Cloud Accounting - The New Accounting Trend | Vicky Nedelcheva | Skillshare

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Cloud Accounting - The New Accounting Trend

teacher avatar Vicky Nedelcheva, Accountant

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Taught by industry leaders & working professionals
Topics include illustration, design, photography, and more

Watch this class and thousands more

Get unlimited access to every class
Taught by industry leaders & working professionals
Topics include illustration, design, photography, and more

Lessons in This Class

10 Lessons (23m)
    • 1. Introduction

      1:41
    • 2. Cloud accounting explanation

      3:04
    • 3. Cloud accounting benefits

      1:42
    • 4. Cloud accounting features

      1:36
    • 5. Automated invoicing and billing

      3:19
    • 6. Integration with 3rd parts

      2:19
    • 7. Real time information

      2:33
    • 8. Security

      1:46
    • 9. Expensing and capitalizing

      2:33
    • 10. Expensing cloud accounting costs

      2:56
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About This Class

In this course, I am going to talk about clouds, accounting, and how they are connected. It sounds strange, but actually, it is not. This is the new accounting trend. And every business that wants to be successful should be familiar with this trend and know why it should apply this new trend and how to do it. This is the reason why I decided to design a short tutorial which reveals all basic answers related to the topic " Cloud and accounting".
This tutorial is a pleasant meeting with cloud accounting. I am going to explain to you what cloud accounting software is, what its benefits for the business are, and what its main futures are. I am going to use Quickbook and Xero as a base for my explanation and analysis. These are two of the most used cloud accounting systems.
I am going to talk about accessibility, automated invoicing and billing, integration with third parties, how the cost of accounting software affects the business financial statements.
Going through these main topics you will be well-equipped with the necessary skills and knowledge to integrate cloud accounting into your business and use it in a way that will improve your business performance.
Of course, this tutorial does not say "do not use the help of an accountant". It says you " You can do most of the accounting job, collaborate with an accounting specialist, and only look for accounting advice when you need it".
I hope this tutorial will beneficial for you and your business.

