Running a startup or SME business here in the Philippines?
Looking to transition the accounting, bookkeeping and finance function of the company to digital?
If so, are you going to:
- Subscribe to an accounting solution and manage it internally?; or
- Outsource to an online accounting and bookkeeping services provider?
In this article, we explain the differences between subscribing to a cloud accounting solution and outsourcing to a provider of online accounting and bookkeeping services in Manila and the Philippines.
First off, let’s examine how accounting solutions work!
What is an Accounting Solution?
Accounting solutions are technological solutions that enable a user to perform various accounting, bookkeeping and finance tasks through a computer or mobile application.
An accounting solution enables a user to enter, manage and store all of their company’s financial information via a computer or mobile programme. In theory, an accounting solution should minimize or remove the need to record transactions manually into traditional accounting books and hard-copy ledgers.
However, if optimized correctly, an accounting solution can do much more than just record transactions!
With advancements in technology, an accounting solution can be programmed to perform various automated tasks across the entire range of accounting and and bookkeeping services, including invoicing, collection of bills, accounts payable, tax compliance, bookkeeping, catch-up accounting, budget forecasting and financial planning and reporting.
What is a Cloud Accounting Solution?
In the early days, accounting solutions were only accessible on the computer or computer network where the solution was installed (i.e. a desktop or server-based solution). A user could only access their finances when physically on company premises. Recent technology advancements have, however, created an ability for founders, owners and business managers to access their finances from anywhere and anytime – this is cloud accounting!
Cloud technology has revolutionized the accounting and finance world. Cloud accounting solutions enable financial information and documentation to be uploaded, processed and maintained on remote computer servers. This means that all accounting, bookkeeping and finance related activities can be performed from anywhere in the world provided the user a) has an internet connection and (b) has been granted access to the solution.
An example! Let’s say an executive is based in the US but is managing a business here in the Philippines. If the PH business is using a cloud accounting solution for finance management, the executive will be able to manage all the finances of the PH entity including reviewing revenue, examining financial statements, generating invoices, reviewing the cashflow statements and much more – all from the US!
Check out our recent article on why a cloud accounting solution can be such an important resource and tool for businesses during the COVID-19 pandemic.
What are the different types of Cloud Accounting Solutions?
There are numerous types of intuitive and cost-efficient cloud accounting solutions on the market. Any decision on which cloud accounting solution to use should always consider the industry, model and size of the business against the specific functionalities of each solution.
It’s also important to ensure that the accounting solution can be set up to align with the compliance framework of the country in which the business is operating. For example, the tax compliance requirements of percentage tax and withholding tax in the Philippines are not applicable in every country. So, it’s important to ensure the accounting solution has a function for the efficient management and computation of these taxes.
In one of our previous articles, we outlined why tax compliance is so complex for corporations in the Philippines!
We previously wrote about Quickbooks Online and Xero – two efficient cloud accounting solutions used by businesses globally. In that article, we outlined some of the key functionalities to look out for when selecting the right cloud accounting solution for your business!
What’s the difference between an ERP and an Accounting Solution?
An Enterprise Resource Planning system, commonly known as an ERP, is a business management computer system that enables integration and collaboration across various departments and functions internally within a company. An ERP enables a company to manage almost their entire business through one integrated platform, including manufacturing, procurement, inventory, supply chain, HR, customers, contracts and accounting and finance.
Examples of globally used ERPs include Oracle, SAP and Microsoft Dynamics to name just a few!
ERPs are not generally necessary for early stage startups or SMEs seeking to move their finance function to digital. ERPs are costly from a capital expenditure perspective. ERPs also require time and resources to ensure a successful implementation. For this reason, an efficient cloud accounting solution (see above) should be more than enough for a startup or growing SME to perform their accounting and bookkeeping online.
Cloud Accounting Solution v Online Accounting Services
At CloudCfo, we are regularly asked about the differences between subscribing to a cloud accounting solution and engaging CloudCfo to provide online accounting and bookkeeping services here in the Philippines.
Here’s the short answer!
Subscribing to a cloud accounting solution
If a startup or SME in the Philippines subscribes to a cloud accounting solution, they’ll have access to an incredibly efficient tool for managing their finances.
However, while most users can learn to record simple transactions, there is a level of accounting and finance knowledge required to utilize a cloud accounting solution to its full potential. There is also a need to understand the tax compliance framework in the Philippines to ensure the correct amount of taxes are being computed and applied to the right transactions!
In short, as with any tool, the user must understand how it works in order to achieve optimum results!
Outsourcing to a provider of cloud accounting and bookkeeping services
Where a business outsources to a cloud accounting services provider, the company will have access to both a tool and to a specialized and expert service.
The cloud accounting service provider would effectively manage the cloud accounting solution on behalf of the business, yet enabling the business owners or managers to access and review their financial data at any time!
In a recent article, we examined what “online” or “digital” actually means when it comes to outsourced accounting and bookkeeping services.
Below, we have outlined 6 benefits of outsourcing the management of your cloud accounting solution to a provider of accounting and bookkeeping services:
- Implementation – First off, an outsourced accounting provider will help you implement your accounting solution, set up your Chart of Accounts, upload existing balances and overall, ensure your accounting solution is fully optimized!
- Expertise – By outsourcing your accounting and bookkeeping services, you get access to a range of expertise within the outsourced provider including Philippines tax compliance experts, financial advisers, CPA accountants, skilled bookkeepers and more. This is a true value-add!
- Integration – More and more businesses in the Philippines are moving parts of their business to digital. An outsourced accounting provider will have the knowledge and experience to help integrate the accounting solution with other platforms and solutions within the business. For example, in the restaurant or e-commerce industries, an outsourced accountant can advise on how to migrate key data from the Point of Sales system (POS) or the back-end shop platform to the accounting solution.
- Functionality – Many accounting solution users will not use the solution to its maximum capability! Cloud accounting service providers are experts at ensuring that the full spectrum of capabilities are utilized for the benefit of the business! From invoicing, to report generation, to inventory costing, to country specific tax compliance – this is how technology should be used!
- Industry Experience – By outsourcing to an established provider of accounting, bookkeeping and tax compliance services here in Manila and the Philippines, you will have access to a bank of experts who have experience managing accounts of businesses in similar industries and with similar business models! This kind of experience and knowledge is invaluable for your company as the outsourced accountants and bookkeepers can advise on typical pain points, industry specific legislation and tax treatment relevant to your business model.
- Tax Compliance – While a cloud accounting solution can compute and record the various taxes that have to be paid, tax forms still have to be prepared and submitted and tax payments still have to be paid! By outsourcing your accounting and tax compliance services, you get access to an end-to-end solution for your finance management requirements!
CloudCfo – Online Accountants, Bookkeepers and Tax Compliance Experts in Manila and the Philippines
We advise all our clients on the key ways to generate cost and resource efficiencies for their businesses through the use of cloud accounting solutions. We also implement and manage the accounting solution on their behalf!