Cloud Accounting vs. Desktop

- Which is better for you, what is the best for your company and what are the differences? cloud accounting

Whether you do your own bookkeeping and accounts, you have a member of your team carry these out or you outsource to an external company, the system used for the recording of your accounts, the interaction with your systems and the reports that they produce can fundamentally alter your business.

Cloud accounting is where your data and the software system is hosted and worked on inside of the cloud. The most recognisable example of this is Xero, a system that arrived in the UK in around 2010 and now has over 20+ million subscribers across the world. Desktop accounting, where the software is downloaded on to your company’s computers and from here it is worked on, was the way all accounts systems worked from the 1990’s to 2010, the most popular being from Sage.

As with most software systems that are cloud based, you access the systems via a web browser, login to the system and to your files. The files are held within the cloud and are backed up instantaneously. You are generally able to export your company’s data from these systems but they do not, yet, support back up’s on to your desktop. This is in stark contrast with desktop hosted systems where because all of the data is stored in your machine it can and should be backed up on it.

The negatives of having your data in the cloud system;

- You are unable to carry out a back up to which you can restore to. You could carry out a trial balance, debtor and creditor schedule and then manually restore if necessary afterwards but this is not the same as carry out a normal back up and restore.

- If you wish to leave a particular software company your data only remains on their system for a set period once you’ve closed your account.

- Trialling some processes in your business will be significantly more difficult as your data in the cloud is always live.

The positives of cloud data storage;

- Your data is in a system that is very secure and constant, various back ups and load balancing mean the chances of your data being lost are almost infinitesimal.

- With your data on a desktop, if you do not carry out very regular back ups to various places including off site data centres, you are at a much higher risk of losing data.

- You can access your accounts and data wherever you can get to the internet with a suitable device.

The way cloud-based systems interact with other software has also been a sea-change in the way accounting data streams have developed in the last decade. Being able to link other cloud-based systems together with your accounts package could bring whole new levels of efficiency to your operation. The most common integrations I see are Xero linked to Hubdoc, ReceiptBank, Hubspot, Stripe, GoCardless, PayPal & A2X. To give you a flavour, this is linking your accounts system to software that automatically process card payments, stock and invoicing on web stores, purchase ledger software and your customer relationship management.

Not having to re-enter data in various systems is very efficient not only in time but usually in stationary too. Of course, with every pro there is usually a con and in this circumstance it is related to the operations in your company. If you have, for example, inhouse software that was developed to interact specifically with a certain software package or using an externally created comparable, until they are adapted, you will be unable to make the switch over. It is also fair to say that a lot of the desktop software suppliers have developed methods to get external integration with the systems.

With the two types of system, you generally get the same type of reports from both. This would stand to reason as double entry bookkeeping has been around since Roman times according to Wikipedia. But the speed and accessibility of the cloud-based systems means that instead of being sent reports such as the P&L and the balance sheet on a pdf to your email account, you as a business owner can go in and look at them at any point in time from anywhere in the world. A great asset.

When looking at whether your accounting system should be cloud or desktop based, assess what operational systems you use and whether the integration would increase efficiency. Next consider how you want your data to be stored and if having a constantly live system would be a hinderance or the security of the cloud, a boon. The last thing to assess, is the most important, and that is how you get the financial data in a format you can understand as accurately and quickly as possible.