By Julie Lubetkin, VP of Strategic Partners
This article orginally ran in Accounting Today on April 29, 2014.
I admit it. I am a control fanatic. And if you’re reading this, you probably are, too.
Control is integral to the work of the accounting professional. It helps negate risk, protect important information, and support conduct consistent with the highest level of professional excellence. However, the flip side of control fanaticism is that it can reinforce overly risk-averse behavior that actually inhibits innovation.
Take, for example, paper.
Walk into an accounting firm and most likely you will see a large amount of paper – bills, files, invoices, receipts and documents. Information exchange, overall, is paper-based. While paper reliance has been the standard in the industry, it can lead to expenses you might not expect. For example, the average cost to pay a single bill across an organization is $92*.
Paper is often the culprit for inordinate costs, fraud and inefficiencies, but less-than-adequate technology is also to blame. For example, software that needs frequent updates and relicensing and allows access only from select PCs or laptops can often compound and not alleviate problems. Inadequate integration in technology also leads to duplication of efforts and data entry – which increases the possibility for errors. And as technology continues to evolve at a breakneck pace, even hardware can pose problems. Some PCs and laptops don’t offer CD-ROM drives. Netbooks and iPads often have minimal or no data ports at all. If your practice depends on CDs or USB drives, you may find that your clients don’t have compatibility with those items or they demand other means of output or collaboration.
Think about how you use technology in your personal life. Perhaps you check emails on your smartphone or tablet or you text a colleague to let her know you are running late. Apps help you quickly gather important information such as the day’s weather, last night’s baseball game score or your bank balance. It’s easy to get the information you need no matter where you are or what you’re doing. Why should your practice not have the same convenience?
Clinging to a paper-based practice or dated technology works at cross-purposes to what you need for your firm and your clients. Even for the greatest of control fanatics, there is no excuse not to keep pace with the lifestyle and requirements of your clients and their businesses. Cloud-based solutions can offer your accounting firm the cutting edge it needs to distinguish itself from competitors, as well as enhance client services.
Welcome to the Cloud
By now, you have heard of the cloud. And by now, you probably have already used it. Popular services such as Amazon, Google and apps exist in the cloud. They are on-demand and always accessible. Cloud-based solutions eliminate the need for on-site hardware in favor of Internet-based “virtual servers” that can scale up or down according to your firm’s storage and operational needs. There is no need to download software or updates to your computers, since that software is hosted in the cloud. All you have to do is log in and you are ready to go. It can also be significantly less expensive than traditional solutions as it eliminates hardware fees, reduces the burden of IT administration, and may have more accessible costs when compared to traditional software licensing.
The bone of contention with cloud-based services for accounting professionals basically comes down to control. Your information – and your clients’ information – is hosted online, not on-site. It is virtual, not paper. This often leads to the perception that there is a lack of control of that information, its security, and your overall business.
However, despite this perception, the cloud actually endows a certified control fanatic with even more control than paper-based or non-cloud technology.
1. The cloud allows you to control the security of your files.
While the popular feeling in the accounting world is that you have to sacrifice security when you migrate to a cloud-based solution, nothing could be further from the truth. Most vendors protect your clients’ personal information, tax records and checks to a greater degree than holding onto paper-based files in your office cabinets.
Cloud-based service providers should adhere to the following stringent security standards:
- Extended Validation (EV) SSL encryption technology
- Firewalls that prevent unauthorized electronic access to servers
- Encryption of sensitive data in transit and rest in the providers’ databases
- Physical security protocols that include housing production servers in high-security, locked facilities with biometric access controls preventing unauthorized physical access
- Annual audits such as the SSAE 16 SOC 1 Type II Audit by a third-party service
- FDIC-insured payments en route
In addition to these standards, there are a variety of options available to secure your information.
It only takes one person accessing a restricted document or information to cause considerable damage. Minimizing “touch points” to highly valuable items such as checks or payment systems that are the backbone of your (and your clients’) finances reduces the risks of fraud or errors. The cloud allows you to customize the online experience by giving only select individuals permission to access sensitive information. You define who can see what, when they can see it, if they can edit or download it, and how it can be accessed. You can create personalized collaborative sites for each of your clients – sites that only you and they can access. As for the security of the information, cloud services must meet the most stringent levels of compliance for their industry in order to operate, and security is continually reevaluated and reinforced as necessary.
Imagine if your office were flooded or suffered from wind damage. What would happen to your paper files? Migrating to the cloud with electronic formats builds an important and fundamental level of control into your business continuity planning. While your paper files may be destroyed in the event of a disaster, your online files – hosted in the cloud – will stay safe, accurate, and accessible.
