Cloud Computing: Learn why SMEs should prioritize this technology

Cloud Computing

Companies are constantly looking for new ways to increase productivity, security and profitability of their operations. In the case of large companies this is a natural way, because there is almost always money and even departments of innovation. In the case of small and medium-sized enterprises, despite having the same importance, this is a more delicate route due to the reduced budget and the smaller margin of error. Cloud computing technology meets this bottleneck and brings many possibilities.

A study by Gartner shows that by 2020, companies that do not use cloud computing will be as rare as those who do not use the Internet today. That’s because most of the technological innovations are cloud-centric. According to the article ‘The ROI of Cloud ERP for SMBs’, the cloud business software market (ERP) accounts for only 2 to 7 percent of the total market. However, the forecast is that this percentage doubles every 5 years.According to Paessler AG’s “The State of Cloud Acceptance by SMBs”, which heard 2,000 IT decision makers in the US, UK and Germany, 63.5% of companies with fewer than 500 employees rely on cloud computing and are planning to expand the IT services they run in the cloud over the next few years.

Gartner analysts also predict that by 2020, more computing power will have been sold by laaS (Infrastructure as a Service) and PaaS (Platform as a Service) in the cloud than technologies sold and deployed in enterprise data centers. This is a representative transformation, since the IaaS market has grown by 40% per year since 2011 and is expected to continue to grow by more than 25% per year by 2019.

That said, we know that Cloud Computing will still bring about major changes in the near future. But why should an SME prioritize migration to the cloud?

Affordable cost

The main reason for SMEs to adopt cloud computing is obviously the costs. Hiring a service in the cloud is much cheaper than building and maintaining a data center, since the structure would involve spending on electricity (about 33% of the consumption of each establishment), skilled labor that is not leased to other areas in addition to system maintenance, in addition to network costs. Meanwhile, by adopting cloud computing, the whole of this equation is solved in a monthly fee.

Office 365 – The solution for integrated cloud services!

The main reason for SMEs to adopt cloud computing is obviously the costs. Hiring a service in the cloud is much cheaper than building and maintaining a data center, since the structure would involve spending on electricity (about 33% of the consumption of each establishment), skilled labor that is not leased to other areas in addition to system maintenance, in addition to network costs. Meanwhile, by adopting cloud computing, the whole of this equation is solved in a monthly fee.

ROI (Return of Investment)

In addition to the much lower cost, another benefit of cloud computing that can be calculated in figures is the return on investment, ie it is possible to tangibilize in how long the amount spent by the company will be offset. Nucleus Research reported a ROI calculation from the adoption of enterprise cloud software and ranged from 73% to 589% with a payback time ranging from 2 to 23 months, with average annual benefits of $ 72,790.00 a $ 715,603.00.

Mobility

Cloud computing enables remote work, among other things, enabling managers and employees to access any type of company data anytime, anywhere. This technology was one of the main responsible for the increase of the Home Office modality.

That is, cloud computing allows a much faster and faster service delivery than traditional computing would be capable of.

Scalability

Scalability in cloud computing allows the expansion of technological resources according to the needs of the company, being able to follow the growth of the company over time or even a temporary need to increase the computational resources to perform a certain work in a short period of time. time. Providing the necessary resources very quickly, not requiring large investments in software, equipment and teams.

  • Benefits of scalability:
  • Reduction of costs;
  • Elasticity: Possibility to increase or reduce computational resources, according to the company’s need;
  • Effective use of available IT resources.

Productivity

Because of the high collaboration that cloud computing provides organizations, the productivity of your company will only grow with the adoption of the same. For example, a file can be viewed and edited by several people from the same organization at the same time, without the need to save a file, send an email, wait for another colleague to get back to work.

Equally important factor are the backups. While traditional ones take hours, this process is automatic in the cloud system.

Additionally, it becomes much simpler to cross-company data to produce any type of report.

Additionally, it becomes much simpler to cross-company data to produce any type of report.

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 Safety

The biggest discussion of the year was about data security. The cloud provider is responsible for the security of the Data Center where your company information is stored. This means that all information is located in an environment with maximum security, thus protecting your employees and your business as a whole.

There are those who think that if company data is not stored in internal hard drives, there is a greater risk of losing the information or that it is being invaded.

