Cloud accounting software has revolutionised modern accounting practices, but what exactly is it and how could it benefit your business? Our accounts experts explain the basics and benefits of cloud accounting for small and medium businesses.
What is cloud accounting and how does it work?
Cloud accounting refers to software that performs accounting tasks and can be accessed online by authorised users. While traditional accounting software is installed on a local computer or server, cloud accounting software is stored remotely on ‘the cloud’.
This software uses automation to streamline key processes and reduce the time you need to spend on your accounts. It also facilitates any-time access to your financial data and promotes a more collaborative relationship between you and your accountant.
Cloud accounting vs traditional accounting software
How does cloud accounting compare to traditional accounting software? The table below evaluates the two different types of software on several key features.
|Traditional accounting software||Cloud accounting software|
|Scalability||Limited – there is a set amount of storage on a computer||Limitless – you can expand cloud storage to meet your growing needs|
|Security||Basic – reliance on single device increases the chances of data loss from hardware failures and system crashes||Advanced – two-step authentication and a range of integrated security features that protect data and reduce likelihood of data loss|
|Accessibility||Only accessible via a single computer, no remote access||Accessible from anywhere on any internet-connected device|
|Updates||Manual – time-consuming and subject to being overlooked||Automatic – saves you time and resource, while keeping your system up to date|
|Data backup||Manual – time-consuming and subject to being overlooked||Automatic – included in the cost of your cloud software|
|Usability||Uses specialist terms that clients may struggle to understand||Jargon-free – simple terms make it easy for you to use the software|
|Cost||Can be costly – maintenance and repair costs for the device the software is installed on||Cost-effective – you only pay for the services you need|
10 benefits of cloud accounting for your business
The most valuable benefit cloud accounting can offer you as a business owner is time saved. As the age-old saying goes ‘time is money’ – this can be especially true in small and medium businesses, where the number of staff and capacity may be more limited. Time re-claimed from sorting your accounts is time that can be allocated to other areas of your business.
There is a variety of reasons you should invest in cloud accounting for your business. 10 of the most significant benefits are listed below.
Real-time use and collaboration
You can use cloud accounting software at the same time as your accountant. This allows you to benefit from more proactive support and quicker solutions to your queries. Other authorised users, such as your company’s finance team, can also use the software simultaneously.
Access any-time and anywhere
As cloud software is hosted online, you can access your data on any internet-connected device from any location world-wide. You can view up-to-date figures and reconcile recent activity away from the office.
Monitor your cash flow in real time
Easy access to cash flow data can help you evaluate the financial performance of your business and make on-the-go decisions.
You can use cloud accounting software to send an invoice from your desktop or mobile with just a few clicks of a mouse or taps of your finger.
Automated payment reminders
Through ongoing monitoring of your finances, cloud accounting can help you keep track of your business’ outgoings and remind you of upcoming expenditure. It can also monitor sale invoices and send reminders to customers for outstanding payment.
Online filing system
Cloud accounting makes it easy to store your receipts, POs and other important financial documentation digitally. This significantly reduces time spent sorting your tax returns at the end of the financial year and removes the need to file paper receipts.
Automates a range of processes
Cloud accounting software can automate a wide range of different processes, including payroll, CIS returns and VAT returns.
Making Tax Digital compliance
Online submission of VAT returns is now mandatory, with income tax self-assessments set to also become mandatory in April 2026. Cloud accounting makes the compliance process easier and more efficient for accountants and clients alike.
Eco-friendly and sustainable
Accounting has always been administration heavy, which historically meant lots of paperwork. Cloud accounting removes the need for printing and physical filing, in doing so reducing your company’s environmental impact. You can send key documents for clients, such as invoices and bills, directly to email inboxes.
Enhanced data security
Being able to access your accounts via the internet has led people to falsely believe that cloud accounting software is less secure than offline alternatives, but in reality the opposite is true!
Xero cloud accounting with PKF Smith Cooper
Xero is a world-leading provider of cloud accounting software. Designed to meet the needs of small and medium business owners, it makes managing your accounts simple by skipping the jargon and using terms that anyone can understand.
As Xero Global Partners, we use cloud accounting software to enhance the financial services and outcomes our clients receive. Contact us today for a commitment-free discussion on how cloud accounting can benefit your business.