Transferring to cloud accounting is a game changer for businesses today. It undoubtedly streamlines financial operations while providing real-time data and insights. Consequently, businesses can manage their finances more efficiently, ensuring smoother cash flow and more accurate reporting. Additionally, with cloud accounting, teams can access their financial information anytime, anywhere, allowing for more flexibility and collaboration.

Why Transfer to Cloud Accounting?

Firstly, moving away from traditional accounting systems to the cloud helps reduce paperwork and manual data entry. Moreover, it makes collaboration easier as multiple users can work on the same data simultaneously. Xero, for instance, is one of the most popular platforms that enables businesses to automate invoicing, track expenses, and monitor cash flow in real time. However, despite these advantages, some businesses hesitate due to concerns about the transition.

Addressing the Myths

Although there are concerns about security, cloud accounting platforms, including Xero, implement high-level encryption to protect sensitive financial information. Comparatively, the risk of data loss in traditional accounting is higher due to hardware failures or theft. On the contrary, cloud systems regularly back up data, ensuring its safety.

Some business owners also believe that switching to cloud accounting is expensive. However, Xero and many other providers offer affordable pricing plans that suit businesses of all sizes. Besides, the long-term benefits far outweigh the initial costs, as cloud solutions save time and reduce errors. Furthermore, businesses like BudgetWhizz provide additional tools to help with budgeting and financial forecasting, making cloud accounting an even more valuable asset to growing enterprises.

The Future of Accounting is in the Cloud

Ultimately, the shift to cloud accounting is a strategic move for any business looking to streamline its operations and future-proof its finances. Moreover, it is a secure, efficient, and cost-effective solution. Lastly, adopting cloud accounting, especially with tools like Xero, means staying competitive in a fast-paced, digital world. Be sure to tune in to the I Hate Numbers podcast, where we explore topics like cloud accounting and more, helping you make informed financial decisions. For more support, check out BudgetWhizz.

In my business life, I'm guided by the 7 Ps. That's an old British Army adage, which stands for proper planning and preparation prevents piss poor performance. Now you may be thinking, what's the 7 Ps got to do with this week's podcast, Mahmood? Well, this week's podcast is about having made that decision that cloud and digital accounting is for you, and why wouldn't it be, is how we actually make that move.

And in this week's I Hate Numbers podcast, I'm going to outline the three things you need to be aware of when you actually make that move to cloud accounting. Thank you very much, British Army. Let's crack on and explore those three stages.

Now having already made that decision that cloud accounting is the thing that you should be doing in your business, irrespective of your size, the type of business you are, and please do check out the previous podcast where I've talked about this topic where we're now going to have a look at what stage one is.

And stage one is about the preparation. In the preparation phase, we're going to be looking at three things. Definition i.e. defining your requirements, communication, and that's the communication that you need to do with your team and choosing the right migration tools and preparation of the data. Let's expand on those.

Now, once that decision is made to move across to the cloud, you need to think about what you actually need from your new system. Now, whatever that system of choice is, and as a personal heads-up, personal preference, I recommend Xero, then we have to outline what we actually need to take out from this new system.

So for example, there is something called tracking categories. So if you sell more than one product, if you provide more than one service, if you're a charity that has funding coming from a number of different funders, if you provide different services, anything that could be broken down in that manner can be assigned tracking categories.

So, decide how you want to categorise transactions, whether it's departmental, project-based, location-based, or funds-based. What are the outputs that you need that you and your management team require? Those financial reports that are required will link into how the data is going to be processed and captured, and they're critical.

Now, even if you don't make a definitive list, you're not quite sure, you can certainly modify those on, once you've actually migrated and started to use the system. But just have a think about it at the beginning, it may save some headache later on. What are the systems that you want your cloud system to integrate with?

So, for example, Xero is an application that has an app marketplace and it can link to many, many different feeder systems. So if you want to integrate with your website, if you integrate with your CRM system, whatever other business systems you have, there's the ability to make them talk to Xero or any other platform that you choose.

Bank feeds. Now, one of the powerful things about digital accounting is that you can connect your bank account to your accounting system, and you have what are called bank feeds. What that means is that those transactions that flow through your bank will also be imported, linked into, and entered into your accounting system.

Just think of all that time that you're going to save. Now there are available apps and Xero has 300 plus apps for example. So, whether it's dealing with inventory, time, employment, management, payroll or whatever, then there's an app for that. The next thing is the communication with your team, and I can't overemphasise how important communication actually is.

They're implementing a new system, just like any change will affect everyone involved in your financial processes or anyone who's on the receiving end, and it's important to make sure you communicate that clearly. You need to inform your team, let them know about the upcoming change and how it's going to benefit the business, any challenges there might be, get them aired. You need to make sure you've got adequate training sorted out so all your team are familiar with the new way of working.

Whether they're a user who wants to access the information, whether there's somebody who's going to be involved in entering the data. Make sure the training is provided before you go live. You need to make sure you allocate as a business the adequate resources both in time, skills, and expertise to make sure that you are going to get the best out of a new system and mitigate any anxiety and fears.

The next thing you've got to consider at the preparation stage is when do you flick the switch, so to speak. Probably have a contradiction in a digital platform, but what's the migration date that you go for? Now, time is critical when you switch systems. Now, typically the best dates to choose if you've got an existing system is either at the end of a financial period, the end of your VAT quarter.

Obviously, if you're a new starter and you haven't got any historical data, the date may be something that's not as hardwired in. If you align your migration date to align with your VAT quarter, you've got a cleaner break as well. Now, one thing we've also got to consider is the data preparation. Now, if you're going from one system to another, there are a number of things you need to think about.

