Cloud Accounting integration: what you need to know

Arecent EY report states that we are amidst a ‘critical moment in technological convergence’ as developments in cloud technology, AI, and the Internet of Things (IoT) facilitate a technological shift which significantly enhances business opportunities and capabilities.  

The integration of cloud-based software into accounting practices is allowing businesses to function more efficiently in the continually globalising and digitalised world.  

This market is expanding steadily with several firms contending for market dominance for their Service as a Subscription (SaaS) model of cloud accounting software.  

Businesses are steadily incorporating cloud-based software offered by the likes of Freshbooks, Zoho, Xero and Oracle Netsuite. Whilst traditional accounting software has dominated the industry, cloud accounting software with the SaaS model is expected to take up an increasing share of the market, as businesses seek to utilise more cloud-enabled solutions.

These developments won’t be replacing any accountants, but they help significantly to streamline the process. Firstly, cloud-based software allows all transactions to be tracked in real-time, by employees across the globe. Consequently, businesses can be more agile, identifying exactly what their margins, costs and profits are at any given moment. Cloud accounting solutions also overcome the traditional risks of physical hardware being damaged, thus making businesses’ accounting records more secure. One of the core benefits of the software is automatic bookkeeping, which is currently one of its most utilised functions. This saves time by negating the need for manual data entry as there is integration with live bank feeds. 

Another key advantage of cloud accounting software due to the SaaS nature of the product, is its flexibility and scalability. This is particularly useful for small and medium-sized businesses that are growing rapidly as it has the flexibility to expand swiftly unlike more traditional accounting software. Tom Kelly, Director of Product Management at Oracle NetSuite comments, ‘‘As businesses grow, manual accounting tasks relating to managing ledgers, taxes, payables, and receivables becomes increasingly complex. Oracle NetSuite’s cloud enterprise resource planning (ERP) suite [and other cloud software providers] helps businesses simplify, automate, and gain more control over core financial processes like recording transactions, managing accounts payable and receivable, collecting and paying sales tax, and closing the books’’. EY’s report highlights that cloud technology enhances composable business architecture, resulting in increased modularity and agility when scaling up their data and service in line with growth.  

In addition to this, with the COVID-19 pandemic accelerating the transition to remote and hybrid working models, cloud accounting means employees no longer must be in the office to use certain software. You can access and input data from anywhere. This is incredibly valuable for businesses wanting to attract employees with hybrid working preferences, especially potential Generation Z employees. On the topic of recruitment, Jo Copestake, Director of Accounting Partners at Xero UK, added that, ‘‘cloud technology has a positive impact on a practice’s ability to recruit and retain talent, a significant benefit given the talent challenges facing the industry.’’ 

Cybersecurity remains a key concern for businesses looking to transition to cloud accounting software. The cloud can be a victim of cyberattacks and data leaks, and with such sensitive information as company finances, this is possibly the main factor restraining the growth of the market.  Thales 2023 Cloud Security report stated that only 45% of sensitive information in the cloud is encrypted, so companies utilising the software must remain vigilant to encrypt their data in the cloud and have secure password management among employees. 

Xero recently published its Industry performance 2023 report concerning the use of cloud accounting software in the UK market. From a survey of practices in the UK using Xero, ‘95% have embraced cloud-based software to some degree’, with smaller businesses usually using it for one task such as bookkeeping, whilst larger practices are more likely to use cloud-based software for all their accounting tasks. 

Xero’s UK Report offers insights into how the use of cloud accounting software affects revenue, job satisfaction, and client services for businesses. The report found that 75% of practices using Xero’s cloud accounting software for more than one task have seen an increase in profit over the last year. This is congruent with EY’s report that states the utilisation of the cloud can reduce IT operating costs by 20-40% and reduce the costs of both human labour and carbon.  

Medium and large practices have reported increased job satisfaction since its integration and the efficiency of cloud accounting software has allowed them to focus on growth and improve client services. 74% of medium-sized businesses using Xero’s cloud-based software in the UK agreed their client services have improved since its integration, allowing them to foster more positive relations with clients resulting in more time dedicated to servicing and understanding their clients’ needs.

Copestake, commenting on the future of the industry added,  “While the appetite for cloud adoption is rising, there is room for improvement for practices to maximise the usage of cloud-based software’s various tools and features. More practices, especially micro-practices, could see further benefits by connecting bank feeds, data capture tools, and payment tools.’’ 

An Oracle Netsuite article noted how cloud accounting will continue to evolve in the future with the incorporation of AI and blockchain. Once AI is integrated, it will be able to analyse large swathes of data, comparing it and highlighting ways financial management could be improved. Blockchain also has the potential to streamline accounting. As blockchain technology tracks and verifies payment and ownership, it will be able to validate transactions and mean that accountants do not have to chase up payments from customers as blockchain verification will do it.  

Over the next couple of years as cloud accounting software providers gain more clients and integrate AI and blockchain technology, perhaps one of the core providers will achieve market dominance. For now, businesses can continue to integrate cloud-based solutions into their accounting practices to enhance their business capabilities and opportunities.