The COVID-19 outbreak has undoubtedly rattled businesses across all industries as lockdowns, restrictions, and consumer uncertainty plagued the market for more than two years.
To combat these disruptions and remain productive amidst the chaos, companies worldwide launched remote work initiatives and digitalized their business functions. In fact, according to a survey by Alibaba Cloud, 94% of Philippine businesses consider cloud-based technology essential in mitigating the hit of the pandemic.
Financial service firms are no exception. Digitalization seems to be the industry’s future, especially with the emergence of cloud accounting and other digital trends in the field. So, it’s only fitting for Philippine startups planning to partner with an accounting firm to consider virtual accounting to increase their financial operations’ efficiency.
What is virtual accounting, how does it work, and what are its benefits over traditional accounting? All these and more will be discussed in the article below!
What is Virtual Accounting and How Does It Work?
Virtual accounting is accounting accomplished online through remote servers on the internet. It’s also called cloud accounting as it leverages cloud computing technology, an on-demand data center you can use for storage and computing.
This technology will enable you to perform accounting without downloading large software applications on your computer. You can instead upload financial data on a web-based interface, which you and your team can conveniently access anytime and anywhere via the internet.
Virtual Accounting vs. Traditional Accounting
Virtual and traditional accounting have their fair share of similarities and differences. Understanding the advantages of one over the other can help you choose the right financial management approach for your business. Below are a few notable aspects to further discuss the features of the two:
Traditional accounting in the Philippines uses software that occupies server space on your computer and requires regular maintenance and troubleshooting personnel. It involves full-time employee management and payroll work for your accountants and bookkeepers, which can be costly to your operations.
On the other hand, virtual accounting services will enable you to upload and review accounting data to the cloud. These remote servers can help reduce overhead, maintenance, and payroll costs, giving your team easy access to the financial records they need to work on.
While the country continues to welcome newly licensed accountants year after year, availability still stands as a major issue when it comes to accounting work.
With traditional accounting, the collaboration between your staff can be challenging, as necessary financial documents are stored at a physical location. Those returning to the office today ultimately experience this narrow access, which can be burdensome, especially for urgent requests.
Fortunately, online accounting can solve this issue, as you can share a financial report on-demand with authorized personnel in just a few clicks on your device. They can simultaneously have access, leave inputs, and collaborate, whether on-premise, at home, or in another part of the world.
Human error represents 41% of all accounting mistakes, and it’s more prominent in traditional accounting since it’s accomplished by manually creating columns, entering and computing figures, and compiling reports. Thus, conventional accounting errors can take more time to detect and correct than virtual accounting.
However, with accounting software solutions, you can use formulas in combination with cloud computing to do your calculations, which often yield higher accuracy.
- Access to records
Traditional accounting systems will require your staff to log onto a specific device to review documents and examine financial data. This model may have inefficiencies, as storing, managing, locating, and transporting physical documents is costly and time-consuming.
On the contrary, virtual accounting allows your staff to access information anytime with any internet-abled device, either on-site or remotely. This online arrangement will provide you with financial data that is readily available, less expensive to store, updated in real-time, and backed up securely.
- Data security
In the Philippines, there were about 4.59 million incidents of data breaches reported in 2021. With such an alarming figure, a survey showed that 59% of adult Filipinos see data privacy as relevant in their day-to-day lives. This demand for data security can also be seen in corporations more than ever.
While traditional accounting software provides security to financial data by granting entry to authorized individuals only, it cannot assure safety and accessibility in the event of hardware malfunction, system crashes, or cyberattacks.
Luckily, virtual accounting can help you avoid these problems by allowing you to store financial data on a cloud. Coupled with tight security measures, such as multi-factor authentication, encryption, and data backups, you can combat possible cyber threats.
Key Considerations of Virtual Accounting for Your Startup
More businesses in the Philippines are exploring ways to digitalize different parts of their processes, and accounting is one business function that significantly improves when transitioned to digital. Still, there are some factors you have to consider before considering virtual accounting for your startup.
Modernizing your accounting, bookkeeping, and financial reporting can help improve your business’s overall efficiency. Integrating these processes online and uploading all important materials into a cloud can save your startup time from manually organizing these tasks so you can focus on more productive responsibilities.
- Total expense
Rolling out virtual accounting initiatives for your business in the Philippines means investing in accounting software licenses, cloud storage subscriptions, devices, and even training for in-house employees who have yet to try working remotely. You can also outsource your startup accounting to an expert cloud accounting service provider, which your business needs to budget accordingly.
- Technology to be used
The cloud is the primary technology that enables virtual accounting. Fortunately, cloud accounting service providers can help you integrate this add-on to your accounting systems, develop efficient processes for accounts, generate automated reports and analyses, set and track key performance indicators (KPIs), and more.
Transparency is one of the most valued factors when operating a Philippine company. Entering financial records in an online database can enhance transparency within your organization. Working on a cloud platform can help accountants, business owners, and authorized employees easily track any alteration, addition, or deletion in your firm’s financial data.
- Security and privacy measures
Having your financial data stored online can lead to cybersecurity concerns for your organization. As such, it’s important to pick a cloud technology partner that can offer robust security measures, such as authentication, encryption, and secure back-ups, and that runs under strict protocols to ensure your data is always secured.
- Scope of work
Before switching to virtual accounting, you must ensure your work scope is set. Doing so can help you determine which services your startup needs to focus on, considering that cloud accounting providers can work on multiple finance functions.
- Process and workflows
Startups also need to consider financial processes and workflows when looking to integrate or shift to virtual accounting. This ensures efficient operations, especially if they choose to partner with an online accounting firm.
- Expertise in leveraging the technology
A certain level of accounting knowledge is needed to utilize a cloud accounting solution to its full potential. While you can look up manuals for the technology you will go for, you can also opt to partner with a cloud accounting services provider instead.
Doing so gives you access to accounting experts and online accounting tools, ensuring that your accounting work gets sorted out professionally.
Improve Your Startup Operations with Virtual Accounting
Markets constantly change, creating new norms for businesses to adapt. The flexibility of your business functions is vital to maintaining long-term relevance. Today, the trend for companies across the board is digitalization.
Going digital with your accounting processes can make all the difference in your startup operations. It can help boost your team’s productivity by increasing your financial data’s accessibility, accuracy, cost-effectiveness, and security.
To maximize the opportunities of cloud accounting, it’s best to partner with a professional online accounting services provider such as CloudCfo! CloudCfo is a cloud accounting firm for startups and small businesses in the Philippines that offers customized financial processes and cloud technology to scale your accounting, bookkeeping, and finance function.
Contact us today to learn more about how we can help grow your business!