The impact of cloud computing technology on cloud accounting adoption and financial management of businesses

Conceptual framework

The application of cloud computing in accounting is based on several theoretical foundations and principles, which collectively contribute to the advantages and capabilities of this technology (Al-Htaybat et al., 2019):

Distributed Computing: Cloud computing builds upon distributed computing principles, where processing and storage resources are distributed across a network. In accounting, data and processing tasks are distributed across multiple servers in the cloud, enabling efficient resource utilization and scalability.

Virtualization: Virtualization allows the abstraction of physical computing resources, creating virtual instances that can run multiple applications. Cloud computing platforms use virtualization to provide scalable and flexible computing resources, allowing accounting applications to run independently of the underlying hardware.

Service-Oriented Architecture (SOA): SOA is an architectural style where software components are designed as services that can be loosely coupled and reused. Cloud-based accounting solutions often follow a service-oriented approach, with different modules (e.g., invoicing, payroll) provided as services that can be integrated.

Elasticity and Scalability: Elasticity refers to the ability of a system to scale resources dynamically based on demand. Cloud computing platforms offer elasticity, allowing accounting systems to scale resources up or down as needed. This ensures optimal performance during peak periods and cost savings during off-peak times.

Utility Computing: Utility computing is a model where computing resources are treated as utilities, similar to electricity or water. Cloud computing follows a utility model where businesses pay for the resources they consume, aligning costs with actual usage. This pay-as-you-go model is fundamental to cloud economics.

Network-Attached Storage (NAS) and Storage Area Network (SAN): NAS and SAN are storage architectures that provide centralized and scalable storage solutions. Cloud computing leverages NAS and SAN principles to offer scalable and reliable storage solutions for accounting data, ensuring data availability and accessibility.

Security Principles: Security principles in cloud computing include encryption, access controls, and regular security updates. Cloud-based accounting solutions incorporate these security principles to protect sensitive financial data, addressing confidentiality, integrity, and availability concerns.

Compliance and Governance: Compliance and governance frameworks provide guidelines for meeting legal and regulatory requirements. Cloud providers often adhere to compliance standards, helping accounting applications hosted on these platforms to meet industry-specific regulations and governance requirements.

Business Process Integration: Cloud computing supports integrating various business processes and applications. Cloud-based accounting systems can seamlessly integrate with other business applications, such as CRM or ERP systems, streamlining workflows and data exchange across different functions.

Continuous Improvement and Iterative Development: Cloud computing providers follow principles of continuous improvement and iterative development in their services. Cloud accounting systems benefit from regular updates and enhancements, ensuring they remain current, secure, and aligned with evolving business needs.

These theoretical foundations collectively contribute to the efficiency, flexibility, and reliability of cloud computing applications in accounting. They form the basis for cloud-based accounting solutions’ design, implementation, and ongoing evolution.

Cloud computing technology applied in accounting

Invoices and receipts/payments

Accounting documents are managed and processed in the cloud accounting environment through online accounting software and services. This makes financial management and accounting more accessible, flexible, and saves time compared to traditional methods. Accounting documents in cloud computing are managed through online software and services, helping to optimize accounting processes, enhance tracking and reporting capabilities, and improve the working efficiency of businesses.

In a cloud computing environment, accounting documents can be created, sent, and processed as follows (Gupta and Badve, 2017):

Manage invoices and receipts/payments: Invoices and receipts/payments can be created, sent, and tracked through online accounting software. Users can quickly create invoices and receipts/payments, store them in the cloud, and track payment status.

Automatic recording: Financial transactions such as purchases, sales, income and expenditure, salaries, and many other transactions can be automatically recorded from data sources such as banks, online payment gateways, and other management systems.

Accounting document storage: All accounting-related documents, such as contracts, invoices, receipts, etc., can be stored online and linked to respective transactions. This makes it easy to look up and track necessary information.

Processing automation: Online accounting software often provides integrated accounting process automation tools such as automatically creating journal entries based on transactions, automated processing of account classifications, and automatic financial data updates.

Remote access: With the cloud computing model, users can access accounting data and perform related activities from anywhere with an internet connection, bringing high flexibility to the accounting work.

In cloud computing, the process of creating, storing, and updating documents in accounting software usually takes place through the following steps:

Create documents: Users (such as accountants or finance staff) will access cloud-hosted accounting software through a web browser or mobile application. They will use the software’s interface to create accounting documents, such as invoices, receipts, receipts, payment slips, or other transactions.

