Light bulb moment #4: Financial accountability in a paperless society.

In the face of paper files swamping Ziyo, and client documents competing for space in our fireproof safe, as well as the advantages for our clients, we decided to embrace the prospect of a paperless environment wholeheartedly.

Traditional business methods involved suppliers sending or delivering original paper invoices and statements. Contracts were also in the not-so-distant past always in paper format and signed with a pen. For some time now, there has been a trend of suppliers sending electronic invoices via email or providing a link in an email to click to an invoice for downloading. Electronic signature applications are also increasingly used.

Cloud based filing and accounting are increasingly popular, and even perhaps in the long run, essential.   We have therefore considered the advantages that cloud-based accounting systems, such as Xero and Sage Business Cloud Accounting, can bring both to our clients and Ziyo as a business.

The “cloud” is actually not in the sky, but where records and files are stored on a group of computers situated anywhere in the world.  There are various service providers who offer “Software as a Service” or “SaaS”, to which an organisation can subscribe on a periodic basis.

There are a number of advantages to cloud accounting:

  1. No software installation is needed, which saves time and technical issues. This is especially useful when upgrades are needed as these can be installed across the entire application by the service provider.
  2. The costs of a subscription are usually lower than a licence. It is reported that this is due to the different business model used by a SaaS provider. Some providers offer discounts for non-profit organisations:  a version of Sage Business Cloud Accounting, for example, can be accessed for free or a minimum subscription fee by NPO’s that meet the criteria.
  3. There are numerous applications that can be easily integrated with the accounting application, allowing an organisation to build their own suite of applications that communicate with each other.
  4. Accounting records can be accessed from anywhere that there is an internet connection and there may be no limits to the number of users with paid-for subscriptions, enhancing accessibility.
  5. Storing financial documents in the application means that any authorised person can be given access to view transactions, drilling down to the linked supporting documents, in a perfect trail of evidence. Auditors can be given view access to perform their audit testing, so that no one needs to spend time pulling documents from paper files and putting them back again, possibly mislaying them in the process.
  6. At the user’s request, the SaaS provider’s support function can easily be invited to view issues requiring support.

There are risks to cloud accounting, which should be managed:

  1. Access to the application is only possible where there is a suitable internet connection.
  2. There is sometimes concern about the confidentiality or loss of data or availability of the services. An organisation can gain assurance in this regard by requesting a special audit report called a “SOC 2” from the service provider, in which security and continuity controls, as verified by an independent auditor, can be confirmed.
  3. Applications can run at slightly slower speeds than desktop versions – this is instantly noticeable by those working with desktop applications on a daily basis. This is because the distance for an instruction to travel is longer, and is affected by the speed of the internet connection.

These days, even if our clients don’t use a cloud accounting application, they often use cloud-based storage facilities, such as Dropbox. Once in the cloud, these documents can be shared with the organisation’s accountants or any other authorised person needing access, such as the auditors, without having to handle paper.

But remember, whether the filing system is paper-based, electronic, or in the cloud, a systematic filing system is still required! We strongly recommend the use of unique reference numbers in order to link transactions in the accounting system to a specific document that is filed systematically.

If your organisation would benefit from less paper and an improved electronic trail of evidence that enhances accountability, speak to us about a suitable cloud-based accounting system.  Using our experience in the design of accounting systems, we have helped organisations set up on Xero and Sage Business Cloud Accounting.