Number one, what is in your existing system that is no longer required in the new system? And it's not unusual over a period of time that companies will build up, for example, a supplier and a customer database, having those financial and contact details, and some of those customers and suppliers may no longer be active.

When it comes to the data preparation, it's useful to create a checklist of the data you'll need to enter and import. So, for example, customer information, the financial and contact details of your customers, supplier information, the details of those suppliers, including the payment terms. And there may be some in there, by the way, that are no longer active that you don't wish to take across to the new system.

So it's a good opportunity to do a bit of a data cleanup as well. Think about your chart of accounts. How do you want your accounts to be classified? What names would you like to adopt? And again, your existing chart of accounts may not be appropriate through the way your business runs, the way your business operates, and it may not be appropriate for the account headings you've got on any reports that come off.

Think about the bank information, the details of your bank accounts, so when you set up those bank feeds. Also, you have a choice about how much of your history, how much of your data do you want to transfer across. Now, when we deal with clients, when they migrate to new systems, they are given the choice of transferring all of their financial history,

some of their financial history, or none of it. I would suggest, as a bare minimum, you're looking at something like three years worth of financial data. So when you run the reports and you see how you're doing in your business, you can look at the historical perspective, that's always going to be useful. But the choice is yours.

Remember, this is an excellent opportunity to clean up your records. Get rid of old contacts, ones that are outdated, check the emails are appropriate. So it's a good opportunity to do a good data cleansing exercise as well. Now, that largely covers stage one. Let's have a look at stage two, and that's the actual migration.

Now my recommendation is that you run systems in parallel. Not forever, but on a temporary basis. So whatever you're using currently, if you're preparing to go live, having the new system in operation is going to be really useful. I would normally recommend… Now, if you could, for example, going to transfer and go to a new system at the start of your new financial year, probably about a couple of months before you go live, you set up the system or you get somebody like our team to set the system up for you.

You train, you're familiar with what it's going to be. And then when that switchover date comes, it's going to be less of an uphill struggle, and it'll be a smoother transfer. Now, there can be a high level of risk if you do it abruptly. So to mitigate it, as we said, run both systems for a short period of time.

Familiarity gives you a good opportunity also to crosscheck the data and the reports coming on the two systems to ensure that everything is accurate, and this presupposes by the way that your existing system is up to date, fit for purpose, and is doing what it should do. In my experience, many people who make the switch, they don't keep on top of their current accounting systems, and the accounts begin to look a bit of a mess.

Now, there are things and tools that you can do to actually help you with this migration. I would certainly say that you need to make sure you've got access to professional help. So I would speak to your current accounting team. If they have the experience, if they have the knowledge, they should be able to help.

If not, give us a call. Now, if you are a new business, you won't have those previous accounting systems to worry about. So your migration journey will be much simpler. Now, stage 3, the after. So we've done the preparation, we've done the migration. What happens next? Now you need to make sure that you get the maximum usage out of your new system.

Now my view would be, especially if you're new to a digital accounting platform like Xero, is that you start slowly and incrementally. So, if you don't have that financial expertise in your team, you might be a starting business, you might have a very small limited finance team, is start with the things that are most critical to the organisation.

So, things like issuing invoices to customers, getting those quotes done, getting the proposals out, converting them to invoices, sending out reminders, sending out statements. Do the same thing on the bills and the suppliers. Automate what you can. Get those bank feeds done and do things on an incremental basis.

So if you've got your bank reconciliations, your bank feeds, you're keeping on top of those, getting those invoices out the door, get that credit control sorted out from day one, then that's a great start. As time goes on, you can find out more, especially if you've got that training support where you can automate better.

Make those efficiency gains. The system will pay back for itself, I have no doubt on that one if it's used effectively and the additional features that you might need. Now check the notes out at the end folks here. So, we have an online planning tool called Budgetwhizz, which integrates with Xero. So if you are a fan of planning, and why wouldn't you be, you can produce those financial plans, those financial forecasts, and it can pull the actual data from Xero.

So therefore, that's a great way to look at the two. Now, as you go forward, again, if you feel comfortable, if you're very familiar with new systems, great, you can go off. It's like taking the stabilisers off your bicycle. If not, think about what future training you might need. It could be a catch-up, it could be a regular thing, it could be training people within your organisation as they come on new.

Consider that and factor that into your timescales, and you factor that into your budgets as well. Monitor and adjust as you go along. Now you need to regularly review your new system to make sure it's working for you. Look at the reports that are being generated, gather the feedback from your team. Are there any challenges that they've not quite aired with you?

Things that you can do, make adjustments to your chart of accounts, how things work. Just like getting a new system for anything here, it's familiarity and regularity that's going to be really important. Now what can we conclude? Well, moving to cloud accounting with Xero is a significant step forward in modernising your business's financial management.

It will save time, you will do a lot of the heavy lifting, and it’ll give you more opportunity to use that data to make sense of it and to get some valuable information for profitability purposes, planning, what's going on, and to evaluate and monitor your business. Now the journey doesn't end after migration.

There's a continual learning process and adaptation as you get the maximum out of your digital system. Now, folks, if you're ready to make that move, if you haven't already, you have questions about the process, please check out the show notes for our free guide on cloud accounting. Give us a shout if you need that support and help.

We'll be happy to chat but until then, happy migration. We hope you enjoyed this episode and appreciate you taking the time to listen to the show. We hope you got some value. If you did, then we'd love it if you shared the episode. We look forward to you joining us next week for another I Hate Numbers episode.