So far, the 21st century has been fueled by digital transformation. Digital transformation is changing the face of every industry including the Accounting industry. While a decade ago, paper records and excel were the preferred tools for Accountants, but now Digital Accounting has taken over. As a service Accounting is still the same it was years ago, however, the delivery methods have changed.
Many small businesses still use Excel and spreadsheet to maintain transactional records while they use Word to manually prepare invoices. But times have changed as Cloud-based systems now rule the Accounting industry, making it digital. Now before we hop on to discuss the various benefits of Digital Accounting, here’s an overview of what Digital Accounting is all about:
What is Digital Accounting:
Digital Accounting refers to the storing, transmission and representation of the financial data in easy-to-access online locations (in electronic format). While the industry has been continuously evolving, the UK government’s ‘Making Tax Digital’ initiative has acted as a catalyst to the process. MTD demands the storage of financial information digitally and tax submission via compliant software.
Cloud Accounting has completely changed how Accounting works as the owners of financial data can now stay securely connected with their data 24/7 and can access it from anywhere over the internet.
Digital Accounting in no way has reduced the importance of Accountants, instead, it has only made processes for them simpler and faster while they can concentrate on other services like taking over Advisory roles for their clients. In other words, Digital Accounting has increased the value of the Accounting profession.
Benefits of Digital Accounting(Cloud Accounting):
Digital Accounting has many benefits over traditional Accounting practices. Some of them are as follows:
For those who think migrating to cloud-based systems is costly, then they are highly misguided on this. On the contrary, Digital Accounting can save your firm enough cost in the following ways:
- Eliminate paperwork
- No need for unnecessary manpower that is there just for the sake of data-entry
- Eliminate manual errors that can cost your business enough
- Reduction in hardware costs( like large servers that store data)
- Automatic updates which means you don’t need to purchase the new version
Increased task accuracy
Using a cloud-based CRM or accounting software over the traditional excel or spreadsheets results in increased accuracy since the manual data entry tasks are overtaken by automated cloud accounting software, thereby eliminating human error. It makes the process smarter, faster and accurate.
Easy access to data
The best part about using cloud accounting software is that they are easily accessible from anywhere in the world, over the internet. Users can easily log in and view their financial reports in real-time with just a click.
Following up on the above point, since the data is easily accessible from any device and any place in the world, individuals don’t need to depend on manually shared data like inventory updates, balance sheet information, etc which in turn increases team productivity as it eliminates dependency.
Real-time cash flow management
While in manual reporting, both the team and clients depend on whether the information has been fed manually or not which delays cash-flow assessment. However, cloud accounting software offers real-time cash flow reporting that can be analyzed anytime to make quick and assertive business decisions.
Improved collaboration between client and the accountant
When it comes to communication, Digital Accounting is a one-stop solution for all your communication and collaboration needs. By using Cloud Accounting software like Quickbooks, Freshbooks alongside video conferencing tools like Google meet, Zoom, etc, clients can stay connected with their Accountant at all times and share data easily from anywhere without the need of being physically present in the same office. Moreover, using digital communication networks and social media outreach creates an improved collaborative environment for both clients and Accountants.
Improved data security as paperwork is all digitised
Paperwork or even manual Excel reports were never secure but due to the lack of technology, Accountants and clients had to settle for it. However, times have changed now and so has the value of data. Financial data is the fuel that keeps a business running and even a small error can result in serious repercussions. But with the advent of Cloud Accounting technology, data security has improved as it has eliminated paperwork and other traditional accounting practices. Moreover, cloud-based software uses multi-layer data encryption and on top of it, users can set permissions on a particular set of data which makes manipulation of data almost impossible.
Less physical storage space required
Elimination of paperwork, Excel and spreadsheets frees up both physical space as well as digital space. Cloud-based software offers cloud servers for data storage that can be accessed at any time. This eliminates the need to maintain large servers (hardware reduction) as well as eliminate files and other documents that have been piling up for years.
Good Audit trail
As discussed above, you can set permissions on the data files as to who can access them and modify them. Also, you can track changes in real-time and who made them which makes data manipulation impossible as we always know who did what and when.
Using traditional accounting methods like Excel, spreadsheets, manual data entry, etc can cause reporting complexities since they are prone to data breaches as well as human error. However, with Digital Accounting there is no need to worry about such reporting complexities as it offers on-demand reports using various integrated templates for the concerned use cases and that too with zero error.
Small Accounting firms need to understand the importance of the Digital industry in today’s market and need to adapt to it if they wish to survive in this competitive industry. While cloud accounting has many benefits, above were some that can make you understand its importance and why you need it now more than ever when we are in the midst of a global crisis.