Legal bookkeeping for law firms require Trust Fund Accounting with IOLTA accounts and abide by ethics rules and fiduciary responsibilities.
4 Reasons to Use Cloud-Based Accounting and Tax Technology
Adaptability, security, efficiency, and accessibility anywhere, any time are some of the many reasons for using cloud-based accounting and tax technology.
Over the last two decades, the technologies that accounting firms rely on for serving clients and for firm management have transitioned from programs installed on desktop computers to servers, to software-as-a-service (SaaS), and finally to truly cloud-based SaaS systems. While some early versions of cloud technologies have been around since the late 1990s, they have finally taken a prominent place in professional practices as core systems.Although a 2019 survey of accounting professionals by the AICPA’s Journal of Accountancy shows that cloud-based tax has been slower to gain use, this is largely because of a lack of major cloud systems for tax prep on the market. For financial management, however, an August 2019 survey by staffing firm Robert Half showed that 66% of CFOs report already using cloud-based systems.
Additionally, the results of CPA Practice Advisor’s 2020 Reader’s Choice Awards show that a majority of firms are now using cloud systems for managing their practice, particularly for functions such as project management, workflow, document management, time and billing, CRM, and staff management. Furthermore, such firms widely recommend cloud-based small business management software like BQE Core to their clients. It gives accounting staff the ability to instantly dig into real-time client data, whether producing financial reports, assisting in payroll runs, or helping fix sales transactions.
Benefits of Cloud-Based Accounting & Tax Technology
Here are a few of the many benefits of cloud-based accounting and tax technology for firms.
- Firm Adaptability
- The Cloud is More Secure than Your Office
- Digital Workflow Increases Efficiency
- The Cloud is Where You Want It, When You Want It
Before 2020, moving to the cloud was seen primarily as a productivity-enhancing phenomenon. It allowed firms to be more competitive through faster access to firm and client data from anywhere. The cloud also helps accounting firms automate many functions, integrate data across platforms, and enables greater responsiveness to client needs. These are all still important factors, but when the pandemic arrived, having a cloud-based system became an instant matter of firm adaptability, and the life or death of the firm. With work-from-home orders mandating the closure of accounting firm office spaces in many of the most populous states and cities, practices that had already implemented cloud technologies were able to quickly transition to home offices, with little disruption in many cases.
The cloud allowed firms to stay responsive to the needs of their small business clients, many of whom were facing severe business disruption and needed planning and direction for business continuity. Unfortunately, accounting firms that were not already relying on cloud systems for their primary client services and firm operations were not as able to make this rapid change.
In the early days of cloud-based programs, there was a common concern about security. And rightly so. The life and value of an accounting firm relies on sensitive financial data, and in the trust of their clients to safeguard that information.
With periodic stories in the news about data breaches, it’s natural to be concerned about the security of your data. But those breaches, almost always, involve the largest of companies, which make juicy targets for the data thieves, who will spend years attempting to breach a target. In addition, many of these data thefts occurred before the invention of the cloud.
Firms that continue to use server or desktop-installed accounting and tax systems face the potential total loss of data in the event of fire, theft, or natural disaster. They also risk potential unauthorized access to their data if computers are stolen or accessed by unauthorized users.
The cloud is much more secure than installed systems. When using the cloud technology correctly and following proper practices, it offers greater backup for the most likely threats to your data(fire and theft). This means that even if a fire wiped out your office in the middle of tax season, you could buy new laptops and be up-and-running and serving clients, the next day.
Advanced user security tools can also be implemented to negate the likelihood of unauthorized access to client or firm data. Developers of cloud programs offer strict controls that follow the SOC 2 standards.
Once upon a time, clients would visit their accountant with paper files or a disc of their company’s books, likely in some format that was only usable with the correct software. With hundreds of small businesses and clients using different systems, that not only doesn’t make sense, but it causes hundreds of lost hours per year transferring data manually. And that’s before any actual valued service is provided, such as write-up, reconciliations, or corrections.
The same was true of tax engagements. The client would bring in paper-based documents and forms, which the firm would then have to manually enter into their tax system. This is a tedious waste of time, and can result in significant data entry errors. Even so-called scan-and-fill systems weren’t that much better since they were only as good as the quality of the documents and the scanner.
Businesses and individuals have been living in a digital society for many years. There is no reason to rely on paper-based documents and manual data entry. Businesses using cloud-based bookkeeping programs can export their data into common file formats, and savvy accounting firms using cloud-based accounting and tax systems can easily import data directly into those programs.
Less Manual Data Entry = Better Accuracy = Improved Productivity = Greater Profitability
Digital workflows allow accounting firm management to easily check in on the status of engagements and projects, see where the firm is most profitable, and optimize firm resources.
An added benefit is the potential integration between cloud-based accounting and tax systems, and email and client portals. These allow one-click (or no-click) sharing of files with the clients (“no-click” means that systems can be set to automatically post client returns or financials to their portals when they are completed).
The cloud is everywhere, all the time. Every article touting the benefits of the cloud notes the advantages of being able to access work and data from wherever the professional is—at home, at the office, or at a client’s place of business. And while that is still a major benefit, so are the accompanying features: being able to meet with clients virtually anytime you need to, and being able to collaborate via file sharing and document portals.
This convenience is a two-way street. It allows firm management and staff to have anytime access, and it gives the same benefit to your clients. With the right cloud technologies, you can give clients access to their reports or files when it’s most convenient for them. In turn, this allows your staff to get back to working on client data as soon as it’s available.
Giving your clients back some of their free time is a valuable benefit they receive as a result of using your accounting firm and cloud technology!
Increase Profitability with Cloud-Based Accounting and Tax Technology
To recap: Cloud-based accounting and tax technologies help firms do more, more quickly, more accurately, and more profitably. It also improves client service and decreases staffing needs at the firm. And now, more than ever, cloud-based technology gives professional firms the ability to adapt to changing environments, be flexible in work arrangements, and persevere through adverse events.