Sean O’Flaherty, Director of local accountancy firm Rosscot, explains the rise of the Virtual Finance Director and why it’s time for smart businesses to embrace the Cloud.
Accountants have had to up their game! As more and more accounting services have become automated, businesses are looking to accountants to offer a more strategic service across the board. Gone are the days where your accountant just produced a set of end of year figures and a tax return and in are the times where technology has enabled your accountant to be of huge strategic value at a cost-effective price.
Recent years has seen a growing move towards Cloud Accounting, which has opened the door for Virtual FD services. Designed for the small to medium sized business, a virtual finance director basically does what a full-time finance director would do but more cost-effectively on a part time basis. Your accountant can now access your data from the Cloud and actively monitor performance, enabling cash flow forecasting, risk management evaluation and identifying issues before they become a real problem.
People are fearful of change and the Cloud is no exception but what really is it? Simply put, the cloud enables you to access your data online anytime, anywhere and from any device – very little to fear there. There are also numerous trusted cloud accounting providers including Xero and QuickBooks Online. Data storage is a typical concern but contrary to common belief the Cloud is more secure than most technological wizardry you already use – the providers archetypically surpass required data protection laws and have high level security.
However, nothing is perfect right? So what are the disadvantages of Cloud accounting? Firstly, smaller businesses may pay more for a cloud online accounting package over a period of years when compared to a desktop accounting package. This is usually because people only buy new desktop versions every few years. However, the advantage of Cloud is that your software is always up to date as all upgrades are carried out by the supplier at typically no extra cost. Additionally, the provider does all of the software maintenance for you as part of their monthly fee: version upgrades, maintenance etc. If you spread the cost of the software by making payments by monthly subscription, instead of one lump sum, this can be a great solution.
The other possible negative to consider is that having your data in the Cloud means you don’t have control over where in the world it is. It could be held in the UK, America or anywhere else. Each provider does, however, provide information on this and conform to relevant data protection or the US “Safe Harbor” framework.
In my opinion the positives of the Cloud far outweigh the negatives. Of paramount importance is that Cloud accounting enables real time insight to your business, this is invaluable in understanding your current financial position. Online accounting means small business owners stay connected to their data and their accountants. Additionally, multi-user access typically comes as standard making online collaboration with your team and advisors easy. When your accountant can access your data in real time, they can help you with problems, post year-end journals and there’s no need to mess around with creating and importing backup or accountants’ copies.
You’re also likely to be suffering from the drawbacks of traditional accounting software. A main concern is how quickly it goes out of date and the complication of keeping backups (if done at all). It’s also expensive, difficult and time consuming to upgrade the software and customer support can be slow. A main disadvantage for clients has always been that traditional systems often only work on one computer (or as many licenses as you originally purchased) therefore additional licenses are then an issue when your version becomes out of date. There are also security issues with traditional methods as data is transferred from place to place by USB or similar devises. In the medium term, it is expected that accounting software providers will now focus primarily on their cloud versions, rather than their desktop versions.
Ultimately, the Cloud is here to stay and savvy businesses are embracing the opportunities it affords. It can’t be beaten on scalability and ease of use and it’s totally flexible so you can run your business from work, home, or on the go; and from any device. The way we now work is finally being reflected in accounting technology and I think we’re still yet to see the full benefits of working from the Cloud.