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Accounting Software: Cloud-based or Locally Installed?

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cloud accounting benefits

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.

Pros:

  • 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.

Cons:

  • 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.

Conclusion

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.

Katherine Miller

Katherine Miller

An itinerant wanderer, Katherine spent the past year in Colorado, Chicago, and New Zealand. Several years as an independent contractor have familiarized her with the headaches that often accompany small business accounting, and she’s made it her mission to find the best tools to make things a little easier for new entrepreneurs. When she’s not busy investigating the ins and outs of the latest accounting software, she can be found working on a novel, trekking up mountains, and training in Krav Maga. (Though usually not all at once.)
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5 Comments

Responses are not provided or commissioned by the vendor or bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by the vendor or bank advertiser. It is not the vendor or bank advertiser's responsibility to ensure all posts and/or questions are answered.

    Adam

    My main concern with a cloud based solution is that that you are putting ALL of your financial information on a server that you have no control over. What if that server gets hacked? You could lose EVERYTHING. Granted, everything on the server is encrypted but you don’t have control over that encryption key which is also stored on that server. I know over time people have become much more willing to trust their information online, but this is not a risk I am willing to take.

      Jack Wolford

      Are there no accounting PROGRAMS left besides QUICKEN WHICH HAS GONE DOWN HILL? Can you direct me to any?

        Chelsea Krause

        Hi Jack,

        I’m sorry to hear you’ve had a poor experience with Quicken. Luckily, there are plenty of other great accounting software options. If you were using Quicken for your personal accounting, I would recommend taking a look at Mint as an alternative. If you were using Quicken to manage a business, you can compare our top accounting software solutions. If you have any more questions, we’d love to help!

        Best wishes,

        -Chelsea Krause

          Bhavesh K

          Cloud-based accounting software does have some drawbacks. It may take a little more time to load Internet-based applications than it does to load programs installed on your company server. Some cloud accounting system is not as robust as their software counterparts, which means you could lose the ability to run custom reports or use features you rely on to make financial decisions.

            Caleb

            What about the fact that all your (extremely important data) is locked up in some server somewhere? I use quickbooks and for the most part it’s adequate for my business, but I began to think about how all that data is captive. What if I wanted to switch, I don’t even know if I can download and convert the file. The certainly give me an option to import, but know obvious link to export. I’ve used the local version of QB at my previous company for years and it would be just like them to ransom that out.

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