AcctTwo Blog

Cloud becoming the standard for business accounting

February 12, 2016
Posted by: David Furth

Category: Software

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Cloud computing. It's one of the most buzzed-about technologies of all time, and yet it's really not over-hyped - the cloud has had a tremendous impact on businesses of all kinds, in every sector. And its influence doesn't look likely to deteriorate at any time in the near future. 

The rise of cloud-based accounting solutions is a case in point. It's becoming increasingly clear that 2016 will see cloud accounting offerings grow in popularity, and they may even become the standard option by the end of the year. This doesn't mean that every business should immediately run out and embrace a cloud-based solution today, but it does mean that if you haven't really thought about cloud-based accounting yet, then now's the time.

Cloud accounting in the past
The cloud's not exactly a new technology. Software-as-a-Service was a $10 billion market as early as 2010, according to Gartner, so clearly many companies had embraced such solutions well before then. At the same time, though, there are still many organizations that, to this day, have either resisted the cloud completely or have only implemented cloud solutions in an extremely limited capacity - for example, by deploying a cloud-based email solution, but no other hosted services.

To a large degree, this can be attributed to trust issues. Switching from a legacy on-premise solution to a cloud-based alternative requires a high degree of confidence, as firms are essentially entrusting their data and other assets to a third-party service provider. Cloud security concerns prevented a lot of companies from making the shift to the cloud for a long time.

By now, these fears have pretty much dissipated, as decision-makers have come to realize that the cloud is just as secure, or even more secure, than their on-premise alternatives. But it's taken a while to reach this point.

Cloud security is no longer seen as an obstacle to adoption.Cloud security is no longer seen as an obstacle to adoption.

This has had a particular impact on certain select areas of business IT - including accounting software. As Accounting Web contributor Andrew Marder recently noted, it seems almost as if the accounting sector is three years beyond other industries in terms of its movement toward the cloud. Marder pointed out that, for a while, accounting software providers have offered very few cloud-based options, but this is almost certainly due to a lack of demand, at least to a degree.

Cloud accounting in 2016
In 2016, though, cloud accounting is poised to skyrocket, according to Marder. He pointed to research from his firm Capterra which found that of more than 500 participating business representatives, 39 percent relied on Web-based or hosted accounting software last year, compared to 61 percent who continued to use on-premise offerings. There were significant advantages associated with cloud-based solutions.

"39% of businesses relied on Web-based or hosted accounting software last year."

"By putting your information in the cloud, you increase the ease of collaboration, you put your users in touch with it even if they're on the road (hello, travel receipts) and it gives you built-in protection from local data failures and other catastrophes," the report stated.

The report went on to conclude that, "As to the future, accounting software is likely to be headed into the cloud." Capterra specifically pointed to the growing influence of millennials as a key driver of cloud-based accounting software adoption among companies.

"This shift has been a long time coming," Marder asserted.

Beyond all of these benefits, it is also critical to recognize the financial incentives associated with cloud-based solutions in general, and cloud-based accounting in particular. On-premise solutions present significant upfront costs, and there's no way to get around them. With the cloud, on the other hand, businesses only pay for the services as they use them. This turns the accounting solution from CapEx to OpEx, and that's great news for countless companies. It's especially important for small or medium-sized businesses, as they can gain enterprise-level capabilities without spending too much of their more limited budgets.

Essentially, the debate is not so much why businesses should now embrace cloud-based accounting solutions, but rather why not. Given all of the advantages inherent to an as-a-Service model, it's easy to see why the cloud is becoming the standard option for accounting software. For most firms, the sooner they embrace the cloud, the better.