Cloud Accounting is similar to traditional bookkeeping services, however, rather than noting down information on paper or on a specific desktop, it is processed and uploaded on a ‘cloud’ system on specific servers meant for the business. Cloud accounting is preferred over traditional bookkeeping methods as it uploads onto a cloud system that is accessible from all company-owned desktops and can be accessed by all employees, saving time and hassle as well. It solely relies on the access of an Internet Connection to be used by computers that are permitted access to it, removing the hassle of using on-site, limited desktops to access the accounting data.
The difference between cloud accounting and old school accounting
There are stark differences between cloud accounting and traditional, old-school accounting. In traditional accounting, an application was installed onto a company computer that was only accessed through desktops that had the application installed as well. This required constant software updates, limited data expansion, and the requirement of several desktops in order for accounts and financial data to be accessed by different employees, which is not the best option for small businesses as it requires large amounts of funds. However, cloud accounting also has all the beneficial aspects of traditional accounting with the bonus of eliminating the cons, as since it is Internet-based, it doesn’t require installation of applications, specific hard drives, or desktops, but rather just a working connection in order to access the application harboring all the data. Since it is an online system, it is constantly up-to-date and has the advantage of fixing errors that might possibly occur in bookkeeping. Due to these errors businesses often prefer to consult with professionals, bookkeeping in Toronto is highly popular.
In addition to this, data from banks can directly be transferred to online accounting panels since cloud accounting is based online, in comparison to traditional bookkeeping, where hours can go by typing and listing down all finances, cash inflows, outflows, and expenses.
Cloud Accounting in Contrast
Bookkeeping services for small businesses can end being extremely expensive, as requirements of personnel to handle the accounts, constant switching from hard drives to USBs which add the risk of software malfunction and viruses as well as updating software and getting new desktops to tend to take a major toll on costs. Cloud accounting is a much more flexible, feasible, and cheaper option for a business at any scale, especially for small business bookkeeping. It is much more efficient and much faster than traditional bookkeeping methods.
Bustling cities house many businesses, especially smaller ones. For example, has many small businesses Toronto that follows both traditional, as mentioned earlier, as well as modern, meaning cloud accounting, methods, and services. In the case of small businesses specifically, cloud accounting has both pros and cons.
Advantages of Cloud Accounting
- Cost reduction
- Secure
- Quick
- Password protected
Listing down advantages, one of the main advantages is major cost reduction. A company, especially a small business, can inevitably go bankrupt while spending huge amounts of money on traditional accounting methods. For security issues, they require a safe set up, cooling mechanisms if desktops and hard drives are to overheat, constant updates, and upgrades that require further money. Cloud accounting requires a quarter fraction of the costs of traditional accounting, where servers are manually made and installed on-site, as the server for cloud accounting is based online and does not require specific setups. It also only requires payment of space being used up from uploading data rather than paying the full amount for a percentage of space being used in reference to locally set up accounting methods.
Coming to another advantage is security, although there may be some breaches that can result in online servers being hacked, it is rare in comparison to data that can be physically accessed by employees when data is stored on desktops and hard drives, It can be argued that in-computer software can be added with security measures and protocols, but it is a very costly initiative for small businesses. In comparison to this, cloud system accounting offers password protection, admin access, as well as built-in security measures that pre-exist and is a much more reliable and affordable option for small businesses.
Furthermore, it is also more reliable than in-computer, on-site accounting data collection. Hard-drives can fail, employee theft, system breakdowns, and malfunctions are a few of the many reliability disadvantages that traditional accounting methods harbor. With cloud accounting, data is stored on multiple servers rather than one, meaning if one server crashes, you have several backup servers that still have your information intact. However, if it was a hard drive in question, potentially all data could be erased and lost if the hard drive has malfunctioned beyond repair or restoration.
Are there any drawbacks?
In accordance with the advantages, there are disadvantages as well. The main disadvantage of cloud accounting methods is that if there is no internet connection availability or access, there is no way to access the data that is stored on online servers, meaning there is the constant cost of keeping a stable and steady internet connection. Power shortages or internet service issues can render a company useless in terms of accessing their financial data.
In addition to this, as mentioned earlier, security in the case of cloud accounting is both an advantage and a disadvantage. Unless air-tight security measures are involved, online data can be accessed by third parties and potentially harm the business finances if tampered with. Security, in reference to cloud accounting methods, depends highly on how much work a company puts in to make it secure. So essentially, it depends on initiatives a company takes to keep their data secure, so if the efforts are not up to par, security will be a disadvantage, however, if it is installed effectively and efficiently, it is a major advantage in comparison to traditional bookkeeping services. Lastly, another major disadvantage of cloud computing is that it provided by an online small business that offers its services. If the said company is to fail and go bankrupt, other businesses relying on their services would lose their financial data as well as their bookkeeping service. This can take a very devastating toll on a company and its finances.