Many contractors are turning to cloud-based accounting programs because of the numerous benefits of being able to access data wherever and whenever it’s needed. Cloud-based refers to applications (software) that reside on the provider’s servers that are connected to the internet. These apps give multiple people the ability to access the same data and files from various devices.
Cloud-based solutions were cost prohibitive to smaller contractors. These contractors typically used QuickBooks, Excel and other computer-based programs to manage the financial side of their business. Depending on the size of the business and its level of activity, these programs may have been enough.
Even so, with the challenges presented by the global economy, tariffs, trade restrictions, shortages, as well as increasing labor and material costs, contractors need real-time data to make decisions. Cloud-based accounting is becoming a must-have instead of a nice-to-have option.
Generally, cloud-based technology is more reliable and secure than server-based programs. Technology companies invest millions of dollars to ensure their software is up, running and locked down (encrypted). Because the latest version of the app is always running, data security is enhanced. In addition, contractors do not have to invest in costly software updates, servers and personnel to support their IT infrastructure.
However, since these programs are accessed via the internet, they can be vulnerable. Therefore, it is critical that the vendor has the necessary firewalls and other security features in place to protect the company’s data. Contractors need to review data security protocols before investing in cloud-based technology and ensure that the provider keeps up-to-date on encryption, firewall and other technology to protect their system from a data breach.
Online access is a major benefit of cloud-based construction accounting programs. Contractors can access their financial data in the field on any device. Mobile apps make it possible for contractors to look up actual building and material costs on their cell phones, making it possible to provide more accurate job estimates.
Generally, the benefits of cloud-based accounting systems include the following.
- Real-time data entry and access to financials;
- Improved communication with various people in the field and office;
- Better collaboration and sharing of internal data;
- Seamless integration and exchange of data with other programs;
- Access to up-to-date information on the financial performance of a job, project, contract, team and the company;
- Ease of sharing data with sureties, bankers, insurance agents, accountants and other interested parties;
- Enhanced security and fraud/data protection;
- Environmentally friendly (paperless office);
- Reduced IT infrastructure, software and operational costs (updates and enhancements are typically included in subscription and/or maintenance fees); and
- Improved productivity.
Key disadvantages of cloud-based accounting and other programs include the following.
- Data cannot be assessed if the internet and/or the provider’s servers are down;
- Users can only access data if they have an internet connection;
- Security could be an issue if the provider is not transparent about data breaches and other issues;
- Integrated systems can be impacted if the program is down or compromised; and
- Costs are generally based on the number of users, storage requirements and other usage related variables that may not be in the contractor’s control.
As with any decision, contractors need to weigh the costs versus the benefits of investing in a cloud-based accounting program. A lot depends on factors including the future growth of the company, number of jobs in progress, number of open projects and bids, and who needs to access financial data. The bottom line is contractors must base the decision on their current and future needs.
Finally, in the event of a natural disaster, contractors can be up and running in a fraction of the time, as long as the provider is located in an area outside of the destruction zone. If the contractor’s location is devastated by a hurricane, fire or another “act of God,” it can still assess its financial data with a mobile device and internet connection. Additionally, there is less chance that data will be lost.
Cloud-based accounting programs are becoming essential for construction contractors. Immediate access to real-time financial data is becoming necessary to remain competitive. Contractors need to know what their actual costs and margins are before bidding on a project, making an investment, taking any course of action or purchasing land, materials and equipment.
