Cloud Accounting vs. Traditional Software: Which is Right for You?

Businesses have many accounting options, from working with third-party tools that replace some of the many tasks they need to complete throughout the day to preparing tax returns.

And over time, you’ll be met with the decision to:

• Migrate to the cloud
• Stay traditional

As a firm that offers extensive software setup, we know how to evaluate your options to find whether cloud accounting or traditional solutions are the best fit for you.

You can migrate to the cloud, and in many cases, it makes sense, but the choice requires more than a one-size-fits-all approach.

What’s the Difference Between Traditional and Cloud Accounting Software?

Your traditional desktop software does the job. If you’re in the office, it’s a snappy solution with no concerns of having to connect to the Internet to manage your accounting. But there are limitations that you also need to consider:

• Limited remote access
• On-premise data storage
• One-time or perpetual licensing
• Manual updates and maintenance
• Installed locally on computers or servers

Some examples of software that fall within this classification are QuickBooks Desktop, Sage 50 and local ERP systems.

Cloud platforms offer more flexibility and options for worldwide teams to work together from an Internet connection without concerns of scaling. 

Cloud accounting software offers features that include:

• Subscription-based pricing
• Automatic updates and patches
• Access via a web browser or app (anywhere with Internet)
• Data stored on the vendor’s secure servers

Prime examples of tools that fall within the category of cloud account tools are: QuickBooks Online, Expensify, FreshBooks, NetSuite, Xero and Wave.

Due to the easy scaling and opportunities to grow your business with cloud tools, it’s easy to see why so many businesses are moving away from traditional software.

5 Reasons Why Businesses are Transitioning to Cloud Accounting

If you’re on the fence with moving to the cloud, know that 94% of the world’s businesses use the cloud to some degree. And when it comes to software and third-party tools, there are plenty of reasons to adopt them:

1. Accessibility from Offices Worldwide

Your workers can work from anywhere at any time. For example, team members in London can log into your platform with your US team to:

• Collaborate with team members
• Work together with clients 

Users have access to real-time data across locations and can use mobile apps for on-the-go updates.

Traditional software ties you to a single location, while cloud options allow for worldwide collaboration.

2. Cost efficiency across your organization 

Running software in-house, the right way, requires a lot of upfront costs. You have to invest in hardware and redundancies to maintain data integrity. Cloud providers build many of these costs into their pricing so that you enjoy:

• Automatic updates included (no IT maintenance fees)
• Scales with business growth
• No upfront hardware investment
• Predictable monthly/annual costs

3. Security and compliance

Your organization’s security and compliance are a top priority. Cloud accounting software is built to the highest standards with options for:

• Disaster recovery built-in
• Data backups handled automatically
• Vendor-managed security updates and patches

Often, cloud providers meet SOC 2, HIPAA and GDPR standards. You must verify that the provider you choose meets the security and compliance requirements of your industry.

4. Integration and automation

Adding cloud accounting software to your business is possible with:

• Easy connection to banking, payment platforms and third-party apps
• Automatic transaction feeds and reconciliation
• Workflow automation and intelligent workflows
• Better ecosystem connectivity

You can integrate cloud solutions into your existing tech stack with the tap of a few buttons. Fast deployment like this allows you to get up and running faster.

5. Reporting and analytics

Dashboards and insights are at your fingertips. Every cloud accounting provider is a little different, but most offer:

• Customizable reports on demand
• Better data visualization tools
• Faster financial reporting

Cloud accounting makes sense when you transition from a small team to a growing company that wants to scale without the friction that traditional software introduces.

Working with a professional who can help you select the accounting software your organization needs and integrate it into your existing systems is a fast track to success. You’ll also have to consider hidden costs and challenges, such as:

• API rate limits
• Vendor lock-in
• Subscription fatigue
• Internet dependency
• Data privacy concerns
• Customization limitations

Even traditional software comes with its own challenges, such as needing in-house specialists, hardware upgrades, maintenance and security – to name a few.

Traditional software runs on your systems, putting you more in control of your security, but you also shoulder a lot of upfront costs. Cloud accounting alleviates the maintenance and startup costs while removing some of your control over your security.

Schedule a consultation to learn how we can help you with your traditional or cloud accounting software.