Effects of cloud computing on accounting practices and performance

The Effect of Cloud Computing in Accounting Table of Contents
Introduction 3
The Concept of Cloud Computing 3
Positive Effects of Cloud Computing in Accounting 5
Cost Reduction 5
Greater Agility, Flexibility and Storage 6
Increased Transparency, Productivity and Performance 7
Higher Return on Investment (ROI) 10
Improved Decision Making 11
Network Improvements and Maintenance 12
Negative Effects of Cloud Computing in Accounting 12
Security Concerns 12
Lack of Training, Understanding and Control 15
Incompatibility 16
Network Dependency and Limited Features 16
Conclusion 17
References 19

Introduction
In the modern world, change is inexorable. In recent times, the rise in globalization together with increased advancement in technology has prompted the need for innovation so as to accomplish performance and progress. Technological changes are bound to transform the business setting, and consequently, the accounting sector for the coming decade. In recent years, there have been significant advancements in information technology. The ground-breaking cloud computing spectacle has substantiated its worth not just within the IT sector but has also permeated to other sectors. Presently, within the accounting realm, cloud accounting is budding and expected to transform the accounting function. Cloud computing is one of the forms of innovations that have advanced in recent years. In essence, cloud computing takes into account providing computer hardware and also software applications as services rendered via the internet. It permits end users to carry out data storage and utilize applications via dissimilar devices situated in numerous locations (Dimitriu and Matei, 2015). The advancement in cloud computing is revolutionizing accounting. The purpose of this research study is to extensively examine the effect of cloud computing in the field of accounting. The Concept of Cloud Computing The present day’s model of accounting implies ease in accessibility, customization, collaboration and at the end of the day, the use of the Internet through cloud computing. The fundamental principles that impel cloud computing, joined with the activities undertaken by accounting software companies, have given rise to the development of cloud accounting. Cloud accounting is also referred to as online accounting. It encompasses the similar functionalities as an accounting software fitted on the client’s computer, but which in reality runs on the cloud service providers’ servers. Essentially, it provides accounting services by means of cloud computing solutions (Dimitriu and Matei, 2015).
Cloud computing can be defined as a model for facilitating ever-present, convenient, on-demand network accessibility to a common group of computer resources that can be configured, which can be swiftly provisioned and unveiled with insignificant management effort or service provider interrelation. In a simpler and more extensive manner, the cloud can be explicated as a very powerful way of business process optimization of also cost minimization. Cloud computing or simply referred to as the cloud refers to the delivery of on-request registering assets over the web on a compensation for-utilize premise. Cloud computing is dependent on sharing processing assets contrasted with having individual implements or close by servers in order to deal with applications. As a platform, cloud computing facilitates the supplying, arranging and reconfiguring of servers. The servers are virtual machines (Soyata, 2015).
The cloud computing platform comprises of three different platform services. First, there is Infrastructure as a service (IaaS). Consumers utilize processing, storage, networking in addition to other computing resources from providers of cloud service in order to conduct their information systems. This is a platform service in which a corporation sells and also shares pertinent information to another individual or corporation in order to conduct their business. A fitting example of IaaS includes payment processing. A second different platform is Software as a service (SaaS). Consumers utilize software that is hosted by the seller on the seller’s cloud infrastructure and rendered as a service over a network. Suitable examples of SaaS comprise of Google Apps, which facilitate the provision of mutual business applications online. Another example includes Salesforce which conducts the leasing of consumer relationship management and associated software services through the internet. Finally, there is Platform as a Service (PaaS). In this service, the consumers make use of infrastructure together with programming components that are backed by the cloud service provider to enable the development of their own applications. A suit able example is Java runtime (Laudon and Laudon, 2016).
The advent of cloud computing has unprecedentedly revolutionized the world of internet. It is presently conceivable to access data and applications remotely. Cloud computing technology offers a shared platform through which users can access, retrieve, and share data over the internet from any part of the globe. For business organizations, cloud computing can result in significant reductions in information technology (IT) expenditure. One of the applications businesses can access through the cloud is cloud accounting, a platform that enables an organization to integrate accounting software and applications online. Cloud computing has increasingly gained popularity in recent years. It is now a trend, with even traditionally conservative businesses joining in as well. Cloud accounting is also referred to as online accounting. It encompasses the similar functionalities as an accounting software fitted on the client’s computer, but which in reality runs on the CSP’s servers. Essentially, it provides accounting services by means of cloud computing solutions (Dimitriu and Matei, 2015).
