- Cloud accounting keeps your books online so you can access them anywhere, collaborate in real time, and reduce manual work.
- When choosing software, evaluate budget, time savings, ease of use, business fit, features, support, security, and data protection.
- Compare cloud vs. desktop by accessibility, updates/maintenance, backups, integrations, and internet needs.
- Prioritize core features like bank feeds, invoicing, reporting, multi-user controls, and reliable customer support.
As a small business owner, you need to record your financial transactions. But, accounting is not easy, and all signs point to accounting software. Cloud-based accounting software could be a low-cost, time-saving option for tracking your business’s finances.
The cloud
Do you think understanding the “cloud” is over your head? The cloud is a service delivered over the Internet. Data and software live on secure remote servers instead of your computer’s hard drive. Instead of working from your hard drive, you store information on the Internet.
Cloud accounting allows you to store your accounting data online. You need an Internet connection to access your records. You can access your records from anywhere with an Internet connection. You may even be able to do your accounting from a mobile device.
Cloud accounting software allows you to generate your financial reports without an accountant. If you use an accountant, you can still record information with cloud-based software. Cloud software may also help you share data with your accountant.
Common benefits include:
- Anywhere access from web or mobile
- Automatic updates and backups
- Real-time collaboration with your team or accountant
- Integrations that reduce duplicate data entry (e.g., payroll software)
Key features of cloud accounting software
- Bank feeds and automatic reconciliation
- Invoicing and online payments
- Expense and bill tracking (A/P)
- Customer and vendor records
- Financial reports (P&L, balance sheet, cash flow)
- Multi-user access with roles and permissions
- Document storage
- Integrations
- Automation
Choosing cloud accounting software
There are many factors to think about when you consider cloud-based accounting software. Here are eight questions you want to ask.
1. Does the software fit my budget?
Cloud accounting software ranges in cost. Depending on your needs, you can find quality software for under $25 per month. After you subscribe to the software, you don’t pay to maintain it.
Look for a software company that updates the software for free. For example, some cloud-based software companies don’t charge you to update the software when the software changes.
What to check:
- Pricing model (per company, per user, per client, per feature, etc.)
- Extra fees for bank feeds, storage, support, or 1099 e-Filing
- Cancellation terms
- Ability to scale tiers up or down as your needs change
2. Will the software save me time?
Balancing your accounts takes time. The more time you spend on your accounting, the less time you spend growing your business.
The software computes figures for you. Your accounting information is automatically organized. You don’t waste time physically filing or searching for statements.
What to check:
- Automatic bank feeds and rules to categorize transactions
- Recurring invoices, payment reminders, and late-fee automation
- Integrations (e.g., payroll) to avoid double entry
3. How difficult is the software to use?
Shop around for user-friendly cloud accounting software. Some software allows you to try a demo or sign up for a free trial.
Software designed specifically for small businesses may be easier to use. Small business software might exclude big business features that you do not need.
What to check:
- Guided onboarding, templates, and in-app tips
- Clear navigation and plain-language labels
- Quality of help center, videos, and training resources
- Average time to set up bank feeds, chart of accounts, and first invoice
4. Is the software compatible with my business?
Every small business has unique accounting needs. Some businesses need industry-specific features.
For example, a construction company owner may want software that tracks the expenses for individual projects. Decide if your business needs industry-specific accounting software.
What to check:
- Industry needs like recurring invoices
- Ability to break down expenses by departments
- Required integrations
5. What do I need the software to do?
Know which accounting features you need for your business. Find software that meets those needs. You do not want to pay for extra features that you will never use.
Also, decide if you need more features as your business grows. Find out if the software provider has add-on features that meet your needs.
You may want your cloud-based accounting software to:
- Create invoices
- Store customer information
- Track expenses
- Pay bills
- Prepare financial statements
- Reconcile bank statements
- Create estimates and convert to invoices
- Allow users-based permissions
6. Is there a customer service team available?
Some cloud accounting software companies offer you help from customer service representatives.
You might be able to reach a customer service representative by phone, email, or online chat. Will the software company’s service representatives answer your specific questions? Also, find out if your time with a customer representative is limited.
What to check:
- Support hours, response times, and channels (e.g., phone, chat, email)
- Whether support is included or costs extra
- USA-based or global support teams
- Customer reviews mentioning support quality
7. How secure is my information?
Cloud accounting software should protect your accounting information (e.g., customer contacts and account numbers).
Service representatives should not be able to access your personal information or passwords. The software company should be bonded and insured.
What to check:
- Data encryption
- Multi-factor authentication
- Independent audits and certifications (e.g., SOC 2)
8. Can my data get lost?
Cloud-based accounting could prevent your accounting data from being lost or destroyed. You do not store your information on your computer’s hard drive.
Instead, you store your information on the Internet and can access it from any computer. You will not lose your accounting data if your computer crashes.
What to check:
- Automatic backups
- Data export options (e.g., CSV)
Cloud vs. desktop accounting: Quick comparison
- Accessibility and collaboration: Cloud works on any device with internet and supports real-time multi-user access; desktop ties you to specific machines and manual file sharing.
- Updates and maintenance: Cloud updates automatically; desktop requires manual updates and occasional hardware upgrades.
- Backups and security: Cloud includes encrypted, automatic backups on secure servers; desktop puts backup and security on you but gives direct control over storage.Integrations: Cloud connects easily to other online systems (banking, payroll, eCommerce); desktop integrations are more limited.
- Internet dependency: Cloud needs an internet connection; desktop can run offline but may need internet for e-filing or bank connections.
- Cost structure: Cloud is typically subscription-based with predictable monthly costs; desktop often has upfront licensing with potentially lower long-term costs for stable, single-location setups.
Frequently asked questions
Cloud accounting keeps your books online so you can access financial data from any device with an internet connection. Your provider hosts the software, handles updates, and backs up your data.
Reputable providers use encryption, multi-factor authentication, role-based access, and independent audits (e.g., SOC 2).
You won’t be able to sync or update records until you’re back online. Most cloud accounting software providers offer mobile access so you can use the software from your phone.
Yes. Most vendors support importing charts of accounts, customers/vendors, items, and transactions via CSV or assisted migration. Confirm data migration with the provider.
Total cost depends on users, add-ons (e.g., payroll), and support level. Review any additional fees with the provider.
Cloud offers anywhere access, automatic updates, and built-in backups; desktop runs locally, can work offline, and requires you to manage updates and backups.
Are you interested in using cloud-based accounting software? Try our easy-to-use accounting software for free today!
This article has been updated from its original publication date of November 18, 2015.
This is not intended as legal advice; for more information, please click here.
