The Pros & Cons of Cloud-Based Accounting Software

The Pros & Cons of Cloud-Based Accounting Software

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  • Are you thinking about switching over to cloud-based accounting software? Of course, there are some key considerations to think about.
  • Cloud-based software has greater accessibility, is cost-effective and is updated automatically. However, there are sometimes hidden costs to consider and security risks to factor in. 
  • In this article, we look at the pros and cons of cloud-based accounting software to help you make up your mind.

Did you know that if you’re using email or accessing your bank account online then you’re already using cloud technology? In cloud computing, you just use your computer (or iPad or smartphone etc) to log into computers held at the offices of an off-site service provider (which may be anywhere in the world – hence in “the cloud” as far as you are concerned).

Their computers host the programs you use, store the records and data you create and they look after hardware maintenance and software upgrades. And this system replaces the need for you to maintain particular programs on your office computers.

As part of the trend toward cloud computing, we have seen a rise in accounting applications being made available online in the last 12 to 18 months in Australia.

Let’s think about the possibilities for your business of making this change in the way you do things by looking at the pros and cons of using cloud service and the cost related issues as they relate to the two main players in the accounting software space, MYOB and Xero.

You will notice that a number of items turn up listed in both the pros and cons lists. That’s because it may be influenced by your particular circumstances. For instance, cost may be either a pro or a con for you depending on your size of operation. You may find or think of other issues related to getting cloud bound, but it will provide you with a general guideline for thinking about its feasibility.

The Benefits of Cloud-Based Accounting Software 

The benefits of cloud computing accounting software are:

  1. Ability to enter and access data anywhere, anytime
  2. Ability to allow others to access the file
  3. Automatic processing of data
  4. Cost-effective
  5. Always up to date
  6. Data security

1. Ability to enter and access data anywhere, anytime

You can access a cloud-based record system from home, from abroad, from your mobile devices. Effectively, whenever you want to look at something, if you have Internet access then it is available to you. While it is possible you could do this on your existing system with various configurations or access methods, using a cloud-based system reduces the amount of technology involved, and increases the speed of access.

2. Ability to allow others to access the file

In our case as an example, clients who call to ask us a question regarding their business usually need or would appreciate a quick response. If that client is using a cloud service we can immediately access their most up-to-date information to help form a decision. There is no need for files to be emailed back and forth, or otherwise sent to us. If you keep your records up-to-date we can immediately get an accurate picture what is happening in the business.

3. Automatic processing of data

The systems currently available will automatically load your bank data overnight. This means that no one needs to do the volume of mind-numbing processing that previously occurred. Built-in features such as auto memorising of transactions or descriptions further decrease processing time by automatically carrying out repetitive tasks.

4. Cost-effective

Generally, cloud services are cheaper than purchasing an off-the-shelf accounting software package and paying a continuing maintenance fee to keep it current with changes to regulations, rates, tax laws etc. But be aware – if you have multiple companies the cost could end up being substantially more (check the “Long term issues” information in the Cons section).

5. Always up to date

As improvements and updates are made to the software by the cloud service provider there is nothing for you to do. The improvements are installed on the system and simply become available to you.

6. Data security

Your data is continually backed up and therefore there is limited risk of loss of data and reduced need to retain data offsite. It’s all part of the service.

The Disadvantages of Cloud-Based Accounting Software 

The disadvantages of cloud-based accounting software include:

  • The cost of software updates
  • The cost of subscriptions
  • The cost of changing circumstances
  • Potential security issues 

1. The cost of software updates

A cloud solution ensures you are constantly up-to-date on versions. But many people are happy with the version they originally purchased and would prefer not to constantly pay support fees. For anyone not paying support fees to maintain access to the latest versions and updates, the cloud will cost more, and this should be considered at a time when you choose to review your software.

2. The cost of subscriptions

With these services you will normally be charged a subscription “per entity”. This means if you have five companies you are paying for each entity that is online using the cloud package. Using in-house systems, on the other hand, you pay for the software (and if you wanted, support), and this allows you to use it on multiple entities.

3. The cost of changing circumstances

You choose a cloud service based on what it provides you today but let’s consider the longer-term ramifications. Two easy examples:

a) You sell the business or close down: Whilst you no longer want the service you do however need to retain access to all that information for five years. What are your options – continue to pay for the service for another five years? Or, print all the information out;

b) Add an extra angle to this: Say that every hard copy invoice you have paid you destroyed because you attached a scanned copy to the cloud database.  Do you pay for another five years membership?  Or, do you open every invoice within the system and save it to another location (a very long and time-consuming task).

3. Potential security issues 

Whether your information is on the cloud or sitting in the computer on your desktop security of the data and maintaining its integrity are vital issues.

All the common procedures used with in-house systems, such as password-only access and immediate closure of access to staff no longer needing it (e.g. on transfer or resignation), need to be available from your cloud service provider.

Don’t just assume they have the same capabilities as your existing system  – test it first.

Additional safety tip: When using a cloud-based accounting program your data is stored remotely, not on your own computer. You should check in which country your data is being stored. It’s important your data is stored somewhere in Australia according to Australian privacy laws.

David Henderson

Principal at ROCG Asia Pacific

Comments (1)
Dj Hodgson

Dj Hodgson, Marketing & Communications Manager, BDM at David Henderson Online

Great first article, keep them coming!