Takashi Yamaguchi, English Speaking Japanese Tax Accountant

Why not the Cloud Accounting?

I am a user of cloud accounting application.
It is convenient and easy to operate.
Therefore I strongly recommend it to customers.
Today, let me tell you how the cloud accounting is different from conventional accounting software and  how convenient it is, how easy it is.

What is the Could Accounting? 

First of all, what is “cloud accounting”?
Conventional accounting software, usually stored in media such as CDs and DVDs, has to be installed on your PC.
As for some software, you may be able to download programs from the Internet without media and install them on PC.
Either way, as the conventional software works as a program installed on the PC, “work place” where the program is run and the data is saved is the user’s PC.
The user must also upgrade the program by him/herself as new version is released.

On the other hand, the Cloud Accounting works on service vendor’s servers not on user’s PC.
No program is installed on the user’s PC.
Users upload data necessary for work to the vendor’s server via internet.
It is the vendor who will upgrade the program.

For example, when watching a movie using a PC, playing DVD on your PC is “conventional type” and streaming movie from vendor’s server is “cloud type”.
Even if you can watch the same movie, the location of data storage and running are different between the these two types.

Technical and administrative advantages

One of the technical merits of using the Cloud Accounting is that your data is surely protected from failure and defect of PC and hardware on your premises.
Indeed, there is a risk that the vendor’s server is damaged and all of your data is destroyed.
However, as for service vendors who had taken fail safe measures such as BCP and backup server sites, such risk would be remote.
So I would say you don not have to worry about it.

The administrative advantage is that the latest program is always available.
In the case of conventional accounting software handling preparation of tax returns, upgrade of the software is necessary to catch up with tax reform (it is almost every year event in Japan). It means, unless the user upgrades the software by him/her self, the tax calculation is done by obsolete method and reported amount can be wrong.

In the case of the Cloud Accounting, the vendor updates the program in accordance with annual tax reform. So users can always report taxable income and tax due amount in accordance with the latest tax law.
Besides,you can enjoy another benefit of the Cloud Accounting  when you replace a PC.
You can use it immediately without data transfer from old PC to new one since all the necessary data are stored on the vendor’s server and the user can access and work on them from any PC.
Even if your PC suddenly fails you can resume your work as soon as you switch the PC to another one.

Any disadvantage?

First of all, it is not free of charge.
Some vendors offer free trial plan. However it is subject to duration and/or data volume cap you can enter and process during the certain period of time. Thus, as a realty, an active user would have to subscribe the full fledged service annual or monthly basis.
Besides, as it is not purchase of software, you will not be able to obtain any right on the software no matter how long and how much you pay.
However, considering upgrade cost, lifetime cost of conventional software may not be so advantageous compared with the Cloud Accounting service.

Next, the performance of the Cloud Accounting is totally depending on the Internet environment.
Thus broadband is essential.
It seems that some vendors’ service performance is deteriorated when access is concentrated on their server.
So you may be frustrated with the Cloud Accounting in terms of process speed if your vendor’s server capacity is not enough.
I am a user of “freee” and “MF cloud” and have never experienced process delay with both vendors.
This may be something to do with my internet environment through optic wire (about 90 Mbps download  / about 95 Mbps upload) and specification of the hardware (Windows 10 + Intel Core i 5 + 8 GB memory).

More powerful with internet banking services

One of the selling points of the Cloud Accounting is capture of transaction data through Internet banking.
You can upload transaction data of your bank account automatically or manually to the server on the cloud.
If you select automatic mode, the application periodically captures the transaction and let you know how many transactions have been captured and awaiting your process.
This notification can be displayed simultaneously on your mobile device if the application is installed on it.
So you will not be bothered with starting up the application to check the notification.
By linking with Internet banking, at the very least, you can omit the manual work of entering the transaction date, decrease and increase of your bank account balance. Text data in journal description is also automatically captured.
Based on these captured information, you can judge nature of the transactions and designate booking account then the system process bookkeeping.
You will be released from routine work such as visiting bank to fill out your bankbook, entering the bank journal to your spreadsheet or conventional accounting system referring the bankbook, checking the entered data and the bankbook each other to make sure you did not make any mistake.

Further more efficient with credit card internet service

Similar data capture is possible using web based usage statement provided by major credit card companies such as VISA, MASTER, JCB.
If you stop spending cash then switch to changing to your credit card, all of your expense can be captured with the Cloud Accounting.
You may have to get rid of your non-business usage of credit card from the captured statement.
However, you can avoid such burden if you set the rule that you should not use credit cards registered in the Cloud Accounting for private expenditure.

The more use, the less manual work

In the introduction phase of the Cloud Accounting, you would have to add certain information such as booking account, consumption tax implication (e.g., taxable, non-taxable) to the captured data by manual work.
However, Artificial Intelligence built in the Cloud Accounting observes your manual process and gradually learns it.
When similar transactions are captured later, AI becomes to guess and suggest probable outcome like “This is the booking account isn’t it?” based on past learning log.
If it is right, it will be registered as a journal entry just by clicking on the register button by you.
If it is wrong, you register correct journal entry overriding suggestion by AI.
AI accumulates the transaction patterns by observing such maneuvers.
It will soon recognize plain transactions such as with fixed amount and the same payment frequency.

If you use a scanner, you can upload the vouchers such as receipts and receipts into the Cloud Accounting.
If you make the Could Accounting “read” the vouchers , AI detects the transaction date, expense item, expense amount, etc. as same as it captures transaction through internet banking.
Accuracy of the recognition is driven by format of the voucher. Sometimes it is quite precise. Sometime it is totally unacceptable (even expense amount can not be recognized).
I hope the accuracy will be gradually improved with more learning opportunities and longer period as well.

Besides, you can control AI’s guesswork by setting sensitivity on criteria for it such as priority of items in the captured information AI should refer, whether or not AI should suggest journal entry if the captured items are not identical to any of the past transaction patterns.
In my experience, 2 to 3 months learning phase made distinct improvement that made me impressed “Oh, AI do it!”.

Easy cross reference of voucher and journal entry 

The captured voucher can be attached as a image file to each journal entry data.
As you can easily check whether or not voucher file is attached to specific journal entry on the list, it helps you manage the receipt.
This function is also greatly helpful in tax audit.
If you can keep journal entry list with scanned vouchers on the Cloud Accounting, you do not necessary have to file them in order.
It will suffice to just put original copy of the voucher into pouch or paper bag so that you can present them to tax auditors.
Please note that you should keep the originals for just in case of tax audit.
It is perfect audit trail if you write the journal ID number (the Cloud Accounting assigned) on the original copy then file in that order.

More efficiency with smartphone

Some vendor provide application on mobile devices to operate the Cloud Accounting.
“freee” is compatible with smartphone.

While commuting on train, relaxing on couch at your home, in your bed but cannot sleep, you would be able to make the better use of spare time with smartphone checking and approving journal entries AI guessed.

If you snapshot receipt with a smartphone, you can capture the voucher without a scanner.

You should shoot receipt on the spot soon after you get receipt from shop.
Once the Could Accounting captured the receipt, you can forget about it.
It remembers and prompts you necessary action until you do.
I make it a rule to take a photo shot as soon as I get a receipt.
For instance, I capture Starbucks receipt immediately after meeting on the spot then complete the journal entry on the train back to the office.


How did you find it?
Today, I have talked about benefit of using the Cloud Accounting from efficiency of bookkeeping perspective.
Next time, I would like to talk about value added derived from such efficiency.

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