The realm of accounting software is swiftly shifting towards cloud computing. In the contemporary setting, a significant number of accounting software merchants have already relocated their products to the cloud and provide wide-ranging options of cloud computing solutions. Major accounting corporations such as Deloitte & Touche, SAP, Ernst & Young, KPMG and Pricewaterhouse-Coopers have demonstrated their offers for cloud solutions in addition to making publications that explicate the functionalities and advantages attained through the various kinds of services (Dimitriu and Matei, 2015). Positive Effects of Cloud Computing in Accounting Accounting software has been taken into an entirely new aspect and point of view through cloud accounting. In general, carrying out accounting activities in the cloud gives the implication that all individuals within the company have accessibility to the similar financial data, at the same time, from various locations, with a particular set of applications that are rendered via an internet connection. Cloud computing has substantial positive effects on accounting in different ways.

Cost Reduction Customarily, the costs that are incurred by a business when using accounting software include the initial investment of the software in addition to the subsequent expenses for regular maintenance. Cloud computing facilitates the reduction of costs largely for the reason that there is no longer the need for initial capital outlays for internal IT equipment or licenses for software. In addition, an accounting firm employing cloud computing no longer necessitates costly IT personnel or members of staff to carry out the installation or upgrading of applications or maintaining servers (Bond, 2015). In this regard, it is possible for the accounting firm to rent out software applications and also storage space and thereafter give reimbursement for the services on a monthly basis. Through this approach, the firm is able to achieve optimal costs by transforming the fixed expenses into variable expenses. This sort of benefit is especially valuable for small accounting companies that more often than not conduct their business operations on limited budgets and are unable to afford the procurement and installation of accounting software and hardware systems that might not suitably respond to the needs of the company (Brandas et al., 2015).
Having an integrated cloud accounting system can significantly decrease IT associated costs, comprising of infrastructure necessities, administration staff, and also support. Furthermore, through the use of this one particular system diminishes training requirements for end-users, owing to the reason that they only need to learn and understand one system instead of interrelating with several individual applications. Furthermore, the firm is able to achieve cost-savings through the elimination of upgrading fees. The use of cloud computing within the accounting firms implies that upgrade expenses are not incurred owing to the reason that the service is incessant and unending and the client makes use of the latest software version and gaining accessibility to the most current features (Brandas et al., 2015). Greater Agility, Flexibility and Storage Cloud computing in accounting brings about improved business performance as a result of augmented corporate agility and flexibility. Basically, with the firm capitalizing on high-speed internet connectivity in addition to the employment of cutting-edge technology, it becomes conceivable to carry out fast-paced data transfers and also achieve real-time connection. As a result, this makes it possible for the firm to easily and swiftly respond to the incessant changes within the business setting. Cloud accounting also augments the level of agility in the manner that firms have the ability to attain accessibility to data and information in a hasty way and at the same time also allow parties to be flexible and make adjustments that are in line with their needs (Brandas et al., 2015).
Files bearing financial and accounting data usually demand a lot of space. Furthermore, as the businesses continue to grow and expand their business operations, such files necessitate even greater storage space. In the conventional data centers, accounting companies are usually forced to upgrade their software and hardware on a regular basis in order to accommodate mounting demands, which at the end of the day becomes a costly solution. In contrast, by utilizing cloud computing, accounting companies have the ability to expand their storage space in order to cater to such demand at a cost that is substantially cheaper (Laudon and Laudon, 2016). Moreover, this is an undertaking that does not necessitate the procurement of costly computer equipment and hardware or the employment of IT experts to carry out frequent maintenance. Cloud accounting benefits accounting companies as it automatically and routinely backs up the accounting and financial data, which is always stored locally and therefore implying that such data and information are safe (Laudon and Laudon, 2016). Ultimately, this implies that accounting firms do not have to incur outlays for investing in additional servers to store increasing data and information. What is more, cloud accounting brings the advantage of creating a constantly massive database. This is in the sense that the firms do not need to create a data center and experience limitations in data contained and the storage costs incurred beforehand (Laudon and Laudon, 2016). Increased Transparency, Productivity, and Performance Cloud computing facilitates system availability at all times. Cloud computing brings about system redundancy as the service providers customarily provide 99.9 percent system accessibility and uptime. Taking into consideration that the cloud service providers partake in the sustenance of the operating system together with provide software support, corporations usually experience very minimal downtime for system patches and also software version upgrades (Kumar and Vidhyalakshmi, 2018). What is more, in using cloud computing, the service providers provide assurance of system availability as part of their contract. Secondly, there is the advantage of utilizing processors. This is in the sense that owing to the reason that cloud-based providers have the ability to scale processors on demand, an accounting firm does not face the need for deploying a significant number of processors in order to meet the entity’s potential demand. Rather, a firm can approximate initial demand and subsequently scale up or scale down accordingly and with dynamism to instigate a more efficacious utilization of processors (Kumar and Vidhyalakshmi, 2018).