Safety from Normal Wear and Tear
With paper, even the safest of storage facilities cannot prevent the degradation of physical files. Over time, ink fades or paper rips, compromising the integrity of your files.
Non-Reliance on Obsolete Technology
The cloud allows you to access whatever file is hosted, no matter what the format. That is not always the case with on-site electronic storage. For example: How many files do you have in storage that might have important information on floppy discs? Even the widespread acceptance of CD-ROMs is fading as more and more laptops and computers move from CD drives to pure-play online storage.
Flow of Information and Transparent Reporting
Does your accounting firm have an established services workflow for its clients? Can you easily ascertain where a bill is in the approval process or who has not yet reviewed it? Chances are, if you rely on paper, you do not. Without an established and enforced workflow, information can be inappropriately shared or languish openly on top of someone’s desk. Most cloud-based services allow you to set up automated workflows based on the deliverable and its owner. The service will automatically shepherd the file, bill or invoice to the correct person during each stage of the process. It provides a reminder alert if individuals are not responding within an allotted time. Furthermore, you can easily log in to see exactly where that file is, who else needs to see it, and what steps need to be taken to finalize it.
Establish Audit and Communication Trails
Cloud-based solutions often offer full audit trails of all transactions. This can allow for easy tax audits, for example, as auditors can be given access to review all transactions firsthand.
Deter Employee or Outsider Fraud Potential
A typical organization loses 5 percent of its annual revenue to fraud (either internal or external) and 49 percent of these businesses never recover these losses.** Features such as workflows, centralized repositories of information, and the ability to restrict access to certain files reduce the potential for fraud.
2. The cloud allows you to control where you work.
When you are part of a paper-based organization, you must work where the paper is. However, as the popularity of smartphones, tablets, and home offices grows, more accountants – like their clients – must be able to be flexible about work arrangements. When you move to cloud services, all of your information – files, invoices, notes, and forms – is available online through any mobile device or Internet connection. That means clients will not have to hear, “I can get that to you when I’m back in the office.” Instead, they get the information they need immediately.
3. The cloud lets you control cost.
Let’s face it: Paper is expensive. It costs a lot to buy it, print it, file it, store it and move it. By eliminating paper, you can save a substantial amount of money that has normally gone toward paper-based expenses.
Moreover, the cloud gives firms of all sizes the opportunity to reduce their capital investment on hardware, software and associated infrastructure. Rather than purchasing technology and product licenses outright, cloud users simply rent them, paying for IT solutions on a subscription basis, benefitting from the provider's economy of scale. That money saved on IT infrastructure and services can be reinvested in other areas of the firm.
4. The cloud lets you control time.
Maybe you won’t be able to turn back time or time travel, but the cloud can significantly reduce the amount of time you spend working on mundane tasks. As more functions get automated, removing the burden of manual work, you can focus on other value-added tasks, helping to boost overall output. Automated alerts remind you when to process bills and invoices or schedule an electronic payment, which removes the need to create manual reminders or search through paper files to determine due dates.
Moving from a reliance on paper to a reliance on electronic files in a cloud-based environment reduces the “lag” of paper-based operations and adds more efficiency and speed into everyday services. Cloud services such as workflows and online payments can significantly shorten your receivable process and get your money to you more quickly.
The cloud can even convert traditionally low-margin services such as bill pay into feasible and profitable services through the aforementioned workflows, online payments and reminders.
5. The cloud gives you the ability to control firm growth.
The accounting world is competitive. With new firms launching every day and offering specialized scopes of services, the edge provided by cloud technologies can bring you the needed impetus to accelerate your firm’s growth and revenue. The cloud offers you the opportunity to:
- Increase collaboration and provide a greater level of responsiveness: This creates more opportunities to cement your relationship with existing clients and incorporate more services into your portfolio to meet their immediate needs and woo prospective clients from other firms.
- Identify new areas of growth: With the cloud, you are no longer restrained to conducting business in your local area. Collaborative tools with on-demand access mean your clients can be based on the opposite coast and still receive the high level of client services your firm is known for.
- Expand your talent pool: By bypassing the reliance on working solely from the office and moving to the cloud, you can acquire additional talent for your firm no matter where those individuals are located.
- Advise your client on business performance and trends: The cloud enables you to perform more routine tasks faster, collaboratively work with your clients, and help steer strategic growth.
Paper has served the accounting world well for decades. However, now is the time to innovate and invite new technologies into your practice – such as cloud-based solutions – that can help your firm enhance its level of client service, offer new services, create a strong competitive profile, and increase revenue. Take it from me, a certified control fanatic: You do not have to sacrifice control to innovate.
* Source: 2010 Purchasing Card Benchmark Survey, RPMG Research
** Source: Association of Certified Fraud Examiners 2012 ‘Report to the Nations’