The key pros and cons of cloud accounting services

Cloud-based accounting software has been available in Latvia for several years and has already become a standard part of daily operations for many companies. This long-term and widespread use provides enough data to draw conclusions about the true pros and cons of cloud-based accounting solutions.

Pros

Remote work capabilities

An increasing number of companies are providing remote work options for their employees, and staff highly value the ability to work outside the office. They can save time on commuting and accomplish more on days when no in-person meetings with colleagues, clients, or partners are scheduled. Numerous studies have shown that employees who have the opportunity to work remotely from time to time are more productive, take fewer sick days, and experience less stress.

Cloud accounting solutions facilitate these remote work opportunities. As long as there is an internet connection, most systems can be accessed from both computers and mobile devices, including smartphones, using a standard web browser. This is particularly important for business owners, as they can access accounting data at any time to obtain up-to-date information. This is useful, for example, when meeting with partners to discuss participation in a new project.

Accountants no longer need to stay in the office late into the evening during reporting periods. If something was not finished during the day, they can log into the system from home during their free time to complete the task.

Easier work for accountants and accounting service providers

The market for accounting service providers in Latvia is quite broad. It includes self-employed accountants who serve a few companies, as well as large accounting consulting and audit firms that manage the accounting and financial needs of many businesses. There are also in-house accountants who serve multiple companies or branches within a single group.

Cloud services offer specific advantages to accounting service providers and accountants serving multiple companies, as they perfectly support this business model. Cloud services allow clients to log into their own database to view and enter accounting data (delivery notes, invoices, timesheets, etc.). Using this model, the daily tasks of the accounting service provider are performed more efficiently because the client can enter most of the information into the system themselves. The accounting service provider can then offer greater added value by providing advice on bookkeeping, financial optimization, and other highly qualified services.

The security of client financial data is a critical aspect for accounting service providers, which is why they value the ability to entrust this responsibility to professionals and avoid the complications that can arise from storing client data on their own computers or servers.

Cloud accounting services also significantly reduce IT costs associated with maintaining high-quality servers and IT infrastructure. These costs can be directly and clearly attributed to each client, making it possible to accurately plan business models and the profit generated by each client.

More opportunities for managers and accountants

Accounting and financial management are closely linked to the company's executives and middle management. To make sound decisions, managers need up-to-date information on financial indicators. Previously, financial information was prepared by an accountant upon a manager's request, but now managers can view all necessary data in a cloud solution, even on their smartphones. For example, they can quickly view information about the company's turnover and profit, or projected revenue and overdue payments.

Managers most often find specific reports that reflect the exact information they need to be useful. For example, unpaid invoices for the month, the number of units sold this week, employee efficiency reports, etc. In such cases, a report is prepared, and the manager can subsequently view it updated with real-time data. This functionality is also very useful for accounting service providers, who can prepare reports for their clients, which the clients can then view in their web browsers on a computer, smartphone, or tablet, significantly improving the value and competitiveness of the service provided.

Example: A manager regularly needs a report on stock levels in each warehouse on a specific day. The accountant can create this report in the accounting system, and it will be available in the company's cloud-based management solution.

Cloud services that provide such management reporting capabilities make the work and communication between the accountant and the manager more efficient and positive, allowing everyone involved to dedicate more time to essential tasks.

Cons

Unified work principles and security

Cloud solutions pose the greatest challenge to accountants who are accustomed to maintaining a specific order in the world of numbers—an order only they understand. They know where to find specific data and can locate it quickly, but anyone else feels lost in a thicket when faced with this "order."

In the cloud, company data is available at any time to any employee who has been assigned a username and password. Therefore, everyone must ensure that the correct data is kept in the correct places within the system and that nothing is accidentally deleted.

Another important aspect is security. Although cloud service providers use various systems to protect clients from unauthorized access to their databases, clients must also take greater responsibility for the security of their passwords and maintain good digital hygiene to prevent unauthorized parties from accessing financial data.