In addition, it is imperative to note that cloud computing permits complete accessibility to each significant process in the business by making data from each unit or department easily accessible to the user and the senior management. What is more, bearing in mind that the incorporation of data is done in real-time, it becomes significantly faster for the organization to conduct its various accounting activities. As a result, there is the advantage of enhanced reporting and planning (Kumar and Vidhyalakshmi, 2018). Carrying out a cloud computing system implies that the organization has a sole, integrated system of reporting for each process. Through this single source of information, an organization’s cloud computing system can freely create beneficial reports and analytics at any given point in time. In addition to diminished IT and training expenses, a cloud computing system can also diminish the time and effort necessitated by the labor force to implement their everyday activities. Therefore, the system enhances efficiency within the entity. Furthermore, the clients of the cloud computing services obtain benefits from the implementation of such a system for the reason that it is both centralized and streamlined (Kumar and Vidhyalakshmi, 2018).
Cloud computing facilitates diminished system management accountability. Cloud computing shifts a great deal of infrastructure together with other system management responsibilities towards the cloud service vendors. Devoted teams at the vendor’s end are capable of carrying out all of these activities. As a result, the firms who are the end-users can enjoy a sense of respite and can focus solely on their accounting interest devoid of being concerned about the management of the computing issues (Bhowmik, 2017). Furthermore, the cloud is accessible all the time and for that reason does not restrict members of staff within an organization to solely the regular working hours. The computerized reserve of the financial data is implemented as a programmed undertaking on an everyday, weekly or monthly basis, based on the needs and requirements of the accounting firm. The cloud provider is at all times expending a stable setting for the reason that in the end, protecting accounting data and information is essential for each and every firm. Scalability or the distribution of company resources are made available through the use of cloud-based software (Stergiou et al., 2018).
By assimilating corporate data and harmonizing between functional units in real-time, enterprise resource planning systems permit performance analysis in the current period of time, which is the present moment (Soyata, 2015). In addition, traditional systems permit the examination of performance metrics, but at all times the preceding data is taken into consideration. Therefore any analysis would give rise to lagging with what is taking place in the prevailing moment. Within a setting that is dynamic, this is a significant difference. For instance, in the accounting sector, cloud computing enables accounting companies with business intelligent oriented solutions for gathering performance pertinent information for the business procedures, personnel activities in addition to technical system-level measurements (Soyata, 2015). Higher Return on Investment (ROI) A distinguishing feature of making an investment in the implementation of cloud and mobile technologies in the accounting information systems is the high rate of ROI. A constructive financial impact of adopting cloud services is the one on the business’s cash flows by decreasing payments for purchases of hardware and software. Cloud services are pay-per-usage and they are used by recompensing rent monthly or yearly (Hill and Wright, 2013).
The adoption of cloud computing facilitates the integration and restructuring of the organizations’ processes by integrating business processes. This gives rise to improved process efficiency through the reduction of mistakes, quicker processing of data, uniformity, and dependability in data and increase in throughput (Bhowmik, 2017). In addition, this results in an enhanced collaboration between departments brought about by collective data and integrated processes, enabling the organization to achieve economies of scale. The inference of this is that the organization can subsequently form cost leadership, having attained economies of scale.