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But international security standards require advanced encryption, SSL, ISO and other protection tools, which makes these possibilities practically nil.

And with the automated backups mentioned earlier, if any errors occur, all company data will be available on another server a few clicks away.

And with the automated backups mentioned earlier, if any errors occur, all company data will be available on another server a few clicks away.

The Data Age is a path with no return

We are in the midst of the Data Age and all companies, even the medium and small ones, cannot fail to be prepared for the real advent of the market that is now Data Driven. In fact, Data is the main asset that each company has and to use them for business and revenue generation is the difference between competing, winning and even existing in the years ahead.

Monetizing data with applications of Artificial Intelligence, Machine Learning and Robotics, among other advances is the mission of managers tuned in the new economy.

Cloud Computing is first and foremost an enabler for the data input, to gain the most important highlight in each corporation generating benefits, revenue increase and even new lines of business.

To postpone such an important decision is to leave a flank open for obsolescence and misalignment in this new Data Age.

Revenue vs. Profit

Any business owner needs to know how to maximize their profit and to demonstrate to investors that the company is heading in the right path since revenue can indicate a firm’s potential.

The most important difference between revenue and profit is that while any company can increase its revenue, it may well be registering a net loss of earrings at the same time.

 

Revenue

Revenue means the total amount of money that the company generated through its business activities (in other words, it is the total sales of the company).

 

Profit

  1. Gross profit

It is basically revenue minus cost of goods sold, on the income statement, gross profit appears directly after revenue, it is calculated by subtracting Cost of Goods Sold (COGS) from the total revenue.

As a metric, it is used by business owners to gain an idea of how much money they have with which to fund the business after their core product is produced and sold.

 

  1. Operating Profit

Operating Profit means Gross Profit minus all fixed expenses encountered when you run the business, such as rents, utility bills & payroll. It is used to demonstrate the earning power of any business in terms of its regular operations, removing external factors to show its potential profitability.

Some companies may choose to use Operating Profit over Net Profit to highlight the financial impact of external overheads. For example, investors can use Operating Profit to compare the business with a similar firm operating under a different tax structure.

 

  1. Net Profit

Whenever people start to talk about any firm’s profit, they usually refer to Net Profit which means the remaining income after all the operating costs, debts, expenses, interest and taxes are deducted.

Net Profit is the most important financial metric on the income statement, it is the most important figure to the investors and shareholders.

In terms of Operating Profit, Net Profit can be expressed as Operating Profit minus interest and taxes:

Net Profit = Operating Profit – Interest – Tax

 

  1. Net profit margin

The Net Profit Margin is the ratio of the company’s net income to its revenue, it is presented as a percentage.

 

Taking all of this into account, a business owner should always try to maximize his Gross, Net, and Operating Profits rather than just increasing sales revenue. Nevertheless, if operating expenses are kept under control, increasing sales revenue might well result in an increase in profits.

 

Inventory Valuation Methods Impact on VAT

Inventory Valuation and VAT

Inventory Valuation and VAT

Would changing the inventory valuation method from First In First Out (FIFO) to Weighted Average (WA) or vice versa reduce my VAT payments?

VAT is computed on the amount paid to purchase or sell an item. So, in case a retailer purchases stock for 1,000 BD from a distributor, the VAT amount would be 50 BD on top of the 1,000 BD that is to be paid for the stock.

Subsequently, when the retailer sells the stock for 2,000 BD, he would have to collect 100 BD on top of the 2,000 BD as output tax. The retailer would then deduct the 50 BD paid to the distributor from the 100 BD collected from the customer and give the difference (50 BD) to the government.

Inventory valuation on the other hand has to do with calculating the value of stock that a company has on hand in order to identify the value of the assets in stock and accordingly the Cost of Goods Sold when a sale is done.

To clarify this, let’s take an example of an item that a reseller purchases at one time for 10 BD and another time for 9 BD and then sells the items for 20 BD.

 

Weighted Average Method

If the reseller buys 100 items for 1,000 BD at 10 BD a piece and then another 100 of the same item for a discounted price of 9 BD a piece for a total of 900 BD, the value of each stock item would be (1000 + 900)/200 = 9.5 BD if the reseller was following the Weighted Average inventory valuation method. Therefore, for each sale of this item, the reseller would have to record COGS of 9.5 BD.

