Accounting Software: Cloud-based or Locally Installed?
Cloud-based accounting software is a rapidly expanding industry; the rates of growth are staggering. Xero and QuickBooks Online (two of the biggest players in the field) together serve over a million businesses, and that’s not even counting the many other companies in the industry: Zoho Books, Kashoo, Wave … the list goes on.
For a field that hardly existed ten years ago, that’s impressive.
So is it worth making the switch? As with anything, there are both benefits and drawbacks. So let’s take a look at some of the pros and cons of cloud accounting software.
- Mobility – This is one of the best features of cloud-based software. Want to access your accounts from different locations? No problem. Different devices? Sure. Check your balance sheet on your PC at the office, log receipts on your Android phone, or create a new invoice on your iPad. Cloud-based accounting gives you a previously unheard-of level of flexibility.
- User-friendly – Most cloud-based software is designed for small business owners, rather than for accountants. With simple terminology and intuitive interfaces, these programs make it easy for people with little to no accounting knowledge to maintain proper bookkeeping.
- Automated backups – There’s no danger of losing your financial data because your hard drive crashed. Most providers of cloud-based accounting solutions utilize frequent or realtime backups. User data is often stored in multiple locations for redundancy. Best of all, this happens automatically; you don’t need to spend any time on it.
- No commitment – Most cloud-based accounting software works on a subscription model. You pay month by month, and if you wish to cancel your subscription, you can do so and owe nothing further. Cloud-based subscription packages carry less upfront cost than locally installed programs, and most offer free trials so you can test the software before buying it.
- Cost – Because the subscription model involves an ongoing cost, in the long run it can be more costly than simply purchasing a locally installed program. Also, cloud-based software introduces a factor of uncertainty; prices are subject to change.
- Uptime – If the internet goes down – at either end – so does your accounting. Even though the top cloud accounting providers have over 99.9% uptime, no one guarantees 100%.
- Functionality – Cloud-based accounting programs are geared toward micro, small, and in some cases mid-sized businesses. Most don’t have the robust functionality large companies need.
- Designed for non-accountants – While the lack of accounting jargon can make cloud-based software more user-friendly for the average person, some accountants find themselves frustrated by the terminology and organization.
The biggest single downside to cloud accounting software is the comparative lack of features. But most small businesses don’t need all the bells and whistles; they just need a basic accounting and invoicing platform, something to speed up the bookkeeping without creating too many additional headaches. For many small business owners, cloud accounting benefits outweigh the benefits of a locally installed system (e.g., QuickBooks Pro).
Still have questions about cloud-based accounting software? Check out our article on how to choose the best software for your business, or have a look at our online accounting software reviews. And, as always, feel free to get in touch with any questions.