According to most estimates, the cloud-based accountancy market will be worth around $4.25bn by the end of 2023 and that figure is set to grow exponentially by the end of the decade. There is a lot to be said for getting in early and 'on the ground floor' so to speak.
While cloud-based accounting is still a relatively new trend to the finance sector, it already has a significant effect on the way many PAOs are working. Moving to the cloud can save an organization time, money, and effort, and eliminate the need to install expensive accounting software on individual machines, with separate licenses. But that barely scratches the surface of all the benefits a cloud-based working model can bring to a PAO.
What Does Accounting Look Like in The Cloud?
Before getting started on what the cloud can do for PAOs, let’s define what cloud-based accountancy is as it is not as simple as just storing data online.
A long time ago, all finance operated on a barter system; next came abacuses to keep track of who owed who what. From there grew double-entry bookkeeping to monitor a business's finances, and finally, the world arrived at on-prem accounting software, capable of tracking an organization's finances in real-time (on-prem being software installed on organizations own servers, on their premises, instead of in the cloud). So, what is the need for the cloud? How does it improve on what came before?
If an organization is yet to switch to a cloud-based accounting model, all their accounting software is likely installed locally, either on one laptop or on a local network. This can continue to be feasible if the server does not run out of space, the organization does not mind paying for numerous copies of the software on various machines, is happy only to access the data when someone is at the appropriate work machine with the correct software installed, and is covered if a fire, flood, or another disaster knocks out the office. But today – none of that seems very appealing.
Cloud accounting (sometimes also referred to as online accounting), on the other hand, is a much more secure and efficient option for PAOs. An organization’s finances and data can be reached through any machine and any location, by any individual, provided they have the right credentials. There is less risk of losing data should something unfortunate happen to the physical servers.
All a PAO's data and members can be reached in one place (meaning no more situations with one member’s data on one machine and another dataset on a different machine). And it is incredibly cost-efficient for several reasons we will dive into next.
The cloud does not just host your existing software in the cloud, however. Companies like Microsoft let PAOs access an incredible array of prebuilt solutions like Dynamics 365 Finance, only available through the cloud. This gives even the smallest of PAOs the opportunity to use advanced, cutting edge, simple to use accounting software.
But the biggest benefit of moving all accountancy processes to the cloud is the value-add it offers.
What Can the Cloud Actually Do for A PAO?
We have already mentioned how accessible the cloud makes data, but it is worth repeating as it is such a significant benefit and an integral part of the cloud. For example, PAOs that were already using the cloud at the start of 2020 were likely able to instantly adapt to a hybrid or full Working from Home model, while those with their data all stored locally had to scramble for a solution. In turn, increased accessibility led to increased collaboration at a very essential moment.
On-prem accounting (working on individual machines or local networks) naturally leads to data silos— with one person often in charge of one set of data, with others in an organization not being able to access that data, or in the worst-case scenarios, unaware it even exists. Once all data is in the cloud, however, appropriate access levels can be set for everyone in the company, which leads to increased collaboration, productivity, and profitability, across all departments.
The cloud also makes it much easier to access real-time data. Gone is the need to reconcile past transactions before you can see a client's status, as those processes will all be automated.
With everything viewable in real-time, a PAO gains an instant advantage. With enhanced Business Intelligence, their strategic decisions will be better informed, allowing for a more efficient, resilient, transparent, and profitable decision processes.
Automation is the lifeblood of a modern PAO and any organization not utilizing it to its best may find themselves increasingly obsolete. In short, the cloud offers a PAO an unparalleled opportunity to automate repetitive tasks, such as tasks that involve manual repetition or the collating, formatting, and analysis of data. Robotic Profess Automation in the cloud will take care of that across the organization, freeing up staff for much more important tasks.
Agility is another key benefit to cloud-based accountancy software. Cloud-based business models are less about specific software and more about the platform they are built upon. This helps avoid situations where a company has purchased an expensive solution, only to find out it does not do something vital that was needed, or worse, becomes slow or obsolete after a year or two. That does not happen in the cloud based on the concept of Component Led Development.
Cloud accounting software (and the cloud in general) is highly flexible. It can be customized to a PAO's needs and inexpensively and easily adapted should business goals shift. It can also be integrated as a 'layer' over existing legacy systems, allowing for a more-even paced transformation, rather than having to undertake and pay for an expensive transformation project all at once.
Another fantastic benefit of moving to the cloud is being able to access the app ecosystem. If you have a specific business need, it is probable that a third party has already built a solution for it. That means that, rather than paying either an internal/external developer to create the solution from scratch, you can download, integrate, and instantly start benefitting from what is already been created.
Many often state that the cloud is not secure. However, the truth is the cloud is far more secure than any on-prem system. The only people who will be able to access your data in the cloud are people you have given authorization too. The cloud is and always will be the safest place for sensitive client data.
Finally, there is little or no upfront cost and maintenance costs. No more servers, no more storage and no more having to pay and manage software upgrades regularly. Updates in the cloud are almost always free, from additional security measures right through to new features. This saves both time and money.
Cloud based accounting may seem new, but the entire finance sector is starting to shift in that direction. PAOs that adopt the technology now will find they start to quickly outstrip other organizations who decide to stick with their on-prem solutions. The cloud is more cost effective, faster, secure and offers a nearly infinite amount of features and customizability. PAOs looking to adapt, grow, transform, or simply keep up should be looking at the cloud now and do not need to be overwhelmed with the change if working with the right transformation partner.
Where is your PAO on the Digitalization Journey?
IFAC recently teamed up with cloudThing to offer our membership a free Digital Readiness Assessment Tool that would assess an organization's digital readiness ahead of a digital transformation project. The Digital Readiness Assessment Tool has been designed to measure how digitally 'mature' an organization is, or where they already are on their individual digital transformation journey.
If you have not leveraged this free Tool, we encourage you to do so!
Locate the email sent on behalf of IFAC Membership, with the subject line, "IFAC PAO Digital Readiness Assessment Tool Launch." Your organization's unique access link will be located within.
Check out IFAC’s PAO Digital Transformation Series webpage which houses helpful resources, articles and videos on Digital Transformation and is regularly updated!
cloudThing, based in the UK, is a technology company that help organizations such as the British Red Cross, The South African Institute of Accountants, and the Institute of Chartered Accountants (England & Wales) to name but a few, digitally transform by taking advantage of the automation technology available to them on the cloud.