We offer several recommendations for ensuring password security.

1. Choose a password that consists of uppercase and lowercase letters, numbers, and symbols.
2. Do not use the same password for multiple cloud services.
3. Change your password regularly—at least once every three months.
4. Do not write down your password or keep such notes in a place accessible to others.
5. Never disclose your password to anyone.
6. Ensure the security of your computer by running the latest antivirus software; do not install software of unknown origin and avoid visiting websites with questionable content.
7. Create your own password generation system or use a password management program.

Example: You can create a system where the password for any online resource is generated according to a specific principle. Password = first three letters of the resource address + current year minus 2 years + first 2 uppercase letters of the current month + your pet's name + a string of symbols $%. Thus, the current password for a Facebook account would be: fac2015OKmuris$%. In January of next year, the password would be: fac2016JAmuris$%.

The cloud is not always the most suitable solution

             Although cloud service providers claim that the cloud is the only solution for any IT system, that is not entirely true. Business needs and capabilities vary greatly, as do the systems used by companies; therefore, when meeting with cloud service providers, all these nuances and requirements must be discussed.

             Sometimes company offices are located in areas where high-quality internet access is unavailable or unstable. In such cases, using cloud services may cause more problems than benefits. Furthermore, companies often have already implemented accounting and enterprise resource planning systems that are not available as cloud solutions. In such cases, it is necessary to evaluate whether a transition to cloud-based accounting services will be cost-effective in the long term.

             If a company has already invested significant funds and effort into building its IT infrastructure, it should seriously evaluate whether a complete transition to cloud services is necessary. There is also the option of a hybrid solution, where some data is stored on company servers and some in the cloud. However, one must also think long-term, as every data server has a designated lifespan. The most important thing is to carefully evaluate and understand all risks and benefits before making an informed decision.

Choosing a low-quality product

             Entrusting your company's data to another firm can be a psychologically difficult step. The main aspect here is trust in the cloud service provider. There are several factors to pay attention to when choosing a provider, and the following is a list of questions that should be asked of the cloud service provider.

• Experience and duration of operation in the market. The longer a service provider has been operating in this market, the greater the likelihood that the service has already overcome its initial phase of problems and is operating stably. Long-term experience in the market also indicates the ability to attract and retain professional staff within the company.
• Where is the data stored? It is important to clarify whether the data is stored within the European Union—or perhaps even in Latvia.
• What technologies are being used? For example, do the encryption algorithms meet modern standards, and is the technology up to date? Is the server software updated regularly?
• What is the data backup policy? How often are backups created, and how long are they retained? Are backups stored in a separate data center at a different location?
• SLA — what is the maximum allowable service downtime? What are the options for data recovery if the damage is caused by the client's actions or negligence?
• Pricing policy. Are there any additional implementation costs? Are there any hidden fees? What are the options for changing the number of users or other service parameters, and what are the associated costs?
• What are the options for managing individual user permissions? Can users and permissions be managed easily and efficiently?
• Do the cloud services comply with GDPR (General Data Protection Regulation) requirements?
• Contract termination. Are there any penalties if the client wishes to terminate the contract with the service provider? How can the company retrieve its accounting data? Can it be used on a local server in the future?
• Support. What support is provided during the implementation and use of the service? Is it possible to consult with the service provider by phone or in writing? What is the cost?
• Software updates. Are software improvements and updates performed? Who performs them, and when do they take place (during the day, at night, on weekends, or on weekdays)? Is the client informed in advance so that they can plan their workflow accordingly?
• Can data be migrated to the cloud from a local server or other systems?Can a cloud connection be established with cash registers and other systems?
• For accounting service providers — will the client be able to connectWill the client be permitted to perform installations? How will the price change based on the number of clients?

The stability of a cloud service provider is essential, but the development of the service is equally important; therefore, it is useful to determine whether these services will be developed and how long the company plans to maintain them. As technology evolves rapidly, cloud services must also be continuously updated to meet all current security and business requirements.