Document storage: After creation, documents will be stored on the cloud system. Typically, this data is stored on the cloud service provider’s cloud server and may be encrypted and protected with security measures.

Update and modify documents: When necessary, users can update or modify created documents. The cloud system will allow them to access and edit information in these documents.

Automated processing: Some cloud accounting software offers automation, allowing transactions to be processed automatically. For example, when an invoice is created and sent to a customer, the software can automatically perform revenue recognition and ledger updates.

Use integrations and API connections: Cloud accounting software often integrates with other applications through application programming interfaces (APIs). This allows data from other applications (for example, inventory management systems, POS, or payment services) to be transferred automatically into accounting software, helping to optimize accounting processes. maths.

Data security and backup: Accounting data in the cloud is often secured with security measures such as encryption and identity checks. Additionally, cloud service providers often perform regular backups to ensure that data is not lost Fig. 1.

Benefits of cloud invoice. (Oke et al., 2023).

Processing accounting transactions

Applying cloud computing to recording accounting transactions has significant changes and impacts. Using cloud computing to record accounting transactions brings many benefits regarding flexibility, performance, integration, and data security. However, businesses must choose a reputable cloud provider that fits their needs to ensure success during the transition process (Priyadarshinee et al. 2017):

Remote access and recording: A cloud computing environment allows users to access and record transactions from anywhere with an internet connection. This facilitates data entry and updating accounting data even when you are not in the office.

Data integration: Cloud environments often support data integration from various sources. To ensure data integrity and accuracy, you can link accounting data with other systems, such as CRM, warehouse management, or ERP systems.

Speed and performance: Cloud computing services are often able to process and retrieve data quickly. This helps you record and retrieve accounting information more effectively.

Automatic updates: The service provider often updates Cloud-based accounting applications automatically. This ensures you’re always using the latest version with improvements and patches.

Security and access management: Cloud environments often have higher security measures, including access control, data encryption, and continuous monitoring. This ensures the safety of the business’s accounting data.

Analytics tool integration: Cloud services often support the integration of data analytics tools. You can use reports and charts to analyze accounting data and generate more detailed management information.

Flexible billing: The Pay-as-You-Go payment model in cloud computing allows you to pay only for the resources and services you use, helping to optimize costs.

Data redundancy: Cloud services often have automatic data backup and redundancy measures. This ensures that your accounting data is protected from loss.

Cloud books and reports accounting

When applying cloud computing to bookkeeping and accounting book management, there are some significant changes based on the following essential points (Yoon, 2020):

Remote and cross-platform access: Cloud computing allows you to access accounting data from anywhere and any device with an internet connection. This supports flexible work and remote working.

Ability to share data: Accounting data can be easily shared among organization members. No more exchanging Excel files via email or other ineffective methods.

Process automation: Cloud services often come with integrated tools that help optimize accounting processes, from data entry to report generation.

Easy to upgrade and update: Cloud services often automatically update and upgrade software versions, helping units use the latest versions and have better security.

Save infrastructure costs: Businesses do not need to invest heavily in hardware and local server systems. Instead, businesses can rent cloud resources on demand, helping to save costs.

Data security: Cloud services often have robust security measures, including data encryption, access management, log controls, and protection of data from online risks.

Integration and extensibility: Cloud services often can integrate with other applications and services, helping you create custom solutions and expand the capabilities of your business’s accounting system.

Integrate new technology: Cloud computing helps you easily integrate new technologies such as artificial intelligence, data analytics, and machine learning into your accounting process to optimize operations and deliver results with more accurate predictions.

Applying cloud computing to the financial accounting and management reporting system brings many benefits in terms of integration, flexibility, and efficiency, helping to optimize the financial management and administration process in businesses. When applying cloud computing to the financial accounting reporting system and management accounting reporting system, there are some fundamental changes based on the following key points:

Automatic data integration: Cloud services often allow automated data integration from different sources. This saves time and reduces errors in manual data entry.

Real-time updates: Data in cloud computing systems is often updated continuously and in real-time. This allows information users to have a realistic view of the financial situation and management of the business.

Ability to create custom reports: Cloud services often provide tools to create custom reports based on accounting data. Users can create reports according to the specific needs of the business.

Cross-platform access: Users can access reports from any device with an internet connection, helping managers and employees view financial and administrative information anytime, anywhere.

Decentralized access: Cloud computing systems often allow users to manage data access rights, ensuring only authorized people can access and view sensitive information.

