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A new synthesis between tax and technology is emerging. Moreover, it is establishing an entirely new taxation paradigm. Enterprise organizations and small businesses alike have enthusiastically embraced this new paradigm, which owes its very existence to cloud accounting.
Cloud Accounting Ushers in a New Paradigm in Taxation
The role of technology in tax is changing rapidly. To begin with, the tax industry itself is currently faced by a wide range of issues, new layers of complexity, and regulatory pressure.
What’s more, the new frontier of taxation is the digital realm. The adoption of digital tax accounting practices is a highly disruptive trend. It brings real-time analytics, real-time access, and enhanced visibility to business owners, tax consultants, and accountants.
Moreover, new technologies such as blockchain and artificial intelligence have opened new doors in the taxation ecosystem. AI-based optical character recognition, for example, is transforming the way in which businesses log and store expense information. Blockchain technology delivers interoperability between traditionally siloed tax data structures, dramatically streamlining compliance and reporting.
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However, the most profound way in which technology is changing the tax ecosystem is the rise of cloud accounting.
Cloud Accounting Disrupts Taxation Technology
Cloud accounting allows businesses to eliminate the need for expensive local financial data storage. This move helps to minimize the security risks inherent in the older systems. What’s more, it takes advantage of powerful taxation software and services based on remote servers.
Cloud accounting services include payroll, accounting, invoicing, accessibility, and third-party integration features. Businesses that use cloud accounting services benefit from a cost reduction in hardware maintenance and an improved user interface.
Additionally, a major advantage offered by cloud accounting is the ability to share financial data with team members regardless of their location or time zone. Cloud-accounting-enabled data sharing allows accountant team members to instantly access highly accurate financial data at any time, paired with detailed AI-driven insights.
For these reasons, the use of cloud accounting has dramatically increased over the last decade. In fact, data published by Forbes demonstrates that 80 percent of major enterprise organizations now operate critical financial software on cloud-based platforms. Moreover, these platforms significantly improve overall business efficiency.
Getting cloud-based tax and accounting software set up at your business is relatively simple. However, it’s best to enlist the help of accountancy services to ensure you’re collecting data and reporting it in a compliant manner.
What Can Cloud Accounting Do for Your Business?
Cloud accounting and other tech-driven tax solutions can deliver a wide range of advantages to your business regardless of size. To give just one example, cloud accounting will give you the ability to automate tasks that would be time-consuming otherwise.
By leveraging cloud accounting technology, businesses can automate the invoicing process. This allows them to automatically generate invoices then send them to customers and clients with minimal micromanagement.
Other time-consuming accountancy tasks can be automated by cloud accounting software. The generation, management, and storage of profit and loss accounts, bank statements, and accounts receivable can all be executed via hosted software solutions that provide customizable permission levels for individual team members.
As another example, payroll management and employee benefits can now be automatically calculated. Additionally, third-party application integration into major cloud accounting software suites allows businesses to automate other financial obligations such as expense approval or financial forecasting.
The third-party integration offered by cloud accounting platforms are extremely flexible. For example, many online merchants accept digital currencies such as Bitcoin as a payment method. Traditional taxation software can struggle to track cryptocurrency payments. However, third-party applications can provide full reporting functionality designed specifically for digital assets.
Other modern tax technology can assist with the complex nature of cryptocurrency tax reporting. Major cryptocurrency exchanges work to keep customer data extremely secure and private. However, this can make it difficult to track trades for capital gains or income tax reporting. On the other hand, by providing cryptocurrency-specific tools, cloud-based taxation technology establishes a foundation for cryptocurrency adoption and tax strategy.
New Taxation Technology Delivers Real-Time Insight
Maintaining a real-time view of the current financial status of your business is essential to success. An effective financial strategy necessitates the collection and analysis of accurate, up-to-date data. This is because without real-time insight, businesses cannot make accurate predictions and plans.
On the other hand, cloud-based tax and accounting software gives businesses the ability to generate and analyze real-time reports. In fact, it gives business owners a real-time view of the financial status of their entire business operation. The streamlined user interface of cloud-based tax software provides rapid, actionable insight that covers outstanding invoices, debts, and cash flow data, in simple charts.
This allows of common financial pitfalls and cash flow restrictions.
Cloud-Based Tax Services Keep Your Data Safe
Data breaches are extremely costly for businesses of all sizes. Both large- and small-scale enterprises are often the target of hackers who attempt to steal sensitive financial data. A single breach can incur a heavy cost. In fact, data published by IBM reveals that the average data breach costs businesses almost $4 million, with each individual breached record valued at more than $150.
Cloud-based tax solutions and accounting software keep your business data safe with enterprise-scale security, eliminating the threat of data breaches.
Key Takeaways
Many small businesses—and some large businesses—operate under tight budget constraints. This doesn’t leave much room for a professional full-time accounting staff. Performing localized tax and accounting tasks can quickly incur overhead expenses such as hardware maintenance costs and increased payroll obligations.
However, cloud-based tax technology reduces the total amount of time businesses must direct toward financial strategy and tax reporting. This frees up capital that can be reinvested into the business itself. As modular, customizable services, cloud-based solutions allow businesses to pay only for the services they need.
The future of tax technology allows businesses to streamline accounting tasks, keep financial data secure, and minimize expenses with minimal effort.