Cloud computing also facilitates the customization of, products and services; billing and individualized project services to different customer requirements. In addition, utilizing cloud computing dissimilar levels of services are provided in the agreement with different sizes of customer companies (Bhowmik, 2017). What is more, taking into account that cloud computing renders up-to-date information, accounting companies can partake in the creation of financial statements in a swift and more accurate and effective manner. Quality not only provides a cherished advantage to the firms over other rivals in the market but also makes it conceivable for the companies to charge greater prices for accounting services as a result of the differentiation factor. This approach ultimately brings about sustainable competitive advantage (Bond, 2015). Improved Decision Making Managerial motivations for carrying out cloud computing are to augment resource management, improve decision-making and enhance performance control within the organization. Cloud computing facilitates the delivery of informed and the latest organization-wide data and information, and henceforth, organizations are able to attain improvement in decision support across the organization as a whole, improve strategic decision making, and consequently, attain the overall improvement in decision-making (Sehgal, Bhatt, and Acken, 2019). What is more, firms also seek to improve decision making by augmenting cooperative decision making. Therefore, through cloud computing, the firms are able to leverage the general operational efficiency and efficacy in management given rise to by the integration of operations and the increase in efficiency to achieve better performance control. Cloud accounting renders managerial benefits for the reason that they comprise of integrated database and built-in data analysis competences. Consequently, these benefits aid the firm un attaining better resource management, augmented decision making and planning, and performance improvement in various departments of the organization (Sehgal, Bhatt, and Acken, 2019).
The interactions of accounting managers with cloud-based systems enable them to gain access to decision-making information in new ways. There is the flexibility offered by the cloud and this makes it possible for managers to facilitate decision making even when they are not in the board room or within the premises. Cloud accounting facilitates quick decision making within the organization and therefore improving the operations of the business (Strauss, Kristandl, and Quinn, 2015). Network Improvements and Maintenance Traditionally, firms have to conduct regular updates on their networks. This process is usually tiresome, costly, unsettling and also challenging in espousing change to the new technology and making modifications as necessitated. However, through the cloud, it becomes conceivable to eliminate the necessity of ever going through a network improvement based on the reason that everything is hosted within the cloud (Laudon and Laudon, 2016). Cloud service providers enable users to have accessibility to automatic updates. Reliant on a firm’s cloud computing service provider, the cloud accounting system will regularly be updated with the latest technology. This could take account of the latest versions of software, in addition to upgrades to servers and computer processing muscle. The complete cloud design is sustained and managed by the experts at the end of the service provider. The cloud hosting provider for a firm partakes in the enhancements on the backend and also provides the relevant licensing and as a result, the business does not require making any investments in the software. Subsequently, this makes it possible for businesses to place focus on their opportunities rather than getting engrossed into intricate management activities (Laudon and Laudon, 2016).

Negative Effects of Cloud Computing in Accounting Similar to all other kinds of solutions, there are some shortcomings and challenges that come along with cloud accounting, as experienced by various end-users based on their point of view.

Security Concerns Taking into consideration prospective flaws that could take place with cloud accounting, the most prevalent shortcoming is associated with security and safeguarding the financial and accounting data of the client from any unauthorized accessibility, theft of data and information or hacking of the accounting system. The prevalence of hacking and security breaches together with the loss of the internet connection is a major adverse effect on the accounting business. It implies that when internet accessibility is lost, it creates a standstill. In addition, breach of security can result in the loss of important data and information (Dimitriu and Matei, 2015).
Moreover, seeing that the prevailing business setting is highly competitive and challenging, every firm is very vigilant when it comes to sharing their financial data. In spite of the fact that a high level of security has already been established, accounting companies are still wary of their financial information. This is the main stumbling block when considering the migration to the cloud. Numerous forms are worried about the privacy of their sensitive and pivotal data and information that might appear to be susceptible when entrusted to a third party (Dimitriu and Matei, 2015). Undoubtedly, there is also the risk that firms face that the cloud service provider would gain accessibility or constantly monitor their financial data and information. There is also the concern of firms losing control over data, which makes them become constantly reliant on the cloud provider, more so if the availability and quality of the service are not totally assured by the contract (Sehgal, Bhatt, and Acken, 2019).
