Shaping the future of accounting

Nearly 45 years ago, the first accounting software package, Peachtree Software, was introduced for personal computers. No longer was computerized accounting available only to companies that could afford to purchase a mainframe. Within a decade, computers and accounting software became integral to running a business.

More recently, companies have moved their formerly on-premises accounting to the cloud. In fact, Gartner predicts that more than half of enterprise IT spending will shift to the cloud by 2025. That shift is about more than simply where a company’s accounting data resides. It’s shaping the future of accounting.

Here’s a look at how cloud computing is helping accounting professionals and organizations thrive.

Greater flexibility

Organizations that haven’t yet switched to a cloud-based accounting model typically have their accounting software installed locally — on a laptop, desktop computer, or local network. This setup works well until someone needs access when they aren’t in the office.

While a move to the cloud was already underway before the pandemic, implementing remote work business models in response to COVID-19 certainly accelerated the trend. Just a few months into the pandemic, Microsoft CEO Satya Nadella said the company had seen two years’ worth of digital transformation in two months.

With cloud accounting, an organization’s chart of accounts, general ledger, and other financial data can be accessed from any machine, at any location, and by any individual as long as they have the proper credentials. That flexibility quickly became a standard expectation for job seekers in accounting, and it’s unlikely that accounting departments and firms will ever return to 100% on-premises work post-pandemic.

Cost savings

Cloud accounting software doesn’t require an initial investment in servers, databases, and the staff to manage it, so the upfront costs are far lower than for on-premises accounting.

The cost savings doesn’t end at implementation, either. While cloud accounting typically involves ongoing subscriptions, costs don’t stop for on-premises solutions once the hardware, licenses, and implementation are complete. For example, the cost of on-premises accounting software must factor in the electricity to keep the server running, antivirus and backup software, on-premises physical security, and ongoing costs for upgrades and maintenance.

With cloud accounting, the vendor takes care of all utilities, security, upgrades, and maintenance costs. And because it’s subscription-based, those costs are more predictable. You don’t have to worry about surprise IT issues cutting into other budget line items.

While the total cost of either an on-premises or cloud-based accounting package will vary depending on a company’s unique needs, workload, and solutions, one cost comparison from Technology Management Concepts cacluates the average monthly savings of cloud deployment to be 49% compared to on-premises configuration.

Improved collaboration

Prior to the cloud, accounting teams were the gatekeepers for all financial information. They would close the books at the end of the month, quarter, or year and distribute financial reports to stakeholders.

Today, cloud accounting software can integrate with an enterprise resource planning (ERP) package that ties various departments together.

This promotes collaboration because real-time data is accessible to all users at any time and from any location. The company sets access levels and permissions to allow the following.

• Marketing teams can look at current sales numbers.
• Salespeople and other customer-facing staff can access customer account information.
• Customers can view their own information, make changes to certain fields, or view their account history online.
• Suppliers can view information on deliveries, outstanding invoices, and payments.
• Business advisors, accountants, and auditors can view general ledgers, trial balances, and other data necessary to provide advice, file tax returns, or complete the year-end audit.

When facilities, departments, and data are unified in one system that updates in real time and is accessible remotely, companies save time and money while speeding up workflows.

Scalability

Simple spreadsheets or single-entry accounting apps might do the job when companies are just starting out, but what happens when they begin to grow? As income rises, so does complexity.

Rather than disrupt operations to upgrade to cloud accounting software a few years in, many companies prepare to scale by investing in cloud accounting. Most major cloud accounting software providers have options for small businesses and have additional support, features, and storage available when their customers need it.

Automation

The cloud opens up endless possibilities for integration and automation.

With the help of cloud accounting, accountants and auditors can automate an enormous amount of data-intensive, manual tasks. Accountants no longer need to enter countless rows of data, manipulate complicated spreadsheets, reconcile accounts, manage expense reports, track down paper receipts, etc. Tasks that used to take hours or weeks can be done in minutes.

This allows accountants to produce more work in less time, but the benefits go far beyond improved productivity. Accountants are leveraging automation to create capacity to provide greater value for their clients or their employers.

Automation and real-time access to data allow accountants to shift their focus away from the previous period’s numbers toward proactive problem-solving. Accounting and finance teams are engaging in more conversations around strategic goals, tax planning, risk management, and finding meaning in the financial data.

Many areas of a business can benefit from cloud-based software. Still, the benefits to the accounting department are even more remarkable because financial data informs just about everything an organization does. Cloud accounting is the present, and companies that embrace it are preparing for a highly competitive future.

Mike Whitmire

Mike Whitmire, CPA, is CEO and co-founder of FloQast, a provider of accounting workflow automation software created by accountants for accountants to help them work smarter, not harder. A proud Angeleno, Whitemire is a big Los Angeles Dodgers fan and an avid baseball card collector. He resides in LA with his wife and daughter.