The benefits of cloud accounting for small businesses include simplifying tax time, retaining top employees and boosting the business bottom line.
Tax season can be hard enough on a business owner without having to worry about where they stored this or that receipt over the past year, knowing it all had to be put into their on-premise accounting system eventually.
Enter: the benefits of cloud accounting.
The day Mike Castle bought his own small business — an accounting practice in Flemington, New Jersey — in 2015, the CPA "ripped out" the firm's legacy accounting systems and moved them to the cloud. After converting his practice to cloud accounting, Castle has spent the past two-plus years helping small-business clients of his own do the same thing. He remains increasingly convinced of the benefits of cloud accounting, and for business owners bending over backwards during tax season, there are some lessons to be learned.
"We have focused our growth on clients who were interested in leveraging the cloud, and we have all benefited from it," Castle says.
Operating in the cloud has helped both Castle and his clients recruit and retain top employees, boost the bottom line and, especially, simplify tax time. Here are some questions you can ask your CPA to learn more about the benefits of cloud accounting.
How Does This Help Reduce Tax Preparation Time?
Many of the small businesses that work with Castle have traditionally spent hours or days during tax season just organizing their books enough to be sent out to their accounting firm for tax preparation — and more days or weeks wondering how their tax liability would shake out. But for the clients who have switched to cloud-based accounting, those days are over. Your information throughout the year can be accessed by your accountant to help ensure no logjams occur once tax season hits.
"Now there are fewer surprises at tax time," Castle says. "If your financial information is not in the cloud, your accountant doesn't have much access to how you're doing all year and you may end up being surprised by the amount of tax due."
When you use a cloud-based accounting system, there's no need to stash receipts in a file folder (or shoebox) all year long. You can capture and record expenses anywhere, anytime. When employees incur business expenses while traveling or working on the go, they can enter receipts with a mobile phone camera.
And when tax time rolls around, all expense data is already neatly organized and easy to classify.
What Is Streamlined by Using Cloud Accounting?
Short answer? Lots of things. As it relates to tax time, a few benefits in particular are worth noting.
- You can access payroll safely and securely year-round to keep tabs on your payroll costs and help ensure you're ready come tax season. In addition, flooding, hurricane or any other kind of natural disaster won't wipe out your accounting system since it doesn't live on-site. Security is constantly monitored, so there's no need to worry about anyone hacking your own personal servers.
- Your cloud accounting program can be programmed to classify certain expenses in specific categories for tax-reporting purposes. You can automatically tie specific credit card charges to specific expense categories, for instance, so that expenses are categorized correctly regardless of which employee is using the card. Cloud systems also make it easy for business owners to review employees' expenses, approve them and ensure that they're classified correctly for taxes.
- When business operations are available in the cloud, employees can work productively from anywhere. One of Castle's own top employees lives an hour and a half away from the office, for example, but because she can work remotely, she's willing to remain with the firm and produce top-notch work, he says. Via Microsoft Teams, the remote employee can share a screen with co-workers in the office to collaborate on projects. "This employee is fantastic, but if she wasn't able to work from home with her kids, we probably wouldn't be able to keep her," Castle says.
While the ability to help clients transfer operations to the cloud has enabled Castle to build his business, operating digitally has allowed his clients grow their own businesses, too.
If your business isn't yet reaping the benefits of cloud accounting and other cloud-based management systems, it may be time to reconsider. For many small businesses, cloud-based business solutions are the equalizer that allows them to compete successfully with much larger competitors.
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