26 Feb, 2024
Know the benefits of cloud accounting software for small businesses. Learn how it works, its advantages, and popular cloud-based accounting software.
Cloud accounting software is revolutionizing small business accounting. This innovative online software delivers financial visibility, efficiency, mobility, and flexibility that traditional desktop programs can't match. Learn cloud accounting, its key features and benefits, and why it's the best solution for modern businesses.
Cloud accounting software performs all the functions of a typical accounting system. Still, the software and data are hosted on remote servers by a cloud provider rather than individual devices. Users access the software via the internet through a web browser or mobile apps instead of installing programs directly on their computers or networks.
Switching to cloud accounting brings many advantages compared to traditional on-premises accounting software. Cloud platforms centralize access to data, facilitate collaboration across stakeholders, automate tedious manual processes, and scale on demand to support spikes in transaction volume. The software also handles reliability, uptime, security patches, and optimization behind the scenes so companies can focus more on value-adding business initiatives.
Migrating from desktop accounting to the cloud offers many practical advantages, especially for small business owners and finance teams. Cloud solutions provide access to critical financial data anytime, anywhere, and flexible, scalable solutions support business growth.
Since cloud platforms centralize data and workflows, owners and employees don't waste time updating multiple access points or tracking down information. Instead of toggling between applications, everything related to invoicing, bill pay, expense reporting, payroll, and more is available in a single cloud accounting system.
This consolidation and features like mobile apps facilitate more efficient accounting operations. Workflows that once took hours or days can be accomplished in just minutes by leveraging process automation and seamless data-sharing capabilities. This allows accounting staff to focus their time on more value-adding tasks.
Waiting days or weeks for desktop data to sync or reports to run doesn't cut it for today's data-driven, agile small businesses. Cloud accounting eliminates lags, ensuring stakeholders have an accurate, up-to-date financial picture for more innovative, timelier planning and decisions.
Dashboards and centralized reporting provide 24/7 access to daily sales figures, cash flow positions, profit margins, account reconciliation status, budget variances, and more. This real-time visibility facilitates data-backed decisions on the fly instead of relying on estimates or gut intuition without complete supporting financials.
Cloud solutions enable instantaneous collaboration across teams and locations. No matter where accountants, bookkeepers, or owners are located, they can simultaneously access the same up-to-the-minute system data and workflows.
The cloud environment also facilitates easier sharing of files, reports, invoices, and other financial items compared to emailing documents back and forth. Comments and notes can also be added directly within the accounting platform to maintain context.
This collaboration ability is invaluable for owners needing to review books remotely or approve expenses from anywhere. External accounting professionals can also be granted system access to work on company books without being onsite.
Many small businesses rely on other cloud solutions for CRM, inventory, ecommerce, HR, etc. Cloud accounting integrates with hundreds of these applications for consolidated data and more seamless workflows than mixing desktop and cloud platforms.
Rather than toggling between programs or manually transferring data between systems, two-way syncing automatically shares up-to-date information across integrated platforms. This saves ample time while reducing data entry errors.
There are no upgrades or patches for companies to install with cloud accounting tools because providers handle all back-end updates. Users log in to the latest optimized software version each time. Small business teams can focus their bandwidth on core business needs rather than IT administration.
Leading accounting cloud platforms invest heavily in high-grade security infrastructure, including data encryption, reliability testing, access controls, and layered authentication protocols that typically surpass what small businesses can implement on-premises.
Reputable cloud providers undergo regular, stringent independent audits to verify security controls and data protection policies. This ensures financial information remains protected and compliant.
Cloud accounting systems quickly scale up as a business grows. There are no capacity constraints, so if a company expands locations, adds employees, brings on more customers, or increases transaction volume, the subscription-based software flexes to match needs.
Rather than procuring additional desktop software licenses and expanding onsite servers to support more data, cloud accounting solutions have unlimited elastic capacity. Companies only pay for the storage space and number of users they require each month.
Upfront costs for servers, networking infrastructure, IT personnel, and accounting software licensing can mean investing thousands before starting desktop accounting. And once the fixed system is in place, it's inflexible and depreciates quickly.
