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What’s Good (and Bad) about Cloud Accounting?
Nick Roberts • May 21, 2015
Fashion and clever advertising has a huge influence on our lives, especially where technology is involved. Sometimes this can be positive but often it's bad for us e.g. you see folks out and about who don't look like they have two pennies to rub together with the latest expensive smartphones or 60" surround-sound TV's in houses that are unbelievably tatty. So is cloud accounting a fashion or is it here to stay?
There's no denying there's loads of good stuff about cloud accounting:
- Back-ups. For those who can't get into the routine of backing-up cloud accounting can save some pain and cost, and to be fair, sometimes the back-ups are not backing up or they fail, which is why it's wise to have two systems to back-up as well as testing the back-up's regularly. Assuming, of course, terrorists or hackers don't get to your data in the cloud or the underground server room floods!
- Software Updates. You're always on the latest version and there's no dilemma about whether to spend the money to upgrade to the latest version which in actuality, is probably not a lot different to the existing.
- Access. With some (but not all) cloud accounting software you can access your data from any computer with an internet connection, or on mobile phones or tablets if you have sharp eyes.
- Only One Data File. With cloud accounting there's only one live data file which means there's no chance of entering data on the wrong file or getting confused as to which file is the live one. A client the other day had 4 data files on her desktop – talk about the potential for a stuff-up!
- Security. They say that cloud accounting software has much better security than desktop software. Hmm... not sure that's very relevant to small businesses but maybe for bigger ones?
- Sharing Data. The best thing about cloud accounting is that you share your data with others from a distance, whether it's your business partner, your accountant or your business coach. Prior to cloud accounting sharing data meant getting in the car to collect a back-up, or emailing a file to another or via Dropbox all of which take time or can cause confusion.
You may have noticed that I haven't listed automated bank feeds as an advantage of cloud accounting. This is because there is some fantastic accounting software available with automated bank feeds utilising coding rules which is not cloud based. Not only is this cheaper but it's much easier to use by non-accountants and bookkeepers.
So are there any downsides to cloud accounting?
- For smaller businesses the ongoing monthly fees can be a disincentive. If you're paying $50 a month over 10 years this is $6,000, a huge amount more than the few hundred dollars you used to spend on desktop software. Some of my clients are still using 10 year old accounting software which cost them $250!
- Internet speed. Although internet speeds and coverage is improving it can still be frustratingly slower to enter data or run reports using cloud software, especially if the software itself is launched prematurely and is just too slow!
- Third-Party Software. The ability to integrate with third-party software is often quoted as an advantage of cloud accounting software but to me, it's often just a nuisance because there's more cost and hassle and often, they just don't work together. Why on earth would you want to pay for two different software brands if you could get everything in one?
- Difficult to Use.
The clever marketing of one cloud accounting software brand puts forward the idea that it's easy to use for non-accountants or bookkeepers. Unfortunately I don't find that to be the case and whilst desktop accounting software is not exactly easy to use either at least there was no attempt to pretend that it was!
Whose Data is it? There's been various stories floating about the internet about the difficulties business owners found when they fell out with their accountants (who for some odd reason owned their data!) or when they stopped paying the monthly fees and found they could no longer access their data. Neither of these issues would occur with desktop software. - No Internet = No Software! It's rare these days I must admit but what happens when your internet fails?
So don't be swayed by fashion or clever advertising, do some research and ask around before you take the plunge and commit to a particular brand of accounting software. Get advice too from an honest accountant, not one who's been bribed by a cloud accounting provider!
High, low or somewhere in the middle? Where to pitch realistic charge-out rates is a common question facing trades, service and professional businesses.
In fact it's probably one of the most difficult areas of business. You have to be careful not to underprice as this will reduce profits, but at the same time, overpricing could turn customers away.
Setting charge out rates is just as important as marketing and delivering a fantastic service. You can do these two things excellently and then undo the lot by setting charge out rates too low or too high. This means pricing is a complex strategy that should be carefully undertaken and reviewed.
Read more here
Do you wonder sometimes why your Council rates are so high and what they do with all the money? Especially when you see Council workers (as hard working as I'm sure they are) using leaf blowers on the Havelock North to Hastings cycle path?
Finding the money to pay your rates is hard enough as it is, but when you're in business and you have a bad year it's even harder, so did you know you can get a rates rebate if your income drops below a minimum threshold? The threshold level varies depending on your income and situation, but for example, a household with an income of $30,000 and one or two kids could get a $600 rates rebate. And then, even better, you can take the kids to Splash Planet and get in cheaply with a copy of your rates bill!
For further details click here, or email Nick for help if you're not sure what to do next.
n previous blogs we've talked about cutting ACC costs by switching to ACC Cover Plus Extra. However, you need to make sure that if you reduce the level of your ACC cover, that you have adequate life cover in the event of your untimely demise.
This is because ACC pay out Fatal Death Benefits, the amount of which depends on your income for ACC purposes and the amount of the ACC payout can be very substantial.
A spouse is entitled to 60% of the 80% ACC entitlement for 5 years whilst children (via the spouse) will receive the benefits until they turn 18 at 20% each up to 40% in total.
Take, for example, an earner on $80,000 income who dies an accidental death with a spouse and two children of 4 and 7. Collectively they will receive benefits of $1,049,600. If, on the other hand, the earner had reduced his ACC income to $22,464 the benefits would reduce to $368,410, a very substantial reduction indeed!
So, if you want to reduce your ACC premiums by switching to ACC Cover Plus Extra, you have three options:
Take care not to die accidentally!
Get adequate life cover
Stay single without any dependants!
If you need help with ACC, contact me at Accountancy + Business Advise Centre.
The availability of your annual financials is a wonderful opportunity to review your business performance. You can discover how to improve your business as well as refresh your enthusiasm and drive in the business.
Click here to read seven ways you can use your annual financials to improve your business.
Your annual financial statements have their uses, but by their very nature, they are far too historical to be of any use in managing or improving your business.
The most valuable financial accounts you can get your hands on are interim accounts prepared periodically - monthly for larger businesses or quarterly or bi-monthly for smaller businesses in line with your GST return periods. There is a strong correlation between the availability of interim accounts and business survival.
Find out here what having interim accounts to hand means for you
These are the four most common courses of action you can take if you can't pay your tax:
o get some advice (we'll be happy to help) and take action today!
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Preparing an annual cash flow forecast can tell you a lot about your business. It can warn you with plenty of time to spare that you're not going to have enough cash to survive the next year without getting additional working capital - which is vitally important to know. Or it could be the wake-up call you need to make some changes in your business. You might need to make a tweak or two, like increasing prices or shedding ineffective staff, or you could discover something more serious, such as you're in a twilight business and it's time to move on.
Read more on how to prepare and read your forecast here.
Just how much do you know about your business? No, not about what you sell, or how you make or deliver your products and services, I mean the really important things that determine whether you're going to make it through to retirement or maybe even successfully selling your business.
These are my top eight favourite things each and every one of us business owners should know about our businesses.
I've said this before (and no doubt I'll say it again) but I'm always surprised at the lack of simple systems utilised in owner-managed businesses. Using the word "systems" can be off-putting because people immediately think it's going to be too complex, too costly or too time consuming but a system can be very, very simple.
Using systems makes a huge difference to the way a business operate, read more here.