Data security: Cloud services often have robust security measures to protect accounting data, including encryption, access controls, and security monitoring.

Easy to upgrade and expand: The cloud system allows you to quickly upgrade and expand your project without significant infrastructure investments.

Supports connectivity and integration: Cloud services often support integration with other applications and services, helping you create hybrid solutions to meet the specific needs of your business.

Increased analytical capabilities: Data stored in the cloud system can easily be used for financial and administrative analysis using data analytics and artificial intelligence tools.

Hypotheses

Security and privacy

Security and privacy are critical considerations in cloud accounting and business financial management, given the sensitive nature of financial data. Without robust security measures, unauthorized access to financial data can compromise confidentiality. Unauthorized access may lead to financial fraud, identity theft, or unauthorized disclosure of sensitive business information. Security breaches can result in the alteration or manipulation of financial data. Tampering with financial records can lead to incorrect financial reporting, compliance issues, and financial losses for the business. Security incidents, such as denial-of-service attacks, can disrupt access to financial data. Unavailability of financial data can hamper day-to-day operations, decision-making processes, and compliance reporting. Failure to implement adequate security measures may result in non-compliance with industry regulations. Non-compliance can lead to legal consequences, fines, and damage to the business’s reputation. Weak access controls can result in unauthorized users gaining access to financial systems. Proper identity and access management are crucial to prevent unauthorized transactions, data breaches, and misuse of financial information. The security practices of the chosen cloud service provider directly impact financial data security. Businesses must choose reputable cloud providers that adhere to industry security standards, conduct regular security audits, and implement strong data protection measures. Inadequate encryption measures may expose financial data to interception during transmission or storage. Encryption safeguards data in transit and at rest, preventing unauthorized parties from accessing sensitive financial information. An ineffective incident response plan can lead to prolonged downtime and data loss in a security incident. A well-defined incident response plan is essential to minimize the impact of security breaches, enabling quick recovery and limiting potential damage. Insufficient employee awareness of security best practices may lead to accidental security breaches. Regular training programs enhance employee awareness, reducing the risk of human error that could compromise financial data security. Inadequate privacy controls can lead to the unauthorized sharing or use of personal and financial information. Businesses must comply with privacy regulations to protect customer and employee information, and failure to do so may result in legal consequences and reputational damage. Integration with third-party applications may introduce security vulnerabilities. Proper due diligence and security assessments are necessary when integrating third-party applications to ensure they do not compromise financial data security (Mehrban et al., 2020).

H1: Security and privacy features have a positive impact on cloud accounting.

H2: Security and privacy features have a positive impact on corporate financial management.

Legal compliance

Legal compliance is a fundamental aspect of cloud accounting and financial management for businesses. Ensuring compliance with relevant laws and regulations helps mitigate legal risks, build trust with stakeholders, and establish a solid foundation for the secure and ethical use of cloud-based financial systems. Businesses should regularly assess and update their practices to align with evolving legal requirements in the dynamic regulatory landscape.

Legal compliance is crucial in cloud accounting and financial management for businesses. Failure to adhere to relevant laws and regulations can have significant consequences, ranging from legal penalties to reputational damage. Regulations such as the General Data Protection Regulation (GDPR) and others require businesses to protect the privacy of personal and sensitive data. Cloud accounting systems must adhere to these regulations, ensuring proper data handling, storage, and transmission practices to protect the privacy rights of individuals. Regulatory bodies set standards for financial reporting to ensure transparency and accuracy. Cloud accounting systems must support compliance with financial reporting regulations, facilitating accurate and timely reporting for regulatory authorities and stakeholders. Different industries may have specific rules governing financial practices. Businesses operating in regulated industries must ensure that their cloud accounting practices align with industry-specific regulations to avoid legal consequences. Many jurisdictions recognize electronic signatures for legal validity in business transactions. Cloud financial management systems may need to support and adhere to electronic signature laws, ensuring the legality of digitally signed documents. Anti-Money Laundering (AML) and Know Your Customer (KYC) regulations require businesses to implement measures to prevent money laundering and verify the identity of customers. Cloud accounting systems may need to integrate features that support compliance with AML and KYC regulations, such as robust customer identification processes. Tax laws and regulations dictate how businesses report and pay taxes. Cloud accounting systems should support compliance with tax regulations, ensuring accurate calculation, reporting, and payment of taxes in accordance with the law. Contracts and agreements, including service-level agreements (SLAs) with cloud service providers, must be legally sound. Legal compliance ensures that contracts related to cloud accounting services are enforceable and protect the rights and responsibilities of all parties involved. Laws may require businesses to implement security measures and notify individuals in the event of a data breach. Cloud accounting systems must comply with these laws by implementing robust security measures and mechanisms for timely data breach notifications. Some jurisdictions have restrictions on the cross-border transfer of certain types of data. Businesses using cloud accounting services must ensure that data transfer complies with relevant regulations, which may involve choosing cloud providers with data centers in specific geographic regions. Legal compliance extends to contractual agreements with cloud service providers, including data security and privacy terms. Businesses must carefully review and negotiate contractual terms to ensure they align with legal requirements and adequately protect the company’s and its stakeholders’ interests (Li, 2023).