Cloud accounting shifts accounting from a significant capital expense to a manageable monthly operating cost that flexes with business dynamics. Companies pay predictable recurring fees scaled to current use rather than overprovisioning capacity based on guesses of future resource needs. There are no indirect maintenance, troubleshooting, upgrades, or system scaling costs.
Cloud accounting is web-based software provided on a subscription model by a cloud computing company. The software application and related accounting data are hosted on the vendor's or a third-party's servers, not the user's computer system or local servers. Core accounting capabilities 'live' in the cloud and are delivered to users via internet access.
This online, centralized delivery model instantly allows access to the software and new features without downloads or installations. Cloud accounting systems typically have a user login page for access from desktop and mobile devices. Users interact through this browser-based application while the back-end software and compute resources are housed remotely.
Vendors manage all hardware, servers, networking, storage, application optimization, uptime monitoring, and backup needs behind the scenes, so companies don't worry about these complex IT functions. Service providers deliver the accounting system as a subscription, usually charging a monthly or annual fee per user.
Cloud solutions offer flexibility to toggle subscription levels up or down as needs evolve. Companies avoid large upfront licensing costs for elaborate on-premises infrastructure required to run complex accounting software. Instead, cloud computing shifts accounting from a fixed capital expense to a manageable operating cost that flexes according to business dynamics.
Beyond the broader differences highlighted earlier around access, security, collaboration, etc., here is a more detailed look at some of the variations between cloud-based and legacy on-premises accounting systems:
For desktop solutions, companies must procure hardware servers meeting minimum specifications, properly configure networking protocols, allocate IT personnel for setup, install the software, and migrate data. This lengthy process can take weeks or months.
With cloud accounting systems, users sign up online for subscription access and can be up and running with fully functional software within hours or days. Support teams guide new customers through any data migration and initial configuration.
Desktop accounting depends on users accessing the onsite servers hosting the application, so remote work is enabled through VPNs that tunnel into the office network. This adds layers of complexity for offsite users. There are also bandwidth considerations that can degrade performance.
Cloud platforms live on the internet by definition, so providing secure access for location-agnostic work is native. Users log in online without needing specialized networking. Cloud accounting also avoids bandwidth issues using load balancing and elastic compute resources.
On-premises infrastructure has strict hardware limitations around storage, memory, processing capability, and overall scale. Adding more users, locations, or transaction volume necessitates expanded servers and additional software licensing costs. Companies pay for excess capacity upfront to accommodate future growth predictions.
The cloud shifts capacity from fixed capital expense to flexible variable cost. Usage-based pricing means paying only for actual workload needs each month. Capacity scales up or down elastically on demand without incremental hardware investments.
Maintaining desktop systems requires manual monitoring, software updates, troubleshooting hardware issues, data backups, restoring failed servers, and routine security patching. Cloud platforms place this administrative burden solely on providers through automatic self-healing infrastructure.
Highly customizable on-premises software can be modified at a deep code level but requires specialized IT skills. Simple UI personalization and configurations are easily enabled in cloud platforms, but code-level changes are limited since software runs centrally on vendor servers.
Desktop data security depends mainly on internal IT safeguards and vulnerability avoidance through patches and access controls. But only some small businesses can match massive cloud provider investments in enterprise-grade security like encrypted Redundancy, advanced threat detection, strict monitoring, and world-class infrastructure.
With bookkeeping and accounting at the core of small business health, choosing the right cloud platform is hugely impactful. Below are key features and capabilities to evaluate:
Making an informed software choice ensures your accounting platform scales as your small business grows and provides the right features to the demands of your workflow without breaking the bank.
As technology permeates deeper into small business infrastructure, cloud accounting provides data visibility and management flexibility needed to compete in the modern business landscape. The cloud paradigm shift has made robust accounting solutions scalable and accessible for organizations of all sizes.
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Cloud accounting software is accessed online, while traditional accounting software is installed on a local computer.
Cloud accounting offers flexibility, scalability, real-time data access, and cost-effectiveness for businesses.
Companies use cloud accounting software for its accessibility, efficiency, collaboration features, and automatic updates.
Cloud accounting works by storing financial data securely online and allowing users to access, update, and analyze the data from anywhere with an internet connection.
The future of cloud accounting is promising, with more businesses adopting cloud-based accounting systems for improved efficiency and data management.
