Let’s first understand the operating cycle;
Happening of transaction
Issue of Invoice/Receipt
Raising of revenue
Recording of transaction
Causing improvement wherever required.
The automation in these process is the need of hour. In today’s era of fast moving environment the information should be just a click away and that too everywhere.
Whether it be issue of invoice or realization of revenue or analysis of business performance, lesser the time required greater the efficiency will be.
How cloud accounting is different from Traditional Accounting Methods:
Cloud Accounting is a modern way approach for application of accounting techniques where the web based software is used for processing of data, processed data is stored at cloud and high level data security is available.
Traditionally what happens that, application software is used for processing of accounting transaction. This software is installed in a computer system which is itself installed in a remote location. To perform accounting transaction processing or to gather processed result (i.e. financial reports and statements) one need to access that particular computer system.
The major limitations out of use of traditional accounting software is as under;
- Access limit to financial information
- Flow of financial information not streamlined
- Accounting function integration with other function like invoicing & Payroll.
- Real time data availability
- Hardware and Software Requirement
- Data Security Issue
- Data Sharing and probable threat of Data loss.
Why cloud accounting
Cloud accounting came with answer to all these limitations outlined above.
But before that let understand the concept of cloud and cloud accounting.
“The cloud” refers to servers that are accessed over the Internet, and the software and databases that run on those servers. Cloud servers are located in data centers all over the world. By using cloud computing, users and companies don’t have to manage physical servers themselves or run software applications on their own machines.”
Cloud is a concept of data storage space where in servers are spread over more than one location. Database is stored at the server in cloud storage and can be accessed from anywhere through Internet.
Cloud accounting works on SaaS model of cloud wherein Data as well as software both are placed in cloud server itself. The processing of transaction thus takes place at cloud server and data is stored at cloud server too.
To make it simple and conclusive;
Cloud Accounting is a technique wherein interface of accounting software is available at web portal wherein data can be entered online, Transaction processing happens at cloud servers and processed result are available online due to its storage on cloud Servers.
Traditionally it is stored in a computer system or a series of computers on a network wherein in cloud technique it is available on cloud servers and thus data processing as well as availability of processed data is more flexible.
This results into multiple benefit;
- No need of dedicated hardware requirement for accounting function.
- Access to financial information anywhere and that too just a click away.
- Real time processing of data.
- Mitigation of Data Sharing Issue. Data is spontaneously shared with all person having appropriate password to access.
- Data is more secure as it can be accessed through password only. Encryption is so strong that if without password tried to access, it will show as arbitrary codes not understandable at all.
- Simultaneous processing of transaction with happening of even itself.
- Low cost and increased efficiency due to reduction in time required for processing of transaction and its integration with other operations.
Safety of Financial Data:
The data involved therein is highly sensitive one and thus having concern about data security is of utmost importance in present context.
There are three kind of cloud storage provided by cloud storage service providers now a days;
- Public: where in a server is dedicated to multiple users and access for data storage or processing is provided to users according to their requirement.
- Private: Wherein a server or pool of server is dedicated to a single user and no one else is having access to those servers. High level of data security is involved here
- Hybrid: It is a mix of Public and private cloud wherein some information is stored at public cloud and others on private depending upon data sensitivity and other relevant things.
The cloud accounting considering the sensitivity of data, uses private cloud for storage as well as processing of its data.
However still data is totally encrypted in all these clouds and hence risk to data theft is minimal as it can be accessed through user based password only. Cloud provides access to those users only who are intended to use. And such intension is conveyed to software through assignment of unique password.
Cloud accounting technique is much more secure as compared to traditional accounting software and eliminates any such probable threat of data loss, data theft and improper use of financial information
- Spontaneous and smooth process for invoice preparation. It can be done within a moment and that too without requirement of any field creation etc.
- Processing of accounting transaction at back end along with happening of transaction itself. For ex; if an invoice is raised, at backend customer ledger will be debited automatically. Similarly when the payment is received customer ledger will be written off in the same manner. The same thing happens with every financial transaction simultaneously.
- Financial performance analysis and access to ledger balances anytime anywhere. The information is available online and can be accessed on mobile phone even through Mobile Application.
- Tracing of receivables and payables and automatic reminder for debtors as well as creditors according to set defined criteria.
- Access to Inventory quantity anytime anywhere.
- Single platform for Invoicing, Inventory Management and accounting.
- Identification of KPI (Key performance area) and improvement thereon if required,
- High level data security due to encryption feature. The software and thus data can be accessed by those users only who have access right. The access right is controlled through unique password assigned to every user.
- Task Assignment, time log and user based accountability. This happens because of availability of user based tracking feature. It means work can be assigned to a specific user and which activity is performed by which user can also be traced.
- Bank Account mapping with software through API and thus automatic update of accounts along with happening of transaction.
- GST Server mapping with software through API and thus return can be filed through software interface itself and no need to prepare Json file.
- Multiple Invoice format available. i.e. different format of invoice for sale of goods and sale of services particularly in same company