The digital revolution is transforming small businesses around the world, presenting them with new opportunities to optimize costs, productivity and efficiency. While many business operations are jumping on the digital bandwagon, one area lagging in digital adoption is accounting. According to a recent global study by Xero, 37% of U.S. small business owners keep track of their books via spreadsheets and a whopping 39% still use pen and paper.
Many respondents cited reasons — such as preferring to do the work by themselves, their business not being large enough, or it being too costly — to explain why they haven’t digitalized or outsourced their accounting functions. But, as small businesses grow and competition becomes stiffer, manually keeping track of books will become a time-consuming, daunting task.
This is where a holistic accountant steps in. Rather than jumping in just during tax season, accountants should provide more strategic counsel year-round for their small business clients. This is made easier by utilizing digitalized bookkeeping tools, such as cloud accounting software.
What is cloud accounting software?
The advent of new technologies has changed how businesses manage their operations, presenting an opportunity for accountants to work with small business owners to emphasize the benefits of digitizing their accounting functions. In fact, according to a recent study by Fortune Business Insights, the market size of global cloud accounting software is estimated to reach $4.3 billion by 2024. Now is the time for accountants to tap in and help small businesses make informed decisions about how they manage finances to enable business growth.
Cloud accounting software enables small businesses and their advisors to optimize bookkeeping processes online and keep records of income, expenses, assets and liabilities, which allows accountants to have a more encompassing view of the financial information year-round, as opposed to just during tax season. Leveraging the power of cloud-based accounting software will not only boost productivity and efficiency but also helps to streamline the entire accounting function.
Benefits of cloud accounting software
Cloud accounting software can reduce the amount of time and effort small business owners, and their accountants, spend tracking and updating financial information. So, what are the main advantages of using cloud-based software?
Easy, on-the-go accessibility. Unlike desktop accounting software, cloud-based systems allow individuals to access their business finances anytime from any internet-connected device. This data is accessible from any web browser or app — in the era of hybrid work, this tool is especially valuable. This enables team members to keep up to date with current financial information and real-time analytics from home, on the road or even across the country.
Having real-time access to these financial metrics also allows accountants to pull quick, accurate and up-to-date data on their company’s performance. As soon as any data is entered into the cloud-based system, all dashboards and metrics are automatically updated, which allows for more accurate financial forecasting.
Timeliness and efficiency are important for businesses of all sizes, in addition to accessibility. Utilizing a tool that streamlines all accounting functions in a single live platform can take the strain off business owners and their accountants. For instance, operating with spreadsheets may make it difficult to complete tasks in a timely manner due to file storage and tedious manual input needs. Utilizing the cloud streamlines this process, eliminating the need for file management and tracking certain metrics automatically, allowing for access from multiple users across the platform.
Automation is an opportunity, not a threat. As a business expands, so should its digital investments. Cloud-based platforms automate many accounting tasks, therefore reducing the amount of manual work needed to update financial information. Data about sales, income and purchases flow straight from the bank to the books so there is no need to physically transcribe them. Cloud-based software can scale to match a business’s needs over time and allows users to add features and capabilities as they grow. It also enables small businesses to increase their productivity as they can focus their energy on other areas of the business that may require more hands-on attention.
Managing finances with spreadsheets can become unmanageable as a business grows, particularly due to the fact they typically have limited functionality. Spreadsheets may be passable at an early stage of a small business where there is a small number of employees, but as a business grows, accounting needs become increasingly complicated. Spreadsheets do not offer functionality that automatically updates relevant account information, but rather requires individuals, from both the business and accounting side, to manually input information and formulas — which often leads to human error. These errors may not be immediately detected and can have severe financial implications down the line.
Build and maintain greater collaboration. Automating accounting functions also allows for greater centralization and collaboration within an organization. Because of the nature of the platform, sharing information among peers has never been easier. The cloud enables users to upload files to the cloud for everyone to access, rather than sending the files individually. Maintaining relationships with external parties such as vendors and distributors can be difficult when financial information isn’t always readily available, but with cloud accounting software, business owners or accountants can easily locate invoices and bills to ensure all payments are made on time and that all financials are up to date which can eliminate burdens during tax filing season.
Businesses that have not migrated to the cloud and still manually keep track of their finances by spreadsheet or pen and paper may struggle with version control of specific documents. This makes it difficult to identify the most accurate and up-to-date information, especially when multiple users are accessing the same — or a duplicate — of a specific spreadsheet. This, too, can lead to errors or inaccurate information affecting all parties involved.
Reduce the amount of paper used. Over time, business operations can generate a lot of paper use, which can make daily business operations difficult to perform. Utilizing a cloud accounting software system can significantly reduce clutter and disorganization, especially for small businesses or accountants who are operating in small office spaces. Looking through piles of thousands of papers can also reduce productivity, and digital documents can help offset the amount of time spent searching for a specific file. Beyond enhancing productivity, transferring files to the cloud can also have a significant impact on the business’s environmental footprint.
So, what are you waiting for? The revolution in accounting software is taking place, which comes with boatloads of benefits for accountants looking to keep track of their small business clients’ finances more reliably and efficiently. While managing accounting functions may be daunting, embracing online cloud accounting software can help small business owners and their accountants perform manual tasks quicker and simpler — which allows for greater focus and attention on growing their business.