H3: Legal compliance has a positive influence on cloud accounting adoption.

H4: Legal compliance has a positive impact on a business’s financial management.

Integration with other systems

Integration with other systems significantly enhances the effectiveness of cloud accounting and financial management for businesses. It streamlines processes, improves data accuracy, and empowers organizations to make informed decisions based on real-time information. Companies should carefully plan and implement integrations to maximize the benefits and ensure that systems work seamlessly together.

Integration with other systems profoundly impacts cloud accounting and financial management for businesses. It enhances efficiency, data accuracy, and overall business operations. Integration ensures that data flows seamlessly between different systems, reducing the risk of errors caused by manual data entry. Financial data remains accurate and consistent across various business applications, leading to reliable financial reporting and analysis. Integration enables the automation of repetitive tasks and processes. Business processes related to accounting, such as invoicing, payroll, and expense management, can be automated, saving time and reducing the likelihood of errors. Integration allows for real-time data exchange between systems. Decision-makers can access up-to-date financial information, enabling faster and more informed decision-making. Integrated systems provide a comprehensive view of business data for reporting and analytics. Financial managers can generate more detailed and accurate reports, facilitating better insights into the company’s financial performance. Integrating with Customer Relationship Management (CRM) systems provides a holistic view of customer interactions. Financial managers can link customer data with financial transactions, supporting targeted marketing, customer segmentation, and improved customer service. Integration with supply chain systems improves visibility into procurement and inventory management. Businesses can optimize inventory levels, reduce carrying costs, and enhance supply chain efficiency, impacting overall financial performance. Integrating with Human Resources (HR) systems ensures seamless management of payroll, employee expenses, and benefits. HR and finance teams can collaborate more effectively, ensuring accurate employee compensation and compliance with labor regulations. Integrated systems can scale with the growth of the business and adapt to changing business requirements. As the industry evolves, integrated systems can accommodate new processes, applications, and data sources, supporting long-term scalability (Eldalabeeh et al., 2021).

H5: Integration with other systems positively influences cloud accounting adoption.

H6: Integration with other systems has a positive impact on corporate financial management.

Cost-benefit analysis

Cost-benefit analysis is a powerful tool influencing financial decision-making in adopting cloud accounting and financial management systems. It ensures that businesses thoroughly evaluate the financial implications, risks, and benefits, enabling them to make informed decisions that align with their strategic goals and financial objectives.

Cost-benefit analysis is crucial for evaluating the financial implications of adopting cloud accounting and financial management systems. It helps businesses assess the advantages and disadvantages of moving to the cloud. Cost-benefit analysis provides a structured framework for decision-making regarding adopting cloud accounting solutions. Companies can make informed decisions based on a thorough evaluation of the costs and benefits, ensuring that the investment aligns with overall financial goals. Cost-benefit analysis helps estimate the total cost of ownership of cloud accounting systems. Businesses can identify all associated costs, including upfront costs, ongoing subscription fees, training expenses, and potential integration costs, providing a comprehensive view of the financial commitment. Through cost-benefit analysis, businesses can identify areas where cloud accounting can lead to cost savings. This may include reduced hardware and maintenance costs, lower IT support requirements, and eliminating on-premises infrastructure expenses. The cost-benefit analysis considers the scalability of cloud solutions. Businesses can assess how well cloud accounting systems align with their growth plans, avoiding the need for significant upfront investments when scaling operations. The cost-benefit analysis evaluates the potential improvements in operational efficiency. Cloud accounting systems can streamline processes, reduce manual data entry, and automate routine tasks, leading to time savings and increased productivity. Cost-benefit analysis helps calculate the potential return on investment. Compared to the initial investment in cloud accounting, businesses can assess the financial gains over time, including revenue growth, cost savings, and improved efficiency. The cost-benefit analysis considers potential risks associated with cloud adoption. Businesses can identify and mitigate risks related to data security, system downtime, or unforeseen integration challenges, ensuring a more comprehensive understanding of the investment’s implications. Through cost-benefit analysis, businesses can optimize resource allocation. It helps allocate financial resources to areas with the highest return on investment, ensuring efficient use of budgetary resources. Cost-benefit analysis provides transparency in decision-making. Stakeholders can understand the rationale behind adopting cloud accounting, enhancing communication, and buy-in from critical decision-makers (Maresova et al., 2017)

H7: Cost-benefit analysis has a positive influence on cloud accounting adoption.