The reseller would have paid 5% on each purchase, hence, he would have paid 50 BD on the first purchase and 45 BD on the second purchase totalling 95 BD.

The reseller would then sell each of the 200 items for 20 BD and collected 5% VAT on each sale totalling 200 BD for all the items (200 x 20 BD x 0.05 = 200 BD).

Finally, the reseller would deduct the 95 BD VAT that he paid to his distributor from the 200 BD VAT that he received from his customers and pay the difference (200 – 95 = 105 BD) to the government.

 

First In – First Out (FIFO) Method

If the same reseller is following the FIFO inventory valuation method, the reseller would have to track the sales of the items to make sure that for the first 100 items sold, a COGS of 10 BD is recorded, and then the next 100 items a COGS of 9 BD is recorded. However, the reseller would still have paid 50 BD VAT for his first purchase and 45 BD VAT for his second purchase. Moreover, the reseller would still have collected 5% VAT for each of the items sold. Assuming that the selling price was maintained at 20 BD per item, the total VAT that he would have collected for all 200 items would still be 200 BD.

Again, the reseller would have to deduct the 95 BD that he paid on his purchases from the 200 BD that he collected from his customers and pay the difference (105 BD) to the government.

As we can see from the preceding example, the inventory valuation method has nothing to do with the amount of VAT that is going to be paid. Inventory valuation methods are concerned with the value of stock and COGS while VAT impacts the selling/purchasing price of the goods.

 

Advantages of using Accounting Software

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Accounting SW

Accounting SW

Advantages of using Accounting Software

Updated accounting data has many advantages for any establishment, and these advantages will be more valuable if you manage it through an accounting software. Through it you will know what happens in your business, reports will be generated automatically and without losing effort or time in them.

Accounting software or accounting systems are designed to organize, control and simplify accounting tasks within a company, whether a small, medium or multinational company. The implementation of accounting software in your company allows you to unify and automate the accounting and commercial operation, and to manage resources more efficiently.

All this will cause you to improve a lot in the management and planning of the company’s financial and accounting resources.

Therefore, let us discuss about the benefits of using accounting software:

  1. Savings.

Generally, a software transforms the operative tasks into automatic tasks. This allows users to save a lot of their company’s resources such as time and people; for instances, a company will need fewer people and less time to accomplish a task, as accounting software streamlines each task that you had to do manually before.

Accounting software allows you to save a lot of time, not only with the updated operational functions, but also with the ease of generating statistics and quality reports. In addition, having everything automated reduces the possibility of errors.

  1. Improvement of business management

Accounting software facilitate the management and decision making of the company, by having the ‘management of income and expenses accounts’ feature, in which the data are unified and stored in one place. Moreover, the data will be provided to keep the business running smoothly, to take it on the right path.

  1. Simplification

Keeping up to date accounting and doing it properly has been a big headache for many workers. However, accounting software allow users to simply automate the work and streamline the daily tasks; users will have time to focus on important tasks and free up from unnecessary manual activities and the stress they bring.

  1. Availability

Having the information unified and centralized all in one Accounting software, allows users to have the data always available, and to access it at all times and without any limitation. As before employees had to always access from the same computer or depend on the report, nowadays employees work with information stored in the cloud, allowing them to manage the information from any place and at any time.

 

  1. Confidentiality and security

Accounting software in the cloud gives you the peace of mind you need. Your information is available 24/7, at your fingertips when and where you require it, stored in fully reliable and secure systems, away from any computer attack or any accident. You can monitor your accounting movements from your preferred mobile device: cell phone, tablet, laptop, etc. With your updated information you have transparency and facility to make decisions. The benefits of accounting software in the cloud are mainly:

  • have the information updated;
  • access the information you require on time;
  • Keep all information secure.

There is no better way to ensure compliance with accounting standards than to use a solid accounting system. H.A. Consultancies provides a full range of accounting systems that can accommodate for the needs of any small, medium, or large companies operating in Bahrain. Our accounting experts will be able to provide guidance in choosing the best accounting software to meet your needs and help setup the system and migrate accounting data error-free.