilkyWay-2) a couple of million years.
- Physical security. Every modern data centre is being monitored by a surveillance system and has on-spot guards.
- Insurance.
Read more about the security of your data in the cloud in our detailed read What is Cloud? How Does It Work With Accounting Software? here.
Updates and Upgrades
- Cloud providers automatically update cloud accounting software. Or they push out update notifications requiring just a few clicks by the user.
Your small business won’t need to use human resources or consultants to update or upgrade each separate computer. That takes time and costs money. It could result in different users being on various updates if they don’t update or buy an upgrade from their software vendor.
Cloud Providers Let You Use Cloud Software at (Almost) Any Time
- Cloud accounting software users have 24-hour access, seven days a week.
That’s unless you have an Internet outage, or the system is temporarily down for maintenance. The cloud provider has redundant servers to minimize being down. Yet, it can be subject to cyber-security issues like denial of service when a hacker orchestrates their attack on the system. Cloud providers have the expertise to recover quickly.
Most of those really good cloud providers work with SLA about 99.90-99.95%, but it is rare to find serious cloud providers with worse SLA than 98%. SLA stands for Service Level Agreement and it is terms of use and terms under which your service will be provided and to what extent.
Read more about what is SLA and how does it work here.
For instance, Google cloud states here that their uptime is 99.978%, but their SLA is a matter of an individual contract with them.
Amazon AWS cloud provider then states 99.99% SLA here:
AWS will use commercially reasonable efforts to make the Included Products and Services each available with a Monthly Uptime Percentage (defined below) of at least 99.99%, in each case during any monthly billing cycle (the “Service Commitment”). In the event any of the Included Products and Services do not meet the Service Commitment, you will be eligible to receive a Service Credit as described below.
Alibaba Cloud is the first cloud provider to offer 99.975% SLA for single instance and network by fixed bandwidth.
Multiple Users
- Many users from your company (up to your SaaS software subscription plan limit) can use cloud accounting software at the same time.
And the system doesn’t become sluggish when too many users are on the network, unlike desktop software systems thanks to virtually unlimited cloud bandwidth and computing power.
Built-in Collaboration and Communication Capabilities
- Users from every department accessing cloud small business accounting systems communicate in real-time.
Besides internal communications with a communications history log, you can solve customer issues.
Ability to Conduct Business Remotely
- When away from the office, you can conduct business from anywhere.
You can use cloud-based accounting software from your mobile phone, tablet, or computer to conduct business. You need to be in touch with your customers. If there’s a missing item, you can send out a purchase order (PO) to fill the need. Invoice customers from anywhere. That will shorten the billing, accounts receivable, and cash conversion cycle. You can even close the books remotely to stay on schedule and receive and provide needed business information and analysis.
Rent vs. Buy SaaS Billing Model
- With a SaaS (software as a service) subscription, you pay cash over a selected time, on a monthly, quarterly, or annual basis.
Learn more what is SaaS and what are its benefits in this descriptive resource by Microsoft here.
SaaS cloud accounting software billing spreads the cost of ownership over time. You can choose a SaaS subscription that matches your company's operations, number of users, and revenue level with the right pricing plan.
You may say Yes, that is all cool. But how much is it going to cost me?
And before we will take a look at most common cloud accounting providers and their prices, a general answer to that is surprisingly little. The whole point of the cloud is to save up your costs, increase security and manage your work with consistency, predictably.
Who Are Most Common Providers of Online Accounting Solutions?
Among the most common providers of online accounting solutions we can find:
- QuickBooks - starts at $12.50/month
- ZarMoney - starts with FREE plans
- FreshBooks - starts at $4.50/month
- Xero - starts at $20.00/month
- Sage - its cheapest plans vary wildly to tell
The list is far from conclusive, as there are dozens of other smaller or larger providers. What is so special about the above-mentioned companies? Each of them has a slightly different list of features, but most of them come to the same points. Where they differ are features on a price point. While some will allow you only a really basic feature at your basic plans, ZarMoney allows for features like Ledgers, Comprehensive reporting or Chart of Accounts in its base version.
Key Takeaway
We covered the reasons why cloud-based accounting software makes sense in this cloud accounting article. You get affordability, security, maintenance, updates, upgrades, and the ability to work anywhere at any time.
Furthermore, you can use your mobile phone, tablet, or computer to run cloud accounting software. To advance your small business accounting system, consider the list above, where ZarMoney is definitely one of hot candidates. Don't believe us?
Check out this back-to-back detailed feature and price overview of two accounting software solutions, ZarMoney and Quickbooks Untuit here.
Then simply take the first step to get started now on your cloud accounting software journey.