H8: Cost-benefit analysis has a positive impact on corporate financial management.

Characteristics of iCloud

While iCloud can be suitable for personal use and essential file storage, its impact on cloud accounting and financial management for businesses may be limited due to its device-centric nature, integration challenges, and focus on personal rather than business applications. Companies with more extensive financial management needs may benefit from exploring dedicated cloud accounting platforms designed to meet the specific requirements of financial professionals and organizations.

ICloud, Apple’s cloud computing service, has unique characteristics that differentiate it from other cloud platforms. While iCloud is primarily known for personal cloud storage and synchronization of Apple devices, its impact on cloud accounting and financial management for businesses is limited compared to other dedicated cloud accounting platforms. ICloud is not designed as a comprehensive business cloud platform with reliable accounting applications. Businesses may find that iCloud lacks the specialized accounting features and integrations other cloud accounting services offer. ICloud is closely tied to Apple devices and the Apple ecosystem. While functional for personal use and individual productivity, iCloud may not seamlessly integrate with a broader range of business applications and systems commonly used in financial management. ICloud excels in file storage and document collaboration. Businesses can use iCloud to store financial documents, such as invoices and receipts, and collaborate on documents within the Apple ecosystem. However, it may not be as feature-rich as dedicated business collaboration platforms. Icloud is primarily designed for Apple devices but is incompatible with other media. Businesses using various devices and operating systems may face challenges in achieving seamless cross-platform compatibility, potentially impacting collaboration and data access. ICloud may lack the scalability and advanced business features required for comprehensive financial management. Growing businesses with complex financial needs may find that iCloud lacks the scalability and tailored features of dedicated cloud accounting solutions. ICloud may have limited integration capabilities with third-party business applications. Integration with other financial management tools and business applications may be challenging, potentially leading to manual data entry and workflow inefficiencies (Hiran et al., 2019).

H9: The specifics of iCloud have a positive influence on cloud accounting.

H10: The specifics of iCloud have a positive impact on the financial management of businesses.

Cloud accounting

Applying cloud accounting can have several significant impacts on the financial management of businesses. Cloud accounting allows users to access financial data from any location with an internet connection. This is especially beneficial for companies with multiple locations or employees needing to work remotely. Cloud accounting enables real-time collaboration among team members, accountants, and other stakeholders. This facilitates better communication and coordination in financial management tasks. With cloud accounting, businesses do not need to invest in expensive hardware or maintain their own servers. This can result in cost savings in terms of infrastructure and maintenance. Businesses can scale their usage of cloud accounting services based on their needs, paying only for the resources and features they use. Cloud accounting software is typically updated automatically by the service provider. This ensures that businesses always use the latest features and promptly address any security vulnerabilities. Companies no longer need to worry about managing and maintaining software updates and patches, reducing the burden on internal IT resources. Cloud accounting software can often integrate with other business systems such as CRM, inventory management, and payment processing. This integration streamlines workflows and provides a more comprehensive view of the business’s financial health. Cloud accounting systems often have automation features for routine financial tasks, such as invoicing, expense tracking, and reconciliation. This can save time and reduce the likelihood of errors. The automation and integration capabilities of cloud accounting contribute to more efficient and streamlined financial processes. Cloud accounting allows for real-time financial reporting and analysis. Businesses can quickly generate financial reports, monitor key performance indicators, and make data-driven decisions promptly. Cloud accounting software is designed to stay current with regulatory changes. This helps businesses stay compliant with tax laws and financial regulations.

In summary, cloud accounting can enhance accessibility, collaboration, cost efficiency, security, and overall efficiency in financial management for businesses of all sizes. However, companies must choose reputable cloud accounting providers and implement proper security measures to safeguard sensitive financial data (Bisht et al., 2022).

H11: Applying cloud accounting has a positive impact on business financial management.