What is Cloud Accounting Software and How Does It Differ From Traditional Accounting Software
Cloud accounting software allows users to manage their accounting program through an internet connection. A monthly fee grants access to an online accounting program and online storage space for your accounting data. This differs from traditional accounting software, which requires a company to purchase outright a licence to install and use the accounting software on their PCs, as well as upgrading their storage servers to house their accounting data.
Both money and time can be saved by businesses using cloud software. All that’s necessary to access cloud accounting is reliable and regular internet access. Similar to internet banking or email, the cloud platform makes software and data accessible anytime online, from any device. This improves team collaboration to no end.
With a traditional accounting system, the software can only work on the computer that contains the installed program. This is not reliable or secure – if this PC were to crash your software would be lost with it. Meanwhile, storing your accounting data on servers is fine, as long as you have a reliable back-up rota. However – changing back-up tapes can often slip through the cracks some days, which could lead to holes in your accounting history – a problem if the auditor comes calling.
Benefits of Cloud Accounting
Clear real-time overview of financial position
Any device having internet connection can be used to access cloud-based software. Through online accounting, small business owners are always connected with their accountants and data. A business can be run from home, work, or while on the go. No matter what the location, an updated business picture is provided.
Multi-user access allows easy online collaboration with advisors and team
Other users can be invited to view data. The access level can be controlled. This is more secure than emailing files or sending out data on a USB stick. Cloud-based companies ensure privacy and security of an organization’s data. Anyone familiar with online banking will feel comfortable with cloud accounting.
In the cloud, software updates are easily developed and delivered faster. Access to new features is available instantly. No installation of the latest version is required. A host of add-ons can be integrated into the system. The software is easy-to-use, cost effective, and scalable. There is no need to install or run applications on a desktop computer. The cloud service provider also manages server failure, system administration costs, maintenance, and upgrades. Disaster recovery and data backup are frequently part of the accounting cloud computing software.
There is a reduction in upfront business costs.
Traditional accounting software requires a large amount of upfront costs – a full payment of the software licence fee and an upgrade of the server capacity. However, cloud accounting solutions often come with a monthly fee based on usage and data size, which can significantly cut down on up-front costs. This feature makes it ideal for small-medium businesses in particular.
Drawbacks of Cloud Accounting
Before launching a cloud-based system, there are some aspects to consider. Ian Gotts and Stephen Parker have written a book entitled, Thinking of. . . Buying Cloud Computing? Ask the Smart Questions. It contains a comprehensive list of issues to consider. In the book, they challenge the claims that cloud accounting saves money. They believe upgrades, support license, comms, and network costs make the system more expensive than traditional software in the long-run – i.e. while you may only pay a small monthly fee, you are paying this fee indefinitely.