What Every CFO Needs to Know About Cloud Based Financial Systems

Many people in the U.S. now conduct personal banking online, but that doesn’t mean that your company CFO is ready to do the same with your business financials. One concern for the CFO will be the perceived risks inherent in adopting cloud based financial systems. However, there’s also a lot of cloud based accounting information which deserves equal consideration.

What about Cloud Based Financial Systems and Loss of Data Security?

The question of data security remains number one for those considering a move to the cloud. Cloud based financial systems must store and protect private, sensitive credit history and payroll information, so concerns about unauthorized access to data or data system outages, which might result in lost data, are very real.

These concerns are legitimate, but they needn’t prevent a company from moving to cloud based financial systems. To begin with, on-premise systems are also at risk of a catastrophic event such as outage or natural disaster – it is not a risk unique to the cloud. Both require well developed disaster recovery plans. In the same way, the risk of unauthorized access exists on both planes.

Are Cloud Based Financial Systems Difficult to Integrate with Existing IT Infrastructure?

A significant hindrance to adoption of cloud based financial systems has been the difficulty of integrating with the existing IT infrastructure. Once behind the firewall, it used to be on the shoulders of the customer to enable disparate systems to communicate, but that responsibility no longer rests solely with the client. Providers can utilize APIs (application programming interfaces) and web services to aid in the smooth interface of cloud services with legacy systems.

As cloud based financial software continues to grow in use, there has been a move among industry users to establish minimum standards pertaining to interoperability. Major players like Dell and IBM have invested in cloud integration; and while the risk is one to consider, things are moving in a good direction.

Do Cloud Based Financial Systems Equal Loss of Data Ownership?

Another concern with cloud based financial systems has to do with data ownership. Since the CFO is probably not the company’s risk-taker, he/she may feel uneasy about losing ownership of financial data. There are a few ways that the company can mitigate that concern. If the provider uses a multi-tenancy architecture, there are concerns about co-mingled information, unauthorized access to information, and maintaining governance-risk-compliance. Data confidentiality can be protected with individualized encryption keys. Other security standards such as SAS 70 Part II and ISO compliance exist to protect data control, so check to be certain the provider meets at least one of these standards.

Cloud Based Financial Systems and Pricing Flexibility

Cloud providers offer Infrastructure as a Service (IaaS), Platform as a Service (PaaS) or Software as a Service (SaaS). The advantage of cloud financials is the low cost and increased flexibility they provide. Avoiding the large expense of purchasing hardware, software and licensing is just the beginning of the price benefits. Cloud based financial systems may be leveraged with a pay-as-you-go pricing plan that requires minimal costs at the outset, if any at all.

Even more flexible is the usage based pay schedule in which the company only pays for the amount of product they actually use. Scalability in pricing based on consumption is a distinct benefit. In addition, some providers offer discounts through the American Institute of CPAs for CPA users while others offer free trial periods.

Collaborations are Easier with Cloud Based Financial Systems

Those with experience using traditional on-premise systems can attest to the often slow and tedious processes when trying to share information. Today there are more demands for information visibility and sharing across the company than at any other time. Cloud based financial systems don’t require that information be entered in several instances and then later consolidated, but provide full and seamless integration of financial data. Cumbersome financial regulations which demand an audit trail and increased traceability are fast and simple with on-demand information access. Whether following expenses, revenue or profitability the visibility cloud based financial systems provide collaborations fast and easy.

Cloud Based Financial Systems can Increase Revenue Through Higher Efficiencies

Automating financial management processes can lead to increased efficiency, speedier closes and simplified compliance. The icing on the cake is the ability to reallocate IT dollars required to maintain existing systems toward better business processes that add value and drive revenue. The CFO will want to balance the risks against the benefits of adopting a cloud based financial system.