New technologies such as blockchain and artificial intelligence have opened new doors in the taxation ecosystem

How blockchain technology is impacting cloud accounting and tax?

For example, AI-based optical character recognition is transforming the way in which businesses log and store expense information. Blockchain technology delivers interoperability between traditionally siloed tax data structures, streamlining compliance and reporting.

The most profound way in which technology is changing the tax ecosystem, however, is the rise of cloud accounting.

What is cloud accounting?

Cloud accounting allows businesses to eliminate the need for expensive local financial data storage, which presents security risks and take advantage of powerful taxation software and services based on remote servers.

Cloud accounting services include payroll, accounting, invoicing, accessibility, and third-party integration features, and can significantly reduce the overheads associated with executing an effective tax strategy. Businesses that use cloud accounting services benefit from a cost reduction in hardware maintenance, and an improved user interface.

Enterprise and the cloud

The use of cloud accounting has dramatically increased over the last decade. Data published by Forbes demonstrates that 80 percent of major enterprise organizations now operate critical financial software on cloud-based platforms that significantly improve overall business efficiency.

Getting cloud-based tax and accounting software set up at your business is relatively simple, but it’s best to enlist the help of accountancy services to ensure you’re collecting data and reporting in a compliant manner, which automates tasks that would be time-consuming tasks.

Cryptocurrency payments

The third-party integration offered by cloud accounting platforms are extremely flexible — many online merchants, for example, accept digital currencies such as Bitcoin as a payment method. Traditional taxation software can struggle to track cryptocurrency payments, whereas third-party applications are able to provide full reporting functionality designed specifically for digital assets.

Another modern tax tech is able to assist with the complex nature of cryptocurrency tax reporting. Major cryptocurrency exchanges can work to keep customer data extremely secure and private, which can make it difficult to track trades for capital gains, income tax reporting and atomic swaps.

Financial sensitive data

Data breaches are extremely costly for businesses of all sizes. Both large and small scale enterprises are often the target of hackers that attempt to steal sensitive financial data. A single breach can incur a heavy cost.

Data published by IBM reveals that the average data breach costs businesses almost $4 million, with each individual breached record valued at over $150. Cloud-based tax solutions and accounting software help to keep your business data safe with enterprise-scale security, eliminating the threat of data breaches.

Key takeaway

Many businesses operate under tight budget constraints that doesn’t leave much room for professional full-time accounting staff. Cloud-based tax tech reduces the total amount of time businesses must direct toward financial strategy and tax reporting, freeing up capital that can be reinvested into the business itself.

Luke Fitzpatrick Academic Speaker Also View on medium.com Copyright: A previous version of this article first appeared on e27.co - 29th November 2019

Luke is a geek at heart, enjoys writing about tech and teaches International Business at the University of Sydney.

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