Unless you’ve been hiding underneath a pile of financial records, you’ve already noticed that more and more organizations are making the move to a cloud environment. Perhaps, this has already happened at your own organization. That wouldn’t be surprising, since in 2016 the average organization used at least 13 cloud-based platforms.
Gartner forecasts that, by 2018, 40 percent to 50 percent of business users will have moved their core collaboration and communications systems to cloud platforms. In addition, International Data Corporation reported that the cloud software market will continue expanding at a compound annual growth rate of 18.8 percent through 2019. One of the major drivers of cloud-based software penetration has been small businesses. These firms rely on advanced delivery options to keep capital expenditures down and functionality optimal.
Accelerated Growth With a Cloud Environment
Investing in cloud-based software enables organizations to have accelerated digital innovation, while at the same time seamlessly connecting interdepartmental communications. Today’s advanced cloud solutions are extremely open and allow for the frictionless movement of information from system to system. Each department can make the best choice based on its needs to maximize performance.
Are Cloud-Based ERPs Superior? Yes
There are many ways that cloud-based ERPs are superior to on-premise accounting solutions. For example, because the platform is in the cloud, organizations save money on costly hardware and IT Support expenses. Cloud-based environments also offer automatic updates. This changes the way accounting departments function. Cloud-based solutions tend to be faster and more efficient in accounting workflows than the technologies of the past. Cloud-based solutions also improve user experiences and continuously evolve to keep up with the transformation of markets and operations. Cloud-based platforms reduce a lot of the challenges accounting departments experience on a day-to-day basis.
Challenges With Traditional Accounting Software
- Data in the system is not up to date
- There is a reliance on Excel spreadsheets
- Software is only installed in one location
- Backups can be cumbersome
- Irregular updates, if at all
CPA Practical Advisor once listed the most common struggles of accounting in small business as follows: accounts receivable, cash flow, managing paperwork, finalizing monthly reports, and payroll. The publication noted that about 83 percent of entrepreneurs who responded to one survey stated that they do not even have the ability to audit within their management systems.
When approaching accounting with antiquated processes and practices, these types of issues will often cost companies severely either in terms of budget constraints or noncompliance with industry standards.
Advantages of Cloud-Based Accounting Software
- A real-time overview of your financial posture
- Automatic updates, ensuring that you have access to the best-in-class features and security measures
- Access to your data from multiple locations — in a remote working world, this can ensure that efficient financial decisions are made
- Everything runs in the cloud and your data is backed up automatically
- Greater communication between departments and vendors
As you can see, there are so many benefits to adopting a cloud-based environment for your ERP system. Nevertheless, in the back of your mind you might be wondering how safe it is: Will I impose unnecessary risks to my organization? To be fair, there are risks with both on-premise and the cloud. However, with more organizations moving to the cloud, security is the number-one concern for all Software-as-a-Service (SaaS) companies. In fact, Gartner predicts that by 2020, 95 percent of cloud security failures will be from the end-user. Organizations can greatly reduce this risk by enabling IP restrictions, two-step authorization, and setting session timeouts.
Three Things to Keep in Mind
As a CPA, you are more than just a business associate — you are a trusted advisor. Your experience and expertise is valued and your opinion is trusted. When you get asked about whether or not an organization should move their accounting software to the cloud, keep these three points in mind:
- If you choose the right solution, your data is guaranteed to be safe and more accessible. This means it’s necessary to perform a due diligence platform search. There are real consequences when SMBs approach cloud app selection and implementation without a big-picture view. Often, they select a product that is right-sized for their organization right now, not a product that has the capability to grow alongside their business. When companies rush through the process, they can also experience unexpected operating costs, lack of real-time visibility, and over proliferation of applications and costs. Advise your clients to take the time and find the solution that best fits their needs both today and five years from now.
- With a cloud-based environment, you have the ability to work more collaboratively with your clients. You can access the system from anywhere. Instead of communicating through Excel, you can see real-time updates and financial reports. It’s as if you are in the same room working side-by-side.
- Chose a solution that has continuous audit trails. We all dread an audit — even the best of us. However, finding the right accounting solution can offer a collaborative compliance tool for capturing why something was done. It takes away the guessing game of “I think this was done because of this.” For example: During an audit, the controller can pull up a transaction that has a stored conversation and the attached supporting documentation. She or he can answer an auditor’s question about not only what and when it was done, but also why it was done.
If you haven’t transformed into the trusted advisor role yet, prepare to do so. It’s coming. According to a recent CPA.COM study, “80% of CPAs think their role will change significantly in the future — the CPA of the Future will offer more consultative business development, risk management, and advisory services by 2025.” Start to gain a better idea of the general landscape, and reach out to trusted subject matter experts for their sound advice. It might sound like a cheesy public service announcement, but it’s a fact that “The More You Know,” the more you can help your clients and be part of the process.
I hope that I’ve inspired you to do more research or take a deeper look into cloud-based solutions. Research all the pros and cons and fully understand the risks. At the end of the day it is all about finding the right solution for your organization. There are a lot of great options out there and it is not a decision to be made lightly. Please read my eBook: Choosing the Right Middle-Market Accounting Solution to begin your search.