What Happens When Your Cloud Provider... Goes Bust?

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What Happens When Your Cloud Provider... Goes Bust?
When blue skies are a bad thing...

If your cloud accounting provider suddenly closed down, how long would your business survive?

There's a lot to be said for putting your accounts in the cloud. You can work on your books at home just as easily as in the shop or office, you and your accountant can see exactly the same figures at any time, you get the benefits of software improvements throughout the year rather than having to wait for the next annual release, and the provider most likely does a better job of looking after security and backup than you could.

But what would happen if you tried to log into the system one morning, only to discover that the company had folded? This is perhaps the cloud equivalent of arriving at work to find that the computer that runs your desktop software has been stolen, along with the storage devices holding the data backups.

With desktop software you can get at least some protection by keeping at least one current backup copy somewhere else - perhaps at your home or in the cloud. That way you can buy a new computer, reinstall the program (though the more draconian licensing technology might make that harder or more time-consuming than it should be), restore your data from the backup, and you're back in business.

If a cloud software provider suddenly evaporates, it's a different story. You probably don't have a backup of your data file(s), and you don't have access to the software even if you did.

Your only real hope is if you've been able to regularly export all your data in a format that can be imported into a different system. Otherwise you'd have to resort to at least partially recreating the data from the recent reports (you do keep copies?) and source documents.

So, in alphabetical order, what did the four main small business cloud accounting providers tell us about exporting and importing data?

A spokesperson for Intuit (QuickBooks Online) said: "We provide our customers with the option of downloading a copy of their QuickBooks Online data so that they can keep it on their own computer (known as a local copy). This gives customers the added comfort and control of storing the data themselves, as well as having us back it up."

When it comes to loading data into QuickBooks Online: "Customers can choose to import data themselves via a csv file including customer data, supplier data, bank transactions, chart of accounts or, we have a free conversion service where we will convert data from MYOB, Xero, Reckon etc into QuickBooks Online."

MYOB suggests, again via "spokesperson", that with "web based software, one way to protect yourself is to regularly generate reports or exports from your accounting software, for example at key compliance periods such as BAS and End of Year. This will ensure that the most essential financial reports and statements are saved and stored into a safe place and that you have access to a summary of data if required.

"Alternatively, if you are using MYOB AccountRight, it has unique features to enable you to operate your current financial data even if your online version is unavailable for whatever reason. AccountRight can be configured so that the data is synced to a local version so no matter where you are, your accounting software is still operation with your current financial data."

In terms of business continuity, the AccountRight model seems to us to be the best available, even if it lacks some of the benefits of pure cloud systems. And while it allows continued operation in the short term, software licensed on a subscription basis would presumably stop working at the end of the term - or possibly sooner if the program is unable to reach MYOB's licensing server. But you've got the data, and it can be loaded into other systems.

When it comes to importing data into MYOB's cloud products, the spokesperson said various tools and services are available, such as Convert2MYOB's service for transferring data exported from Xero into MYOB AccountRight. Thanks to MYOB's sponsorship, this service is free until the end of 2016 .

Similarly, Reckon's advice is to generate regular reports and save them in Excel or CSV format so you can be sure of meeting your compliance requirements providing you still have the source documents such as invoices and receipts. Reports listing customer details and individual transactions would also help regenerate your data in another system. There is no provision for a complete export of the data stored in Reckon One, and the spokesperson pointed out that it is not possible to preserve all the relationships between records when a database is exported to a flat file and then imported to another database.

The company does have a tool for importing data from the main desktop or cloud accounting systems into Reckon APS (the company's system for accounting practices), and is planning to make Reckon One an alternative destination. There's a suggestion that in the longer term this tool might be further extended to support a full transactional backup into a database under the customer's control, which could - with the right software - then be loaded into another accounting system while retaining all the relationships between records.

Xero pointed out that providers of business critical cloud accounting software should be able to demonstrate their financial health by regularly publishing financial reports. The point being that if you know a company is in sound shape, you don't have to worry about it going out of business.

"Xero Limited is a publicly listed company and as such provides regular financial reporting to the New Zealand Stock Exchange and the Australian Securities Exchange. Xero’s reporting includes quarterly cash flow reports (for example), and annual and half-yearly financial reports. These reports provide a detailed picture of Xero's financial health," said the spokesperson.

"Where the cloud software provider is a smaller private company with limited publicly available financial information, there should be increased importance placed on the ability to make regular local backups and transition quickly to a new provider if the need arises."

Xero does support the export of accounting data in various formats, for example the chart of accounts, contacts, general ledger data, invoices, bills and so on can be exported as CSV or Excel files.

It's a similar situation for exports, eg charts of accounts and contacts lists can be exported in CSV or text format.

If you just want to switch from one provider to another, things aren't that bad. Most providers offer or support some kind of data import service. But that assumes your data is accessible, and that might not be the case if your current provider has run into strife.

In the absence of a systematic approach to keeping an up-to-date copy of your financial data and ensuring that copy is usable elsewhere, you're making a fairly serious bet when you pick a cloud accounting system. 

As Pam Pitt, director of consulting and bookkeeping firm 2Peas, puts it: "Since your cloud based accounting program is being hosted on a remote server, you should make sure that your cloud accounting provider is a solid business with a good reputation.  You don't want a provider who may go out of business and leave you struggling to access your data, especially as many of the cloud accounting programs do not allow you to take backups of your data."

You hear or read the expression 'due diligence' a lot these days, and satisfying yourself of the viability of a cloud accounting service and making sure you can get your data out again in a usable form both before you start using it and on an ongoing basis are good examples. Just remember that you can't do 'some due diligence' - you either investigate with the degree of care and attention that is called for, or you roll the dice...

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