Companies ultimately have two options when choosing accounting software for their business: cloud-based or desktop. Although desktop software has traditionally been widely used, companies are increasingly moving to the cloud for a number of reasons. Cloud software offers inherent benefits, such as enabling finance teams to manage accounting from anywhere and on any device. In addition, leading cloud accounting software offers more comprehensive and flexible financial management features than desktop accounting software, so companies often start with desktop software and move to the cloud as they grow and develop more complex needs. In this article, we will discuss Cloud vs. Desktop Accounting.
Quick Look
Both Cloud and Desktop Accounting software products help businesses manage basic financial processes such as recording transactions, managing accounts payable and receivable, processing taxes, and invoicing. However, there are key differences between cloud and desktop accounting software, and these differences have big implications for businesses. They range from remote access capabilities, management, and security to financial reporting, compliance, and support for more complex business structures.
What is Cloud Accounting?
Cloud accounting is a relatively new approach that has gained popularity in recent years. With cloud accounting, your financial data is stored on remote servers, and you access it through a web browser or mobile app. This approach has several advantages over desktop accounting.
In cloud accounting, the accounting system and business data are stored in cloud resources on the Internet. It is a cloud-based approach to performing accounting activities. It is a newer concept and is based on cloud computing. It provides the user with more features than desktop accounting.
Advantages of Cloud Accounting
The following are the advantages of Cloud Accounting:
- Data about your sales, income and purchases can flow directly from your bank account to your books, so you don’t spend hours transcribing them.
- You can see your current financial situation at any time.
- Multi-user access makes it easy to collaborate online with your team and advisors.
- Its an online software, so there’s no need to install or update anything and all your data is backed up automatically.
- You can set up a dashboard showing important financial information like who owes you money, what bills are due, and what your cash flow looks like.
What is Desktop Accounting?
With Desktop Accounting Software is the accounting software and financial data are stored on each person’s desktop or laptop computer by using it. Companies typically have to purchase a software license up front and pay for regular new releases. They need to manually install software and back up company data. Financial professionals can only access financial data from the computer on which the software is installed, so they need to have that computer with them to access the system from home or on the go.
Desktop Accounting software has been around for a long time and is still used by many businesses today. With desktop accounting software, you install the software on your computer and store all of your financial data on your local hard drive. This approach has some advantages, such as the ability to work offline and the ability to customize the software to your specific needs.
Advantages of Desktop Accounting
The following are the advantages of Desktop Accounting:
- Accessible without an internet connection
- Very safe when you are not connected to the internet. If your computer is connected, hackers can still access your software and information through your computer.
- The price is usually lower than cloud accounting software.
- Desktop solutions may run faster depending on your internet connection speed.
Difference between Cloud Accounting and Desktop Accounting
| CLOUD ACCOUNTING SOFTWARE | DESKTOP ACCOUNTING SOFTWARE | |
| Payment model | Pay-as-you-go monthly subscription based on the number of users and features required. | An up-front license cost, plus an additional cost for upgrades. |
| Installation and updates | No software to install. Businesses are always using the current version of the software. When the supplier updates the software to add features the new version is immediately available to all users. | Businesses must manually install the software and all subsequent upgrades and fixes. |
| Security | Vendors provide enterprise-grade software security and provide access controls. | Companies must protect their data, software and credentials carefully to avoid a breach. |
| Accessibility | Anytime, anywhere access for any user from any device with an internet connection. | Software is installed on specific computers, so employees must take their computers with them in order to access financial data when working remotely. |
| Backup and recovery | Cloud vendor automatically backs up data 24/7. Finance professionals can access the software and financial data even if they lose their computer or it breaks down. | Backups are manual. Users must complete backups regularly to ensure the company doesn’t lose valuable information if their computers break down or are lost or stolen. |
| Sharing data with external parties | Because the data is in the cloud with centralized control over access rights, companies can provide external accountants or other parties with limited or read-only access to relevant data. | Sharing is manual and time-consuming. Users often must manually export data to share with external parties. |
| Automation | Cloud accounting software automates many time-consuming manual processes, including custom reporting and reconciliation. | Little or no automation. |
| Customized reporting | Depending on the software, extensive, customized, real-time reporting may be available to support specific business requirements and accounting regulations. | Limited selection of financial reports, with little customization. It’s often necessary to export data to spreadsheets for custom reporting and analysis. |
Reasons Why Cloud Accounting should be prioritize over Desktop Accounting
There are multiple reasons that companies are choosing cloud accounting over traditional desktop accounting, and those reasons vary depending on each company’s priorities. For example, a company with a distributed workforce may choose cloud accounting primarily because of its remote access capabilities. A retailer with warehouse operations in multiple countries may choose cloud accounting to support real-time inventory management operations. In addition, many companies are switching to cloud accounting because they’ve grown to a point where their requirements outstrip the capabilities of desktop products.
