Cloud-Based Accounting Software: What Is It & Why You Need It

As you read this, people around the world are using cloud-based technology to access everything from emails and family photos (e.g., Google Drive, Dropbox) to their favourite playlists (e.g., Spotify). You’re probably one of them. But cloud technology isn’t just for individuals – it’s transforming how businesses operate by enabling real-time access, seamless integration, and secure backups.

According to the Cloud Computing Study 2024 by IDG, 73% of organisations use at least one cloud-based application or infrastructure service. This study also looked at IT budgets for enterprise organisations, and found that 29% of all budgets (on average) in 2024 were allocated to cloud products and services. 

There’s no doubt about it: The cloud is reshaping how businesses manage software solutions. If you’re looking to understand cloud security better, the following insights will help you make an informed decision.

What is Cloud Accounting Software?

So, what is a cloud software program? And how can it help with accounting tasks? 

Essentially, ‘the cloud’ refers to a network of remote servers that store data over the internet. This technology makes it possible to access software and files from anywhere with an internet connection. 

Cloud-based accounting software allows businesses to manage their finances from any device – making it possible to securely access financial data stored on remote servers. Rather than storing all your information on one computer, the cloud enables online access from multiple devices. Most cloud-based accounting systems – such as QuickBooks – also come with tools for invoicing, paying bills, managing payroll, and more. 

Benefits of Cloud Accounting Software

While new technology can be daunting, it can also be a serious advantage to you and your clients. Here are five key benefits of cloud computing accounting software:

Reduce Time on Paperwork

Everyone is looking for ways to save time, and accounting firms are no exception. Cloud accounting software could help your firm streamline processes and take away manual methods that simply take up too much time. With all your information securely stored in the cloud, you have the added bonus of accessing your data and information anywhere, from any device.

Save Your Business Money

Maintaining traditional methods of accounting software can be a costly exercise. It’s often expensive to upgrade the software and maintain backups of information. 

On the flip side, accounting software in the cloud is usually operated on a monthly subscription and can be upgraded at the click of a button. You don’t have to bother with maintenance, administration costs, or server failures.

Maintain a High Level of Security

The cloud is a secure way to store information, especially compared to a hard drive. It can’t be lost or stolen or wiped like a hard drive can. Instead, all your data is stored securely in the cloud and can only be accessed with log-in details. It also means you can log in using any computer or mobile device – perfect for business owners and accountants on the move.

Have the Ability to Collaborate

Cloud accounting software offers your firm the ability to collaborate with clients on a whole other level. Most software will allow you to have multi-user access so not only can your team collaborate and share work, but you can also do business more effectively with your clients. It’s also helpful when working remotely or even across time zones as it is updated in real time.

Work More Efficiently

As a more cost-effective and safe method of storing information, cloud accounting cloud solutions could also boost productivity in your office. Once everyone is trained on the new method of working, you’ll find that it’s faster and easier to sort files, contact clients, and generate reports. 

You’ll also have the added benefit of seeing all the financials in real-time. There’s no need to worry about saving or backing up information, or transferring information between devices.

Is Your Financial Data Secure With Cloud Accounting?

Stories about hackers and data breaches might make you wonder: Is cloud accounting really as safe as it claims to be?

Before answering that, let’s consider the alternative: self-hosted accounting software. Storing financial data on a computer or office server may seem secure, but it comes with risks. Fire, floods, hardware failures, or even a simple coffee spill could wipe out important files. Additionally, locally stored data is still vulnerable to cyber threats like viruses, ransomware, and unauthorised access if security measures aren’t robust.

Cloud-based accounting software helps mitigate these risks by offering automatic backups, data encryption, and multi-layered security protocols. Many providers also have dedicated security teams and 24/7 monitoring to protect sensitive information from cyber threats.

Wondering how exactly all of this works? We’re glad you asked.

How is Your Data Protected in the Cloud?

You might envision ‘the cloud’ as bits of data floating around cyberspace, waiting for an app or service to call them into use. The reality is slightly less sci-fi, but far more secure.

Let’s take a look at 4 factors that ensure optimal security for cloud-based accounting:

1. Physical Storage

Cloud data is stored on physical servers, typically lined up in large rooms or warehouses, that are connected to the Internet. Vendors often have servers in several states or even different continents to ensure data doesn’t reside in a single place.

For example, Intuit’s servers are stationed in multiple data centres for redundancy. This means that multiple copies of your information are stored to essentially eliminate the risk of destruction of your information due to equipment malfunctions, power outages, or a natural disaster.

