Cloud Accounting vs Traditional Accounting

Which is better for your enterprise?


The Cloud has now been embraced by the majority of business functions, and take-up is increasing. A Computerworld study has shown that 42% of IT decision makers intend to raise spending on Cloud computing in 2015, while Bill McNee, Founder and CEO of Saugatuck Technology, says that over 60% of enterprises will have half or more of their infrastructure on Cloud-based platforms by 2018.

For the finance function, however, it is a different story. In 2014, The Chartered Institute of Management Accountant revealed that only 19% of organizations use Cloud technology to record daily finance transactions - compared with 31% for CRM and 59% for other business processes.

In terms of accounting processes, however, there are a number of clear benefits to adopting it in the place of traditional accounting. There are also a number of things against doing it.

Cloud accounting software utilizes the Cloud to store accounting data. It makes financial information accessible to owners and employees anywhere with an Internet connection. Traditional accounting software, on the other hand, requires a company to have a dedicated hard drive on which accounting software is installed and financial data is recorded.

It is more cost effective. There are no upfront fees for hardware packages - instead you pay smaller fixed monthly fees. However, this does require a contract commitment, which may cost more in the long run, although many firms offer free trials so you can at least ensure that it is the right accounting solution for your organization. It also cuts down on the costs of updating software, as this is done by the software provider, as well as cutting down on the training of in-house IT staff.

Cloud accounting also allows employees to work remotely, which is a clear boon in an era of globalization, in which many need to work while travelling. This comes with a risk however, as unsecured Wi-Fi connections may allow unwanted people to access the data. If you own a small company, a larger online service may actually be able to provide you with more security than you can yourself. However, you also have to depend on the service to give you the level of security you need. Many finance and technology leaders fear moving from an on-premises financial system to something unfamiliar like Cloud ERP, holding concerns over the timing and process of software updates, ownership and location of financial data, backup and recovery, availability, security, and getting used to a new system. This is largely a fallacy. Much of the confusion about the Cloud is spread by legacy software vendors who lack solutions with a true multi-tenant Cloud architecture. Many of the risks of moving to the Cloud put forth by legacy vendors are unjustified.

Start-ups and SMEs have the most to gain from adopting Cloud accounting technology, to whom the flexibility and scalability are of particular importance. The Cloud gives smaller firms the ability to effectively leverage the kind of processing power previously only available to large companies with a larger budget. Cloud technology can even provide an advantage to sole traders looking to better control their finances. Easy Books, for Mac and IOS, can even be used to log time spent, record purchases and prepare invoices which can be synced via iPhone and iPad while on the move, and have everything synched and ready on the laptop at home.

Successful Cloud solutions have molded to match the demands of the finance function, lowering the adaptations required by finance. However, there is a fundamental hurdle within the finance function surrounding the security of Cloud information, and accountants must overcome such misconceptions in order to realize the benefits to Cloud accounting, which clearly outweigh the negatives.


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