To remain competitive, keeping up with technological advances is a prerequisite for firms of all sizes. Cloud-based computing is helping to level the playing field for small and medium-sized practices by increasing efficiency, lowering up-front costs for technology infrastructure, providing real-time access to data from any location, and offering scalability. This article discusses some of the advantages and challenges of cloud computing, and offers suggestions for a successful implementation for small and medium-sized enterprises.
The rate of adoption of cloud-based systems has grown at a rapid pace in recent years. According to the 2016 Management of an Accounting Practice Survey from the AICPA Private Companies Practice Section, adoption of cloud-based software grew by double digits nationally for accounting firms from 2014 to 2016. The same survey found a similar trend among Pennsylvania accounting firms: 65 percent of Pennsylvania firms used cloud-based software in 2016, up from 55 percent in 2014.
Advantages of Cloud Computing
“The cloud” refers to computer applications and services that run on the Internet as opposed to a firm’s own hard drive or server. Cloud computing can be broken down into three categories: software as a service (SaaS), infrastructure as a service (IaaS), and platform as a service. This article focuses on SaaS and IaaS.
SaaS enables business users to access applications over the Internet for a monthly fee. Three major accounting SaaS providers include Intuit QuickBooks Online, Xero, and Zoho Books. Each supports double-entry accounting, accounts receivable and accounts payable transactions forms, mobile access, and inventory tracking. Since these programs run on the Internet, multiple users can enter transactions and run financial reports anytime and anywhere, from multiple platforms, including a PC, Mac, tablet, or smartphone. Additional benefits include automated software updates and data-encrypted backups. Thus, small and medium-sized accounting firms can increase productivity without the heavy investments that large accounting firms make in their infrastructure and software.
Cloud-based tax preparation software is also available, which has similar benefits to the accounting software discussed above. In addition, data collection is made more efficient through secure online portals that allow clients to upload tax documents and other tax-related information. Intuit’s ProConnect Tax Online integrates with QuickBooks and allows practitioners to prepare individual, partnership, and corporate returns on a pay-per-return basis. CCH Axcess Tax from Wolters Kluwer is another competitor in cloud-based tax preparation for professionals. The CCH Axcess Portal allows firms to securely share documents with colleagues and to provide clients with access to financial data and files. MyTaxPrepOffice is an option that provides unlimited tax return preparation for an annual license fee.
SaaS supports a variety of communication, productivity, and document storage applications. Both Google and Microsoft offer enhanced versions of their personal e-mail and document-storage services to businesses for a fee. Google, for example, offers G Suite, which includes company e-mail, shared calendars, social networking for business, video conferencing, secure cloud storage, document sharing, and online productivity software for creating written documents, spreadsheets, presentations, and surveys. Microsoft offers Office Online combined with OneDrive for businesses to deliver a similar bundle of communications and productivity applications for businesses.
When it comes to IaaS, a third party provides the infrastructure for cloud computing – such as servers, storage, and networking – on a subscription basis. IaaS could be ideal for firms that have developed custom applications and are looking for a cost-effective host. Since companies essentially rent the infrastructure, IaaS helps firms avoid the large up-front capital costs of purchasing hardware and software. In addition, IaaS facilitates scalability and flexibility that can quickly be adjusted based on a company’s needs. Know, however, that firms using IaaS would still be required to manage and maintain their applications.
Major providers of IaaS services include Amazon, IBM SmartCloud Enterprise, Google Cloud Platform, and Microsoft Azure. IaaS also supports data backup, which is essential for accounting firms to comply with document retention policies, laws, and regulations. There are several providers of cloud-based backup services, including Amazon, Backblaze, Code42, and Microsoft Azure. These providers typically offer unlimited storage capabilities.
Challenges of Cloud Computing
Although the cloud offers businesses increased capabilities and flexibility, there are important challenges related to security and privacy to consider as firms transition to the cloud. Specifically, the cloud can be used by criminals to store illegal materials, distribute copyright materials,1
and launch distributed denial-of-service attacks against websites and platforms.2
Given the sensitive information that accounting firms maintain, it is imperative for firms to invest in security solutions such as access controls, application firewalls, intrusion detection, and privacy-preserving security.3
In addition, they must adopt risk mitigation strategies, such as establishing a cloud usage policy, assessing security controls, and being familiar with the laws and regulations in your state regarding data storage.4
Leveraging cloud technology will help small and medium-sized accounting firms remain competitive by increasing efficiency, enhancing productivity, and reducing up-front costs for infrastructure. If you decide to move your accounting firm into the cloud, your first step should be to assess your needs and develop a plan for implementation. If you do not have the expertise to develop your own implementation plan, consider working with a technology consultant. Next, estimate the true costs of implementation. Finally, after implementation, ensure that all staff members are trained on the new systems, including best practices for maintaining security and privacy.
1 Diarmuid Coileáin and Donal O’Mahony, “Accounting and Accountability in Content Distribution Architectures: A Survey,”
ACM Computing Surveys, 47(4), 1-35 (2015).
2 Kim-Kwang Choo, Christian Esposito, and Aniello Castiglione, “Evidence and Forensics in the Cloud: Challenges and Future Research Directions,”
IEEE Cloud Computing, 4(3), 14-19 (2017).
4 Peter Kaye and Robert Korbeck Jr., “Cloud Computing: Security and Risk Management,”
Pennsylvania CPA Journal, 87(1), 30-33 (2016).
Cory Ng, CPA, DBA, CGMA, is an assistant professor of instruction and the undergraduate program coordinator of accounting at the Fox School of Business at Temple University in Philadelphia. He is also a member of the
Pennsylvania CPA Journal Editorial Board. He can be reached at email@example.com.