Meet Your Teacher

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Vicky Nedelcheva

Accountant

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Transcripts

1. Introduction: In this course, I am going to talk about clouds, accounting and how they are connected. It sounds strange, but actually it is not. This is the newest accounting trend. Every business that wants to be successful should be familiar with this trend and know why it should apply this new trend and how to do it. This is the reason why I decided to design a short tutorial which reveals all basic answers related to the topic cloud and accounting. This tutorial is a pleasant meeting with cloud accounting. I am going to explain to you what cloud accounting software is, what its benefits for the business are, and what its main features are. I am going to use QuickBooks and 0 as a base for my explanations and analysis. Quickbooks and 0 are two of the most used cloud accounting systems. I am going to talk about accessibility, automated invoicing, and billing, integration with third parties, security, how the cost of accounting software effects the business financial statements and so on. Going through these main topics, you will be well-equipped with the necessary skills and knowledge to integrate cloud accounting into your business and use it in a way that will improve your business performance. Of course, this tutorial doesn't say you don't need the help of an accountant. It says you you can do most of the accounting job, collaborate with an accounting specialist, and only look for accounting advice when you need it. I hope this tutorial we'll beneficial for you and your business. 2. Cloud accounting explanation: We live in a world of technology and digitalization has an impact on all aspects of our daily life. We purchased goods and pay our bills online. We make video calls with people who live hundreds of miles away. We learned from the comfort of our home and we can make virtual trips all over the world. Of course, these are not all examples. Technology shapes also the business in every industry across the globe. And accounting is no exception and it is also affected by technology. Accounting software has existed for years and nowadays accounting is possible only if you use good accounting software. It simplifies the whole accounting process and you don't need to record accounting transactions or prepare reports manually with a few buttons, clicks. The accounting software manages all this for you. This way. The accounting software saves time and prevents inaccuracy. Years ago, all accounting software was only desktop based. In the last few years, a new type of accounting software has appeared. It is called cloud accounting software. This accounting software doesn't need to be installed on a computer using a username and password. Accountants and businesses reach the business data which is stored on a server. Both sides can easily share documents and have instant access to real-time accounting data. Undoubtedly, this type of accounting will help accountants and business owners to carry out their roles more efficiently and precisely in the future. If you are a startup or a small business, you have a lot of things to do to get your business running. In this line of thought, you need an accounting tool that will enable you to have a solid handle on your business financial information, save you money and time. Only this way you will be able to focus on growing your business. There are a lot of easy to use accounting applications on the market, which are designed for business owners with limited knowledge of bookkeeping and accounting basics. The process of entering information is just a piece of cake. All you need to do is just to enter a few lines of information. The application will do all the accounting jobs from transaction recordings to report preparation. Such an entry-level accounting application provides you easy to understand overview of the financial position of your business. It gives you an opportunity to track all your expenses and income and provides you an insight into your cash inflow and cash outflow. Using some of these applications, you will get real-time information about which customers pay their obligations on time and which not. You will have up-to-date information about what you owe to your vendors, what you have to pay immediately, and what you can pay later. 3. Cloud accounting benefits: Moving to cloud accounting leads to some advantages for your business. In the following few videos, I am going to mention some of the top benefits of cloud accounting. The first benefit of cloud accounting I would like to mention is its accessibility. Cloud accounting provides access to business data anytime and from any location. People who are interested in the financial information on the cloud server, the business owners, employees, bookkeepers, and accountants. And if you are one of these people, all you need to access the financial data is internet, a password, and a device with a web browser. You don't even need to download and install any software. Cloud accounting allows business owners and their employees to work remotely. They are no longer tied to their work computer and your office on the beach in their home or somewhere else. They can go through the business numbers and get the information they need. Even if the team is in multiple locations, they can access the data as if they were all in the same office. Online accounting software makes it easy for accounting firms to access their clients financial data from any computer whenever it is convenient. Using online accounting, bookkeepers and accountants avoid working on the personal computers of each client or manually upload data onto their own desktop. This accessibility of cloud accounting from everywhere allows better interaction and communication between businesses and accountants in real-time. 4. Cloud accounting features: In this video, I am going to take a quick look at some of the most common features that cloud accounting software offers. All cloud accounting systems provide features that save you time and help you to grow your business. No matter if you are a business owner or accountant, they offer plan suitable for any needs. Giving you an overview of all your dues and an opportunity to schedule your payments. Plaid accounting software allows you to track and pay the bills of your business on time. You are able to send invoices online and add online payment options to your invoices so customers can pay you by card or direct debit. You can connect your bank to your cloud accounting account to get automatic bank feeds and transactions flow directly into your bookkeeping system. Cloud accounting software helps you to match bank transactions to invoice or bill payments. So it makes reconciliation easy. Most cloud accounting systems calculate automatically sales tax on transactions and use reports to prepare sales tax returns. You don't need to wait until the end of the month to get financial reports because cloud accounting offers up to date data. If you go to the website of QuickBooks 0 wave, or another cloud based accounting software, you can research and compare the feature they offer. You will see that they have a lot in common and really slight differences. 