Accounting Software Vs. Cloud Accounting
Gone are the days of a paper-based accounting system. It has become almost unthinkable to calculate figures like revenue, expenses, and profit by hand when there are numerous accounting software that can automate the process. So why not go a step further and embrace cloud accounting? In other words, this is when the accounting software is hosted not on your device, but on remote servers that are accessed via the internet. If you’re not ready to make the switch yet, let’s explore the differences between accounting software and cloud accounting.
1. Flexibility
As accounting software has to be installed on your computer, you’re bound to a few devices that have the software installed, which limits your mobility. On the other hand, cloud accounting enables you to meet all your accounting needs from any device, anywhere - as long as you have a decent internet connection. Are you going to be working from multiple locations? If so, cloud accounting is the way to go as it gives you more flexibility in today’s culture of remote working.
2. Real-time data and collaboration
Unlike accounting software, cloud accounting is able to update financial information on an automatic basis and generate financial reports in real-time. As a result, account balances are more accurate and there are fewer errors associated with manual data entry. Given that cloud accounting enables staff across departments and offices to access the same version of the software and the same data, it’s also more equipped for collaboration than accounting software. For example, healthcare accounting software, when hosted on the cloud, can provide a real-time overview of a healthcare facility's financial health, streamline billing and invoicing processes, and ensure regulatory compliance across multiple departments.
3. Maintenance costs
Accounting software has a number of costs you’ll need to account for including software licensing costs and database systems management costs, as well as any expensive capital purchases including server space. In contrast, cloud accounting usually operates as a software-as-a-service (SaaS) model so you only need to pay a subscription fee based on your usage. It also requires lesser maintenance on your behalf as the cloud provider completes the backups, updates occur automatically, and nothing needs to be installed on your computer.
Pro tip: For businesses that are looking to expand, cloud accounting ensures that there are no major spikes in costs, unlike accounting software that isn't always easy to maintain or scale.
4. Data security concerns
Both accounting software and cloud accounting have their own merits when it comes to data security:
As accounting software is stored on a specific computer, it can’t be accessed by anyone who doesn’t have access to said computer, and thus make data breaches or cyber attacks less likely. That being said, there are other data security concerns like hardware failures, system crashes, or other risks. As a matter of fact, there is the possibility of losing all your data if you don’t have backups. When it comes to cloud accounting, the situation is reversed.
While cloud accounting runs the risk of data breaches and cyber attacks, cloud providers tend to offer robust security measures including authentication, encryption, secure backups, etc. The plus point is that you’re not responsible for security and will be able to select the level of security your business requires. As cloud providers usually have backup servers in more than one location, you can also rest assured that you’ll have access to your data.