Cloud accounting just means that your accounting data is held on a remote server (“in the cloud”) rather than on your own computer (often referred to as desktop software). If you use a desktop package, it needs to be installed on each computer that needs access to it, whereas cloud software can be used via a browser on any computer (or even on your phone).

You’ve probably heard of some of the companies who specialise in cloud accounting software – Xero and Quickbooks are amongst the more well-known names, but there are lots of smaller providers too.

Whilst it’s important that you choose software that suits your business, it’s worth knowing a bit about the pros and cons of using a cloud accounting package, particularly if you currently use a desktop system and are looking to switch.

Advantages of cloud software

  • Making Tax Digital will require you to provide your returns via a digital link (for many VAT-registered businesses, this is already the case). Cloud accounting packages make this totally straightforward – because all your bookkeeping is done within the software, your VAT returns (and in future your tax returns) can be submitted at the click of a mouse.
  • Although cloud-based systems might seem inherently less secure than data you hold on your own computer, you might find that your data is actually more secure on a remote server. Technology companies invest millions of pounds in keeping your data secure, and have access to far more sophisticated systems than the average small business could dream of. How many people do you know of who have lost hugely valuable data by failing to back up their computer? With cloud accounting, that just isn’t an issue – the backups are done automatically for you.
  • Everyone in your team can access your accounts as and when they need to. You can check who owes you money from the comfort of your sofa. Your accountant can be working on your year-end accounts at the same time as your bookkeeper is inputting your expenditure and reconciling your bank account – no need to pass backups back and forth as you would need to do with a desktop accounts package. You don’t have to wait until the next time your bookkeeper comes in to get the information you need to run your business.
  • For the same reason, you don’t have extra people cluttering up your office – your bookkeeper doesn’t need to come in and sit at a desk, using valuable space and resources that you could give to another member of your team.
  • You don’t need to worry about upgrades – they are done in the background and will be available as soon as you access the software. With a desktop system, you must make sure that you download and install any upgrades as they are released, since they often include things like fixes for newly-discovered security issues.

Disadvantages of cloud software

  • All cloud software obviously relies on your internet connection – no internet, no accounts. If you go through an extended period of disruption to your broadband, or it’s too slow for you to really do anything, trying to produce your accounts in the cloud could end up being a frustrating experience.
  • You’re also reliant on the servers on which your data is held. If there’s a problem, there’s nothing you can do; you just have to wait for the software provider to sort things out. However, they have a lot of infrastructure in place so that outages are a rare occurrence; most cloud accounting providers have multiple servers on different continents, each ready to take over if one of the others goes down.

If you’ve stuck with me this far, you might feel ready to take the next step and switch to a cloud accounting package – we can get you up and running with Xero so you can start taking advantage of the benefits you’ve read about.