May 15, 2024 | 4 minute read
With working from home more of an option than ever, small business owners are rethinking the way they operate. Many are seriously considering cloud-based accounting systems that let them or team members access the business’s data and financial software from anywhere.
Like online accounting, cloud-based accounting applications and user data are accessed through the internet. As a result, those who are authorized can access their company’s books and use bookkeeping and accounting tools from any device connected to the internet and be able to collaborate with colleagues, customers and creditors. The data and applications are constantly updated and backed up, making it easier to analyze cash flow, send invoices and pay bills. Most offer automated backups, helping to add a layer of protection for businesses.
Regardless of whether the accounting software you use is cloud-based or on your premises, managing the security risks associated with either method is ultimately your responsibility. When managing the data stored in your accounting software, follow CIA — confidentiality, integrity and availability — as guiding principles. This involves monitoring access controls, ensuring the integrity of data, understanding the security controls your system uses and updating your approach as needed. Such actions can add an additional layer of security if you maintain your own security controls on your devices and networks.
Like desktop software, cloud-based accounting systems can handle a wide range of bookkeeping and accounting functions, from tracking payables and receivables to managing bills and producing inventory reports. But they also differ in several key ways.
If your accounting software and all your bookkeeping and financial data are stored on a desktop machine at your business, you are in effect tethered to that particular device or local network. Cloud-based systems allow authorized users and devices access to your business’s financial information, wherever they may be working from.
Desktop programs don’t lend themselves easily to remote work environments. With cloud-based systems, on the other hand, multiple authorized users can get access to account data, and dispersed teams can often collaborate and work simultaneously in the system to complete company tasks.
All software programs involve some automated functionality, but desktop and cloud-based software programs come with different levels of automation. Desktop accounting software must be updated and backed up manually to keep the program current and make sure it is secure. Data entry, for the most part, must be completed manually. Cloud-based accounting software is automatically updated by the software vendor. It can be connected to your bank account and automatically update data on a consistent basis, with all transactions processed automatically.
As a result, “when you log into your account, you’re getting the most recent update available in your system,” says Laura Huneycutt, product manager, Small Business Product Strategy at Bank of America.
Both desktop and cloud-based programs let users synchronize their banking transactions with their financial institutions. However, cloud-based accounting software typically allows for an easier and more seamless process, automatically downloading and categorizing transactions for you, for instance.
Desktop programs require an upfront licensing fee, which typically requires a renewal as often as every year, or, sometimes, when upgrades are required. Cloud-based systems generally charge a monthly or annual subscription fee. Your cost will vary with the level of sophistication of the program you choose.
When choosing a cloud-based accounting platform, give some thought to your business’s accounting needs and budget.
Cloud-based accounting programs offer options for companies of different sizes, such as one-person businesses, small employer firms and larger businesses, with features tailored to the needs of specific-sized firms. Choose a program that reflects the current size of your company. You can always trade up to a more sophisticated version. If multiple team members will need to use the platform, make sure you have the option to purchase multiple seats on the plan designed for the size of your company.
You may want to consider choosing a cloud-based accounting software that is integrated with other programs you use, such as your payroll platform — or else you may have to do a lot of manual work to incorporate information from those outside sources. Cloud-based accounting providers generally publish a page on their websites listing their integrations, so check out that information before you commit.
Cloud-based accounting programs aimed at solopreneurs and small businesses tend to cost less per month than enterprise programs aimed at larger small businesses. Make sure to compare the annual and monthly costs of any programs you are considering. If your company is growing, also make sure you have the option to trade up to a more sophisticated version of the software without having to migrate off the platform entirely. Migrations will cost you time and money.
The bottom line is that cloud-based options offer a great many benefits, especially for small business owners who seek easy remote access to their accounting systems. Ultimately, however, deciding whether to choose desktop or cloud-based software rests on one essential issue: which option best suits the needs of your business.
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