Why Cloud Accounting Matters to SME Companies and owners?

The process of bookkeeping has always been tedious and prone to lots of duplication of effort. The traditional role of the bookkeeper can be seen as an aggregator of financial information captured in disparate and separate systems. Sales data is captured in POS while salaries and wages are captured in human resources systems. Bank transactions can only be seen from bank statements. The process of bookkeeping to present an overview financial picture of the Company is filled with data extraction and entry which means the decision maker will only know the situation of the Company at a much later stage.

Importance of real time financial information

Information is becoming a source of strategic advantage for many companies and yet how many managers or owners are still using financial reports that are outdated or even their intuition for current decisions. For example, when a new product is launched, if we only look at the new sales number for the new product, it will not paint a full picture of the company’s sales if the new product cannibalizes the rest of the other products. Most SMEs owners are most concerned over cashflow and yet most SMEs owners have no idea what is their current status of receivables leading to paralysis of action.

Advantages of using cloud accounting software

The advantages we talk about are specific to Xero, the accounting software that we use, although these should be general to all types of cloud accounting software.

Cloud accounting software is able to provide much more real-time information to end users. For certain SMEs, invoices can be sent to customers directly from within Xero. Sales can then be tracked on a daily or weekly basis, giving managers and owners the ability to decide if there’s a need to hold a flash sale or taking other actions to boost sales.

Although chasing for receivables is crucial to most SMEs that does not hold large cash reserves, seldom do managers and owners send out monthly statements of accounts to their customers. If a customer starts to accumulate more unpaid invoices, they will start to pose a credit risk to the Company if they default or enter liquidation. Without the information on hand, SMEs will not be able to assess the risk on hand.

Xero also provides real time bank feeds integration with the local banks such as DBS and UOB. OCBC bank feeds is still in process at the time of this article. One of our clients was able to detect that their managers was stealing the daily cash takes rather than depositing it because we were able to highlight to them that we were not able to locate the deposits in the bank. If the client was using a traditional bookkeeper, it would have taken them more than two months to discover this if they were doing their accounts on a traditional monthly schedule.

There’s much more advantages in terms of better operational efficiency that we will touch on in other articles, so there’s really no reason to continue using a traditional accountant or bookkeeper for SMEs accounting.

Choose to engage us as your Xero accountant or Xero bookkeeper today and drop us a note. We will love to know more about you.

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