2017 – The Year of Cloud Accounting
A leading US commentator on technology recently commented that “if you choose not to embrace the cloud you are retiring in five years”. Scary stuff, and it is not just the preserve of our transatlantic colleagues, this is also happening across small businesses in Europe.
So why is cloud accounting for small firms now garnering such bold predictions and senior focus?
What has changed?
In the UK, cloud accounting usage has been doubling each year since the emergence of packages such as KashFlow in the middle of the ‘noughties’. Then a small base of a few hundred users became a few thousand and then a few tens of thousands. Over the next eighteen months a huge wave of new firms in the UK, quite possibly hundreds of thousands, will be adopting this technology. Sound difficult to believe? Around half a million new companies will incorporate this year and hundreds of thousands of sole traders will also commence trading.
Why is cloud so profoundly different?
Five years ago, when there were just a few thousand evangelical early adopters, discussions around the merits of cloud versus desktop were very technical in nature. "Where does the data sit?”, and phrased in terms that were frankly irrelevant to the average small business user. The key benefit of cloud accounting that is so often ignored or underplayed is better Collaboration.
Cloud moves to the mainstream
It was around 2011 that we began to see the true advantages of cloud really begin to emerge. It was not from inside the software but rather that cloud accounting enables far better collaboration. Start ups, small business and fast growth organisations saw this and acted. This is the truly revolutionary idea as it allows accountants into the financials to give value added commercial advice to growing businesses. Or organisations going through a period of change.
Let’s consider some examples:
- With cloud software it’s far easier to sync bank account data straight into your accounts. Bank reconciliations are remarkably fast when you’re working from the same source data.
- Another benefit is that accountants can collaborate online with clients in real-time and on the same live data. This means that small businesses can receive simple, jargon-free functionality with their accountants discreetly doing the ‘heavy lifting’.
- There’s even a service that allows firms to take a picture of a paper receipt with a smartphone. Then for it to be automatically transmitted into the cloud and remotely entered into their accounting software. No more ‘shoebox accounts’!
So we’re in a period where a new type of accounting is saving businesses from pain with data entry, reconciliation and error-checking. This frees them up to spend more time on more profitable tasks. This can only be a good thing but is just the beginning.
A world of possibilities
It’s in 2017 and beyond that cloud is about making life easier and giving business' significant competitive advantage.
Let’s take two of the top challenges faced by business' - getting finance and getting paid. Here's how cloud accounting addresses them:
- Getting Finance - It’s no secret that banks struggle to finance fast-growing small businesses. Often small business resort to using personal credit cards to fund expansion. This is due in no small part to the challenges lenders have in getting the quality and quantity of information they need to extend appropriate finance. These challenges lead them to put in place procedures and terms simply too onerous for the typical small firm to bear. As an example, less than 10% of firms that could use invoice finance products currently do so, even though this sort of working capital finance product could improve the cashflow position of many more firms. In the near future, small firms will find it much faster and simpler to work with lenders.
- Getting Paid – Late payment and bad debt is another critical issue for small firms. Eexisting best practice credit management tools often too remote and complex to be adopted. Cloud accounting will finally drive mass-market adoption of electronic invoicing and payment among small firms. This makes it far easier to manage and finance trade flows.