- Accessibility: Unlike desktop accounting software, authorized employees can access cloud-based software from any location and on any device. This is vital for companies with distributed, remote or mobile workforces, and for companies with a hybrid model in which employees work from home some of the time.
- Automatic Updates: With premier cloud accounting software, upgrades are immediately and automatically available to every user. This ensures businesses always have the latest functionality, including changes to comply with new accounting and tax rules. With desktop accounting, companies often delay upgrading because of the cost and effort required.
- Less Administration: Because there’s no need to spend time installing and updating software or backing up data, cloud accounting helps the finance team focus all of their efforts on accounting and financial management, not tedious and time-consuming administration.
- Integration with other applications: Desktop software typically wasn’t designed to integrate with other business applications, so businesses can run into issues when attempting to share data across the business. Leading cloud solutions, however, can integrate via APIs, other apps or be offered as a suite with a broad set of cloud-based business applications that handle almost every aspect of the business, from payroll and HR to warehouse management
- Automation results in greater accuracy with fewer errors: Cloud accounting software automates many processes, including reporting, data entry, and reconciliation. With desktop software, employees must perform more of these steps manually, including entering and exporting data. Manual processes are inherently more prone to human error and less efficient.
- Customer support: Cloud providers rely on customers to continue to subscribe to their services, which means they are highly motivated to keep customers happy. The leading vendors have a reputation for good support, and the fact that they run the software centrally can help them resolve technical issues. Some cloud vendors have customer success teams that help businesses get the most out of their software.
- Better Security: Cloud vendors have deep in-house cybersecurity resources and far more extensive security expertise than most enterprises. This puts them in a better position to secure information against hackers or other unauthorized access. The leading cloud software encrypts business data and provides role-based access control that ensures each user only accesses the accounting data they are allowed to see.
- Reliable Backups: Entrusting backup to individual employees is a risky strategy, especially for vital financial data. Cloud accounting providers automatically maintain backups of company data on their secure servers, giving businesses confidence that their important information is safe.
- Cooperation: Cloud accounting software makes collaboration easier because everyone has real-time access to a single version of the data. This eliminates the need to manage multiple versions of the same file or copy data to USB drives for sharing. Distributed teams can more easily collaborate on projects, accelerate financial processes, and share data with external parties.
Which is best for Your Business?
The choice between cloud accounting and desktop accounting ultimately depends on the specific needs of your business. Cloud accounting is ideal for businesses with remote workers or multiple locations, as it allows for easy collaboration and accessibility. Desktop accounting may be more suitable for businesses in areas with poor connectivity or those with specific customization needs.
When deciding which option to choose, it is important to consider factors such as cost, accessibility, and security. Carefully assessing your business needs and the available options will help you make the best decision for your accounting needs.
Conclusion
Companies are moving from desktop to cloud accounting for many reasons, including the global shift to remote and hybrid work. In addition to the cloud’s inherent benefits, such as real-time access to information, leading cloud accounting software offers more comprehensive features and greater flexibility than desktop accounting, so it can better support the increasingly complex needs of growing businesses.