On top of that, Intuit’s data centres and offices maintain 24/7 onsite security.

2. Automatic Backups

Did you remember to save last month’s expense reports? Did you make a copy of those invoices? You can spare yourself these questions (and countless more) with accounting software on a cloud.

QuickBooks Online Advanced offers online backup and restore, which automatically backs up your data every few minutes and allows users to restore previous versions from a specific point in time. Think of it as an ‘auto-save’ function for bookkeeping.

We’re not just talking about one backup file, though. Multiple copies of your data are stored in several locations to ensure that your information is never lost. You get the convenience of automatic offsite storage without the extra effort and cost of creating and managing physical backup copies on your own.

And, should the unexpected ever happen to your system, all of your data will still be instantly accessible to you from any computer connected to the Internet – all with little to no effort on your part.

3. (Digital) Paper Trails

QuickBooks Online Advanced uses an always-on activity log (unique to QuickBooks) and an audit trail feature – both of which record every login to the service as well as any changes made. These features cannot be turned off by a user.

The always-on activity log is a complete record of activities, while the audit trail is an easy-to-read history of all changes to a specific transaction. That means nothing can happen to your records without you or your accountant knowing all about it. Plus, you’ll always have a paper trail should you need to trace a transaction back to its source.

4. Encryption

Cloud-based accounting software uses encryption to move and store data. In other words, your information is rewritten into a code. For example, Advanced utilises 128-bit SSL encryption, which is the same technology used by some of the world’s top banking institutions.

QuickBooks Online Advanced cloud for accountants is a VeriSign Secured product. VeriSign is the leading secure sockets layer (SSL) Certificate Authority.

Best Practices for Keeping Data Safe in the Cloud

According to the 2024 Insider Threat Report, insider attacks have become more frequent in the last 12 months for 48% of organisations. These types of incidents can result in sensitive information going to the wrong people. Additionally, for 32% of organisations, the estimated cost of remediation after an insider attack was between $100K and $499K.

Cloud service vendors go to great lengths to keep data safe, but you have an important role in the process, too. Here are 3 important steps you can take to maximise your cloud security:

1. Define Your User Permission

First things first: Put the right information in the right hands. QuickBooks Online Advanced makes that simple with custom roles and user permission, which lets you delegate work and manage access to sensitive data.

Each person you invite to use Advanced must create a unique password that nobody else can see. You’ll also get multiple permission levels that let you limit the access privileges of each user.

For example, you might grant a sales rep access to sales transactions like invoices and estimates, but nothing else.

2. Change Passwords Regularly

Changing your team members’ passwords is one of the easiest in-house methods to bolster your security in the cloud. Ideally, passwords should be changed every 30 days. Just make sure they’re long and utilise numbers and special characters.

If you want to add a second layer of security, consider multi-factor authentication.

3. Stay on Alert for Fraud

Fraud prevention is one of the biggest challenges facing small business owners today. Data protection can seem like a complicated responsibility, especially if you have limited resources.

That said, following these three tips can help you identify and prevent fraud:

• Only work with companies and individuals you have vetted and trust. Be sure to verify all unsolicited contact with external parties.
• Be wary of malware. Clicking on ads, links, or opening attachments from outside organisations may compromise your information.
• Train your employees to stay aware of potential scams. Your employees are your first line of defence, so be sure they understand what to do if they encounter any red flags.

 Legal Best Practices (Read the Fine Print)

When you transition to cloud-based accounting, there are a few legal matters to consider:

1. CPA Australia reminds accountants they are legally and ethically bound to protect their clients’ sensitive and confidential information. When it comes to choosing a cloud vendor, CPA Australia recommends that businesses should write a clause directly into the service contract requiring the vendor to “assume responsibility and legal liability for confidentiality of data.”
2. In the event that law enforcement would ever request data from your business, you’ll want to comply without compromising the security of your data. This can be accomplished with a zero-knowledge cloud provision. This puts the only decryption key to your data in your hands, which means law enforcement must speak to you directly instead of going through your cloud provider.
3. Your cloud provider can help you avoid commonplace legal issues by working with you to craft a service-level agreement (SLA). This might include a “force majeure” clause that covers unforeseen circumstances.

As a rule of thumb, the more you have in writing, the better.

Ready to Make the Switch?

Cloud accounting is quickly becoming the go-to solution for growing businesses – providing ease of use and enhanced security features. With expanded productivity tools, deeper insights, and premium care, QuickBooks Online Advanced is ideal for growing businesses with complex workflows. 

To get started, you can sign up for a free 30-day trial or contact us to find out more.