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 Differences Between Cloud Accounting Software and On-Premise Accounting Software

Today, most accounting professionals rely on some sort of software to manage invoices, orders, accounts receivable and accounts payable. That software can vary widely in sophistication depending on the complexity of the business and the needs of the customer. For example, many small businesses can manage their books on Excel spreadsheets. 

Many continue to use Excel for accounting even as their business grows, which ultimately results in disparate data spread across multiple spreadsheets that are out of date or even present conflicting numbers. This has businesses wasting time agreeing on whose numbers are correct and justifying their data. Eventually, businesses need to invest in an accounting software package and ultimately, depending on their growth, full-fledged Enterprise Resource Planning (ERP).

What is Cloud Accounting Software?

Accounting software automates some or all of the processes associated with measuring and communicating the financial information of a business. This includes accounts payable, accounts receivable, income, expenses and more. Accounting software enables the finance department to more easily assemble financial data and disseminate it to stakeholders, both internal and external, such as auditors, investors and suppliers. 

Cloud accounting software is storing and accessing these accounting data & programs over the internet instead of your computer’s hard drive. The emergence of cloud computing first began with simpler functions such as email, but has since grown to include nearly every software application including accounting!

What is on-premise (traditional) accounting software?

Historically, accounting software has been run on-premise, meaning the software and database is stored on a local server that people within the organization can access and manipulate. This software would be linked to the device it is installed in and hence when there is a version upgrade, the system in each of the devices would need to be upgraded individually.

5 Advantages of Cloud Accounting Software over On-Premise Accounting Software

Primarily, cloud accounting software can better scale with a company’s growth. This is so because all that is needed to add additional capacity is a user license and a browser, which can be accessed on any device. Businesses can easily and quickly add finance staff, reviewers, such as owners and CFOs, or even other service users such as sales personnel, on a cloud system. 

If a company adds a new office, location or subsidiary, managing the accounting and finance function is easily done as well. It’s just a matter of logging into a computer and accessing the software application online.

This benefit extends to the workforce as well. Team members who are traveling or stuck outside of office because of bad weather or a catastrophe, or even in cases like during lockdowns who needs to work from home, can easily do so by just logging onto the internet without needing a virtual private network (VPN) to access the system.

Cost Effectiveness
Because cloud accounting software does not require an initial investment in servers, databases, data centres and staff to manage it, the upfront costs for the cloud are far lower than for on-premise accounting systems. Those cost savings extend throughout the lifecycle of the cloud accounting software ownership because businesses can avoid the costly and disruptive upgrade cycles required by on-premise software.

The Auditing Process
When it comes to financial audits, cloud accounting software adds another layer of convenience. Some businesses have simply been able to give external auditors access to their cloud accounting system. So instead of taking over a conference room with a small team and room full of boxes, the auditors can do their work off-site. This also reduces the audit preparation time and staff resources needed to be dedicated to the audit process.

Automated Updates
Probably the biggest advantage of cloud accounting software over on-premise software is that it is always up to date. Cloud accounting software companies typically make multiple updates to their software each year and since every customer is on the same version of the software, each and every customer will get upgraded when the vendor rolls out the upgrades to go live. 

That’s unlike on-premise accounting software, which requires manual updates, patches and updates to any integrations with other software that may be required. It also means that any changes to accounting rules and regulations or state or federal law can be accounted for, will be built into the system and pushed out to customers at the push of a button.

Which System is a Better Choice for You? 

There really aren’t much advantages to having your accounting software run on premise versus the cloud. Some on-premise vendors might suggest that there are security advantages to housing accounting data at the location, but the security precautions cloud accounting software vendors take, both physical and cyber, is almost always far more sophisticated and advanced than an individual business. 

Some places do have legal requirements to keep data within a particular geography but most cloud accounting software vendors are building or have already built data centres in those locations to account for such laws. Today, the default choice is the cloud.

If you are interested to find out more about Cloud Accounting or ERP software, contact us now. 

YYC is the Solution Provider Partner for Oracle NetSuite.

YYC is the Platinum Partner for Xero.

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