Cloud versus Desktop Accounting: Which is Better for your Business?

In the past few years, there’s been a steadily-growing trend to move as many business functions to the cloud because it reduces infrastructure costs and increases operational agility. While this tendency is certainly based on very realistic advantages of the new method, it still makes sense to question whether some specific functions such as accounting should be trusted within the cloud. There are many factors to consider before making such a decision, from technical capacity of the company to the volume of accounting work that needs to be completed on a weekly level.

In this article, we will analyze the strengths and weaknesses of each group of solution from the perspective of a small business owner. We will discuss the topic impartially, taking different aspects of business operations into account and evaluating which type of accounting software package could produce more tangible benefits, depending on your business model.

Financial considerations

Cloud solutions are typically marketed differently than desktop software, so instead of licenses the users are often asked to pay a monthly subscription. The monthly amount is usually not very large, and there are often several packages to choose from. Meanwhile, desktop solutions for accounting often come as a part of larger corporate software suites and are implemented company-wide. Licenses must be renewed every year in order to get full support for desktop solutions, so the expenses are recurring in this mode as well. With this in mind, smaller companies are usually better off in the final tally if they sign up for a cloud service than if they opt for traditional accounting product.

Security issues

Whenever financial information needs to be sent to external servers, business owners become a bit nervous. It’s true that there are inherent security risks when you upload sensitive data to the cloud, but modern solutions use advanced encryption and access control technologies, so in practice it’s very rare for financial information stored on online servers to be compromised. With desktop solutions, security challenges are completely different and mostly related to limiting physical access to the computers used for accounting purposes and prevention of intentional abuse by the employees.

Usability and data sharing

One of the greatest advantages of cloud solutions for accounting is their plug-and-play nature. It’s very simple to log in, find invoice templates and other tools, and complete all your work on the online platform. Still, for some users there might be a transition period before they are completely comfortable with this kind of remote access. With desktop software, there’s no need for an active internet connection or verification procedures, but on the other hand such packages are often very complex and include a wide array of advanced options that might take a long time to master.  

Compatibility with existing software

Although it’s getting smaller every year, this is one area where traditional desktop suites still have a slight advantage. If your company is already using a business suite that has an accounting program, it may be best to stay within the same ecosystem rather than risk compatibility problems between products made by different vendors. On the other hand, smaller firms that don’t use a shared IT system and may have just one person handling all accounting duties don’t have to worry about such problems. Most cloud tools use standard data formats anyway, so the risks that compatibility issues will arise are relatively negligible for most users.

Final verdict

Cloud solutions are probably better suited for small and medium companies with moderate accounting needs, but that doesn’t mean desktop tools are completely obsolete either. Businesses that don’t want to invest in IT infrastructure and data security may actually derive direct business value from cloud solutions while cutting costs at the same time, which is extremely difficult to achieve under any circumstances. However, companies that already use solid desktop accounting solutions have no reason to switch to the cloud just because everyone else seems to be doing so. In some cases, the decision may come down to familiarity, since it’s often impractical to re-train accounting specialists to use cloud tools and the managers may prefer to receive data reports in a format they already know. In the years to come, however, many companies will at least try cloud options, allowing them to make a well informed, rational decision.

About Mohit Tater

Mohit is the co-founder and editor of Entrepreneurship Life, a place where entrepreneurs, start-ups, and business owners can find wide ranging information, advice, resources, and tools for starting, running, and growing their businesses.

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