5. Automated invoicing and billing: You don't have to waste too much time creating estimates and invoices. Cloud accounting software allows you to quickly create estimates. And once they're approved, cloud accounting software automatically converts the estimates into invoices. This prevents you from entering the same data twice. Sales invoices have to very important roles. It is evidence that you have sold a service or a product. Only this way, you can claim payment from your customers. If you rely on a verbal agreement, it is more likely not to receive your money. Sale invoices also helped businesses to track their sales income and manage their finances. Every cloud accounting application has an invoicing component included. What you need to do is every time you sell a product or a service to create an invoice. Creating an invoice in the cloud application, you say the accounting program to make a transaction record that increases the business income. When an invoice is not yet paid, the accounting application makes a transaction record that increases the amount of accounts receivable. Accounts Receivable is an account that shows all amounts of business expects to receive from its customers. When an invoice is paid, the accounting application makes a transaction record that increases the cashflow. Cloud accounting automatically creates and sends payment reminders. It reminds your clients when they have to pay their obligation to you and you don't have to manually keep track of debtors. We can summarize the whole accounting process related to sales the following way. After you have created an invoice, the accounting application automatically makes the necessary transaction records since payment reminders to your customers and provides a real-time information related to all paid and unpaid sales invoices. Since we have already talked about invoices, we should also explain what bills are. Bills are evidence that your business owes money to vendors. At the same time, they help businesses to track their purchases and expenses. Every cloud accounting application has a bill component included. More and more applications. Let you scan your receipts and you don't need to manually enter bills. After a bill has been scanned, the accounting application adds the data from the bills. Every time a new bill has been added, the cloud accounting program increases business expenses. When a bill is not yet paid, the accounting application makes a transaction records that increases the amount of accounts payable. Accounts payable is an account that shows all amounts of business owes to its vendors. When a bill is paid, the accounting application makes a transaction record that decreases the cash flow. The cloud accounting application provides real time information related to all paid and unpaid bills. To avoid paying late fees or interest charges, you need to track your bills weekly and try to pay them when they are due. 6. Integration with 3rd parts: It would be very convenient to ensure your accounting information to be all in one place. Most cloud accounting software provides this feature and can be easily integrated with a variety of other programs and software. This makes it possible for your finances to stay organized. It will also reduce manual efforts. We'll eliminate errors, will keep your books up to date and will boost your productivity. Let's assume that you have a Shopify store. Different accounting systems allow you to automatically sync your sales orders, payments, and inventory from your online store to your accounting system. When a product is created or updated on Shopify, the accounting system automatically creates or updates the same item in the accounting system. As soon as an order is placed on Shopify, the accounting system automatically searches if the customer already exists in the system, adds them if they are not already in the system and creates an invoice in their name with the details from the order. One of the most beneficial features of cloud-based accounting is its ability to be connected to one or more BankAccounts. This allows all bank transactions to be imported into your accounting system and helps you make your bank reconciliation faster and more accurate. Bank reconciliation checks, whether all the transactions in your bank accounts are recorded and appear in your accounting records. The aim of bank reconciliation is to match all bank transactions automatically imported into the accounting system to an existing transaction, such as purchases, sales, or cash transactions. The accounting program generates a list of possible existing transactions and compares the bank transaction against the existing transactions from the list. The existing transaction that is most similar to the bank transaction is offered as the match. Where a transaction doesn't already exist that relates to the bank transaction, you have to create a transaction during the reconciliation process. All accountants recommend reconciling on a regular basis. This will guarantee your accounting records are up-to-date. 7. Real time information: Cloud accounting provides real-time information. This instant overview of the current financial position of the business is crucial when making management decisions. It can also increase business productivity and performance. Let's imagine the following situation. On Monday, you buy furniture. As soon as your furniture is scanned and paid at the checkout, your purchase is registered in the store accounting software. On the same day the owner or account into the store can login in the accounting software and see how your furniture purchase has impacted their financial position. What they see is increase in the cashflow and increase in revenue. Having instant access to profit and loss reports means that businesses will not fall into the trap of over or underestimating their income. For example, an owner of an online shop gets a lot of orders in January 2021 and they believe they're doing well, satisfied, the owner logs in the accounting software and looks at the profit and loss reports. Imagine how surprised they are when they see that the business is doing bad and generates a minimal profit in January, perhaps because all the items sold are with minimum markup. Having this insight for the sales in January, the owner can make a decision to increase the price or stop selling these items. The opposite situation is also possible. And owner of an online shop gets only a few orders in January 2021 and they believe they're doing bad. Worried. The owner logs in the accounting software and looks at the Profit and Loss report. Imagine how surprised they are when they see that the business is doing very well and generate satisfying profit in January, the explanation is one, perhaps a few items, but with maximum markup had been sold. In this case, the real-time information helps the owner not to change their business direction, which could have bad impact on the business performance. Real-time information also assists you to track your ongoing performance and compare it against your budget. You get overview if your businesses, where it has to be and if it's current financial position matches its budget. This enables business to track their spins and reallocate funds as necessary. 