Bearing in mind that the ownership, management, and monitoring of the cloud infrastructure are completely done by the service provider, there is a negligible transference of control over to the client. To differing magnitudes, reliant on the particular services, the end-users of the cloud might experience that they have lesser control levels over the function and implementation of services within an infrastructure that is hosted on the cloud. A major concern is that the end-user license agreement that is rendered by the cloud service provider together with management guidelines might enforce restrictions on what consumers can undertake with their utilizations. The consumers are able to maintain control of their data, applications, as well as services. However, they might not have a similar level of control over their infrastructure that is on the back end (Sehgal, Bhatt, and Acken, 2019).
In addition, there is the security issue of cloud computing being susceptible to attack. Imperatively, within the context of cloud computing, every constituent is online and the consequence of this is that it exposes prospective susceptibilities. Even the most effective teams experience severe attacks and security breaches at one point or another. Bearing in mind that cloud computing is constructed as a kind of public service, it is very simple for users to run before they learn how to walk. In any case, cloud vendors do not consider checking the administrative competencies of the user purchasing the service prior to handing them an account (Bhowmik, 2017).
In regard to the provider, there is no need to have a huge capacity which cannot be used and remains indolent. Cloud Computing acknowledgment is faced with different issues. These issues encompass the areas of foundation, security, trust, lawful and reliability and hierarchical problems. Linked to all these is the challenge of trust among consumers and vendors taking into consideration that Cloud Computing calls for activities to have confidence in merchants with the organization of their IT assets including information and accessibility. Most sources of data or information are unguarded against abuse or use by unapproved parties, which regularly calls for control measures to the extent that authorization of utilization by the applicable experts. The hindering circumstance is that these measures are typically not defensive enough and do not offer very substantive security to the information and data on the cloud. In the venture, the selection of Cloud Computing owes much on the development of hierarchical and social, including administrative, forms in the association (Kumar and Vidhyalakshmi, 2017). Lack of Training, Understanding, and Control A fundamental challenge faced in the espousal and implementation of cloud accounting is the lack of comprehensive training, understanding, as well as control. In particular, the education of cloud computing within developing markets continues to be considerably weak. In addition, the regulations that are meant to facilitate effective use are either non-existent or are outmoded (Dimitriu and Matei, 2015). According to Shareia (2016), there is a lack of proficient instructors for cloud accounting within organizations. The existent accounting information systems being implemented within firms are immaterial and intermittent. This is linked to the lack of proper and competent training in the accounting and auditing fields. What is more, in spite of the advancement in technology, the developing markets are yet to significantly take into account the benefit of cloud accounting. The inference of this is that accounting data and information created by such software systems are barely deemed pertinent. This also further diminishes the increased use and advancement of understanding cloud computing and its applicability in the field of accounting.
A recent development in IT infrastructure has given rise to the increased accessibility and availability of high connectivity speeds in the developing nations. Nonetheless, this does not necessarily give a guarantee of accessibility of data at the same speed over the cloud. More often than not, this is impacted by the poor planning of cloud infrastructure and in addition to poorly designed and technologically advanced systems or applications (Dimitriu and Matei, 2015). For instance, major companies such as Microsoft have been renowned providers of cloud computing platforms in different nations, which has nevertheless, been adversely impacted by the poor awareness and familiarity of cloud computing amongst the intended audience in the developing nations. What is more, there is a small number of experts that have extensive cognizance of cloud accounting and most of them do not have strong discernments of cloud computing and for that reason evade the subject matter. There is a potential for cloud computing adoption among users but this has been alleviated by their poor comprehension of what cloud computing is all about (Shareia, 2016). Incompatibility A successful implementation facilitates the firms in cutting costs and streamlining workflows. On the other hand, a poorly planned cloud computing system can have a huge negative impact on the organizations in terms of delays and lost productivity. There are a number of blunders that firms can make, which can result in losses and one of them is poor planning. When a firm fails to make the allocation of sufficient time in the evaluation of cloud computing software that is most ideal for meeting the business needs and requirements, then it can result in serious challenges (Laudon and Laudon, 2016). Organizations need to conduct an internal audit of all policies and processes before selecting a cloud accounting system. An additional issue takes into account the improper scrutinizing of cloud computing vendors. Cloud computing vendors must be assessed in terms of their success stories in addition to the needs of the organizations and budgetary constraints. Furthermore, there is the issue of not attaining an extensive understanding of key features available in the cloud computing package. When companies fail to fully comprehend the great features accessible in cloud computing software, they fail to accomplish the proper automation of their business processes (Laudon and Laudon, 2016).