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What is Cloud Accounting?

December 20, 2016

 'The Cloud' or 'Cloud Computing' are pretty common terms these days but what are they, what does it mean and what does cloud accounting actually entail?


Cloud accounting is one of the most fundamental and game changing shifts in small business accounting in years. Don't worry, it has nothing to do with actual rain bearing clouds. To help you get your head around it and understand this great new phenomenon, we have highlighted a few of the more common questions we get asked and outlined the answers below.


What is 'The Cloud' or 'Cloud Computing'?

The cloud is simply a term used to refer to using the internet to access software and files rather than physically installing it on your computer and just accessing it from that device. This gives you the freedom to access your data from any internet capable device, whenever and where ever you are.


Am I Using Cloud Computing?

Most probably, yes. Most people now a days are using cloud computing without really realizing it. A common example is email accounts such as Gmail or Hotmail or your internet banking service. You have access to these via any internet capable computer or phone but the actual files are all stored online and you log in to access them over an internet connection.


What is Cloud Accounting?

Cloud accounting is also known as online accounting and is in many respects the same as cloud computing outlined above. In some instances you may have to install some driver or access software onto a device but the actual accounting software is all stored on servers that you access via the internet. In some instances, like with Xero, you don't even need any access software on your computer and you access the online files directly from your standard internet browser.


What are the Benefits to My Business of Cloud Accounting?

There are numerous benefits to small and medium sized businesses of using cloud based accounting software solutions. Lets run through a few of the key benefits:

  • The cloud removes your need to have expensive onsite hardware to store all of your records, accounting software files and backed-up redundant systems. Most solutions allow you to work from any standard off the shelf computer with an internet connection, without the need to be connected to an expensive server or having specialized software installed on your computer.

  • Access your data anywhere, anytime. You don't need to be in your office to have access to your accounting software. As long as you have an internet connection, you can access it from wherever you happen to be, whenever you need access.

  • A single cloud based ledger reduces error and improves the accuracy and reliability of the data, necessary for making those key business decisions.

  • You can collaborate with your accountant at any time and work on the same data file from desperate locations with no errors or data corruption.

  • Cloud based solutions are most commonly paid for in monthly installments. This massively reduces up front costs and allows the new solution to be easily incorporated into your annual cash flow forecast with minimal financial impact.

  • The monthly subscription format also has the benefit of continuous updates. No longer having to download or install updates manually will save you time and ensure that without you even noticing, your software will be kept in the most up to date format available.

What is the Impact on My Accountant and Our Relationship with Them?

Accountants and business advisors have been the some of the most ardent supporters and fans of cloud accounting since it first burst on to the market. It has unlocked a whole new world of potential for collaboration between professional advisors and their clients. Accountants have seamless access to their clients data whenever they need it. This allows them to keep an eye on your operations and advise of any changes that may be of concern or may lead to new tax strategies and planning needing to be implemented.


At year end, your accountant can access your data as soon as they need it without the need for you to download and send them any files. They can make any adjustments that are necessary and finalize your year end performance and tax position in a far more timely manner with far more reliable data than ever before.


All of the year end processing happens with very little, if any, disruption to you. Your business and software continues to run as normal. If needed, your accountant can lock off the dates for the prior year to prevent any corruption of the data while they finalize the years financial statements. If you use an in-house bookkeeper, there is no need for your accountant to send them a copy of the journals to enter to update their system as everything will be sorted in the single ledger with no need for duplicate entries. Allowing you and your team to focus on your current year, not get bogged down in the past.


All of these features add value to your relationship with your accountant and business advisor, helping to keep your business running smoothly and simplifying your tax compliance.



This advice is general in nature. Every situation is unique and requires tailored advice. MBP has the expertise to guide you and your business through the process of making informed decisions about adopting a number of different cloud based accounting solutions. If you would like to talk through your options, contact our team today for a free consultation by calling 07 378 6655 or email mailbox@mercerbp.co.nz


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