8. Security: If you are not completely convinced of the security of cloud accounting, you can apply some good practices. Make your password's very strong as you use a combination of letters, numbers, and symbols. From time to time, you can change the password. Very practical is to use multi-factor authentication. This type of authentication requires not only a username and password to login, but also an extra code sent to your mobile device. Protect yourself from phishing scams. Be very careful with links or downloads in e-mails if you have doubts about their legitimacy. Don't think that using desktop accounting software is more secure than using cloud software. When you use desktop accounting software, you are required to transfer financial data using an external storage device, such as a USB. This delivery method is less secure because the device could be lost or damaged. The situation is completely different if you store your financial data on a cloud, even if something wrong happens with your computer, you can access your financial data from another device. False. Someone has access to your computer. They still couldn't log in to your cloud accounting software if you are using multi-factor authentication. I strongly believe that cloud accounting has a high level of security. It is encrypted in constantly backed up. It uses the same type of security used to make online banking safe. So if you use online banking, there is no reason too afraid of using cloud accounting software. 9. Expensing and capitalizing: I find the topic of cloud accounting costs more than important. And I am going to explain some main points related to this topic. To start with this topic, I am going to make a short introduction as I explained, the difference between capitalizing a cost and expensing a cost. When a business spends money, it should add this cost to its financial statements. A business can either recognize the costs as an expense or capitalize the costs. The decision will have an impact on the balance sheet and income statement. Costs that have no long-term benefit or don't directly increase the value of the asset, should be expensed. In this case, the costs will appear on the current income statement and we'll decrease the business revenue. But they won't affect the balance sheet. Business capitalizes costs when they will provide future benefits. Fixed assets, intangible assets, and all improvements of these assets are typically capitalized. When a business capitalizes a cost, it will appear on the current balance sheet as an asset, and it will be recognized in the income statement as a depreciation expense in the coming years. Logically, in the current year, the cost will increase the amount of business assets and in the following few years, it will decrease the business revenue and the amount of assets. Here are two quick illustrations of capitalizing and expensing in action. The illustrations will give you an idea of how both methods affect the business financial statements. Business x has incurred $700 for improving its equipment. The improvement costs should be capitalised. This means the assets of the business will increase by $700 and the current income won't be affected. The amount of $700 will appear on the current balance sheet and it will appear on the income statement as an expense in the coming years. X has incurred $700 for maintaining its equipment. The maintenance costs should be expensed. This means the business income will decrease for the current year by $700 and the amount of assets will not be effected. The amount of $700 will appear on the current income statement. 10. Expensing cloud accounting costs: I am going to outline some points related to implementing new cloud accounting software in a business. There are two main types of clotting software. The first one is clubbed cladding software with a perpetual license, and the second one is cladding software with a subscription-based model. The first type of clouding software allows a business to use the software for an indefinite period of time by paying a single fee. A business pays a higher fee once and it has access to the system forever. Such type of cladding software is an intangible asset for the business and should be capitalised. The single fee that the business has paid will appear on the balance sheet and will increase the amount of the business assets. The business needs to evaluate the estimated useful life of that software and decrease its amount every year of its useful life. Every year of the useful life of the cladding software, part of its cost will be expensed and shown on the income statement. At the same time, it's cost on the balance sheet will be deducted until it is 0. The subscription-based model allows a business to purchase a cloud license for a specific period of time for a SET price. The business has access to the system for the period it has paid a subscription fee. The business wishes to continue using the software, it must renew the license. In this line of thought, it is more reasonable for the business to treat the use of cloud software as a service rather than an intangible asset. Therefore, the business should expense the subscription fees in the current period. All cloud accounting software vendors offer exactly the subscription-based model. Here are two simple illustrations. Business x purchases a cloud accounting software subscription plan with a monthly fee of $15. This amount will not affect the assets of the business and will not appear on the balance sheet, but it will decrease business revenue and will appear on the income statement. Every month. The subscription fee will decrease business revenue by $15 and they will appear on the monthly income statement. At the end of the year, the total amount of $180 will appear on the annual income statement. Business why purchases a cloud accounting software subscription plan with an annual fee of $190. The annual subscription fee will decrease business revenue once by $190. This amount will appear on the income statement for the month when this fee has been paid and on the annual income statement.