What is Cloud Accounting? – Part 1

What is the cloud? This is part 1 of a 3 part series.

This is a very good question and one that many companies are trying to define with their products. In this first part, I will try to define what the cloud is and where you see it every day.

Typically, the could refers to cloud computing. Cloud computing is defined in Wikipedia as a style of computing in which dynamically scalable and often virtualized resources are provided as a service over the Internet. Users need not have knowledge of, expertise in, or control over the technology infrastructure in the “cloud” that supports them.

Interesting, but what does that mean to you and me? A lot, actually. It basically means you use software or a system that you do not have to maintain, store, or care about. By using this service, you gain economies of scale of large storage and processing arrays, best practices by having learned persons managing the systems, and lower costs through the application of these principles.

I hear many people say they do not use cloud computing. But I argue that anyone reading this email is using cloud computing. Google mail (Gmail), Hotmail, Yahoo mail and similar services are all examples of cloud computing. I do not care where it is stored, how it is backed up, or who manages it. What matters is that I can access it and use it when I need it.

Online banking is another example. I can access my Bank of America account from any computer anywhere. I don’t know where they store my data and frankly I do not care. Other examples are Comcast On Demand, Facebook, Myspace, and a host of other online applications.

But businesses have more choices. Many software companies are putting their applications online and they are hosted as a Software as a Service (SaaS). SAP, Oracle, QuickBooks, and a host of other applications are now online and are classified as cloud computing applications.

What does this mean to the business owner? More and more applications are going online to the cloud. It is inevitable and should be embraced, not feared. It can be an incredible time and money saver.

In part 2 of this post, I will explain the concept of Cloud Accounting. In part 3, I will give the best practices for choosing and implementing cloud technology.

6 things your business CPA/tax filer will not tell you

Many CEO’s, entrepreneurs and companies have used a trusted CPA to prepare and submit corporate taxes. And  using the same tax preparers as your corporate financial advisers is becoming more common. But is this the best choice? Check out these 6 things your CPA will not tell you.

1. They are required by law and by their profession to be independent. Since Enron, the SEC, the AICPA, and other agencies have created walls between two parts of an organization that provide auditing and corporate advice on one side and tax preparation and filing  on the other.

2. Bookkeeping, Accounting and Finance are not their primary functions. Despite the A in their name, they are not trained to manage the corporate functions of accounting and finance efficiently and effectively.

3. Filing your taxes is their primary function. A CPA firm’s primary mission is to prepare and file corporate tax returns (or personal if a small firm) as accurately and completely as possible. Secondly, they provide auditing services.

4. When they give you corporate advice, they are considering their position first, not yours. If they are likely to lose their license or be prosecuted by the SEC, they are going to choose the option that has the least ramifications for you.

5. They wont discuss a lot of options. By providing more than one option, you may choose one that puts their company at risk. Consider the decisions that you have asked for advice on and check the options with others.

6. Your accounting and bookkeeping should be helping your company, not helping the IRS. By having a CPA firm run your bookkeeping and accounting, your books will be perfect (for a potential IRS audit). But will they be in line with your company’s goals and objectives? It is not illegal to run your books the best way to help your company, unless you are a tax filer.

The bottom line is that a CPA firm that does your taxes AND does your bookkeeping is always in conflict on the best choice. The conflict almost always leans towards the CPA firm’s favor. Don’t believe me? Ask your CPA about a decision that was made in light of these 6 points.

I cannot count the number of times I have consulted to a company and provided advice that was in conflict with the CPA’s but was in the best interest of the company.

Don