The Pros and Cons of Cloud Accounting Software
Cloud computing has become incredibly popular with large and small businesses for many reasons, including the fact that it streamlines processes for both vendors and customers. And this also holds true for cloud accounting software. Before we get into the pros and cons of this type of accounting software, let’s take a look at what it is and how it works.
What Is Cloud Accounting Software?
Cloud accounting software is an online solution for accounting products provided via cloud computing technology.
Cloud computing allows people to access software and data via the internet instead of on their local machine. Once upon a time, if you create a file on your computer, to access it again, you had to use that same computer. When USB flash drives popped up, transferring data was slightly easier, but still required the use of a physical device. Now, there are many options for data storage but traditional approaches can be risky. For example, hard drives can lose data in myriad ways, from software glitches and being hacked to mechanical failure and even disasters, like floods or fires.
This is where cloud computing comes in. When you store the data in the cloud, it is actually stored on a server that is constantly connected to the internet. These servers have all sorts of backup systems and security systems designed to protect the data so that even if something does happen to one server, the data isn’t lost. Thus, data is more secure in the cloud, and you have the added benefit of being able to access it from anywhere.
Cloud accounting software is the same thing as cloud computing but is limited to accounting software. Thus, your accounting program is hosted on the internet, meaning you can access it at any time. This way, you can review and update your accounts regardless of where you are or what time it is. It is a much more efficient approach to accounting.
While some versions of cloud accounting software must be installed locally on your machine as well, they are still connected to the internet and you can only access the data online. This is actually an advantage because it means you don’t need expensive and complicated computer systems to manage your accounting data.
The Benefits of Cloud Accounting Software
We’ve already hinted at a few benefits of cloud accounting software, but let’s dig a little deeper.
Lower Operational Costs and Higher Reliability
Purchasing and maintaining the IT equipment required for proper data management can get really expensive. You have the initial investment, then maintenance costs, including labour - where it is often IT and technical labour being the expensive one. These can all add up pretty quickly and represent a significant outlay that will eat into your bottom line - especially should you be an SME.
With cloud accounting software, these costs virtually disappear. You won’t need a special team to manage or work with the software, and you won’t need expensive equipment to host the software and store the data. This can mean significant savings – or cost reduction if you’ve already implemented a local system – which will certainly do wonders for your bottom line.
But it’s not just direct costs you have to worry about when storing all your data locally. You also have to consider reliability. Your equipment might fail, a fire could start in your office, or you could be hacked, leading to a loss of vital data, which can take away your ability to make effective decisions quickly, especially financial ones.
Of course, you could argue that even if store your date with your cloud accounting software provider, they are also subject to the same risks because the software and data are stored on a physical device. However, there is one major difference and that is that these types of companies have multiple backup systems and fail-safes in place to avoid such an occurrence.
Plus, they have the equipment to ensure downtime is very limited. So limited, in fact, you probably won’t even realize something happened.
Data Can Be Uploaded and Accessed from Anywhere
Another advantage cloud accounting software has is that you can upload and access data from anywhere in the world, at any time you want. This, again, means a more streamlined operation.
It also means that your accountant can also have constant access to the data, which means they can be more proactive in analyzing your financial position and providing invaluable advice in a timely fashion - doesn't matter if your accountant is in office, at home, or on a trip around New Zealand.
With cloud accounting software, there is only one version of the data, which means accuracy is greater. There is a smaller chance of a mistake in information when it doesn’t have to be transferred from one party to another in different formats. Higher accuracy means fewer mistakes, which can translate into substantial savings and much less aggravation, especially around tax time.
Real-Time Interaction with Your Accountant
Due to the fact that the software is online, as is all the data, you can interact with your accountant in real-time. With traditional software, you’d have to send the file and then wait for your accountant to get up to speed with what’s going on. But with cloud accounting software, the accountant always has access to the data, providing for a more efficient experience.
The Software Is Always Up to Date
With traditional software, you have to wait for updates to be launched and then install them if you want to be sure you are in line with the regulations. And sometimes those updates don’t play nice and can end up causing a slew of problems.
Cloud accounting software is constantly updated by the vendor to ensure a seamless experience, which also means that if an update is bugged, it’s their responsibility to fix it.
Subscription Based Fees
When it comes to traditional accounting software, you usually have to purchase the software and then either pay a regular fee for maintenance or, at the very least, pay for the updates. This can amount to a lot of money.
With cloud accounting software, you only have to pay the subscription, which usually works out to a lot less than the traditional software option.
Cons of Cloud Accounting Software
Though security measures in the cloud have advanced by leaps and bounds, with many claiming the cloud is safer than any other option, there are still some security concerns. Data travels between the server and your computer, which means good encryption is required. Furthermore, not all service providers are equal, which is why you always have to check if the company you plan on doing business with has a good track record.
Another issue is that you need the internet to access your data. While there are lots of options to connect to the internet, there are also situations in which you won’t have that connection, which means you won’t be able to access your data.
Though cloud accounting software does have a few cons, the fact is that they are not insurmountable. In fact, the benefits of this approach to accounting are so significant that they completely outweigh the disadvantages. However, like with any software, you need to find the one that’s the right fit for you as well as your accountant.
Don’t go with the first vendor without doing some research. The more research you do, the better your chances of finding a good provider with a great track record. And that’s when your life will become much easier.
Who Are Most Common Providers of Online Accounting Solutions?
Among the most common providers of online accounting solutions we can find:
- QuickBooks - starts at $12.50/month
- ZarMoney - starts with FREE plans
- FreshBooks - starts at $4.50/month
- Xero - starts at $20.00/month
- Sage - its cheapest plans vary wildly to tell
The list is far from conclusive, as there are dozens of other smaller or larger providers. What is so special about the above-mentioned companies? Each of them has a slightly different list of features, but most of them come to the same points. Where they differ are features on a price point. While some will allow you only a really basic feature at your basic plans, ZarMoney allows for features like Ledgers, Comprehensive reporting or Chart of Accounts in its base version.