In our previous article, we discussed the benefits of cloud accounting at length. In this article, we’ll compare the relative strengths and weaknesses of cloud accounting and locally stored accounting software.

As always, let’s start with some definitions.

Cloud Accounting Software

Cloud accounting combines accounting–bookkeeping, financial tracking, invoicing, and tax reporting–with cloud technology–data stored off-site, accessible through the internet. Cloud accounting means that all financial information is accessible from any mobile device or computer.

Instead of storing and monitoring your financial data on office computers, files are stored remotely–usually in your cloud accounting provider’s database. To access your financial data you visit a webpage or open an app, sign in, and find the information you’re seeking.

Local Accounting Software

Local accounting software means your accounting details and financial data are stored locally; on your office hard drives and computers. Instead of signing into an app or a website to access your accounts, you access an app installed on your computer. Instead of using the internet to send and receive data, you access files that are actually located on your office server. When you need to access or send a file, you go to the office or carry a hard drive with the necessary information. This means you can’t work remotely!

Local accounting software creates the infrastructure for you to store, access and manipulate data on your own local server; that is, your office hard drives and computers.

Side-by-Side Comparison

Local accounting software and Cloud accounting software both have their relative strengths and weaknesses. Let’s take a look side by-side-by.

Let’s examine each of the relative strengths and weaknesses in detail

Installation and Maintenance

Cloud Accounting– no onsite installation or maintenance. This does not mean cloud accounting is IT-problem-free. Depending on the size and needs, most businesses will experience glitches that need resolving. Here’s where working with a partner can help. Partnering with a fractional or virtual CPA is one way to fast-track the installation and maintenance process.

Local Accounting– installation and maintenance are done onsite. Any technical issues such as software glitches that occur must be dealt with on-site with a dedicated IT employee or by the software provider themselves.

Learning Curve

Cloud Accounting-can have a steep learning curve depending on the services you employ. Some companies report long conversations with cloud accounting providers to resolve in-house issues with the software. Others comment on the speed of transition. Usually, it’s just the process of tweaking software to the needs of the specific business. Again, an experienced CPA partner can radically reduce your implementation pains and make it a breeze!

Local Accounting– has a steeper learning curve than cloud accounting. The software you end up going with will have its own unique learning curve with less support available online. Some software solutions can be highly intuitive and easily adaptable, while others take extra time to understand and implement.

Security

Cloud Accounting– highly secure, but not impenetrable by hackers and the like. Cloud data is encrypted, which adds a layer of security against those trying to access your data without logging into your account. It is also duplicated and stored in various locations so that physical damage is redundant.

Local Accounting– also highly secure. Locally stored data is virtually impossible to access through back doors and hacks. Conversely, data stored locally is susceptible to floods, fires, or even spilled coffee if you’re using your laptop.

Access

Cloud Accounting– accessible anywhere, on any device with an internet connection. If you’re out of the office and need to send a file to your accountant to meet a deadline, you can do it from your phone. If you prefer to enter expenses as they happen, you can do it from your phone. You can also work remotely quite seamlessly. 

Local Accounting– only accessible at points of physical contact with an office computer or hard drive. This is a bug and a feature for some. Those who prefer to have their accounting and bookkeeping in one place at one computer, develop the habits and processes to make it work. 

Updates

Cloud Accounting-updates automatically since software exists in the cloud and is maintained there by the provider. If updates affect your day-to-day processes, the provider will usually include an instructional message or video on the changes. Automatic updates mean that glitches and holes get fixed automatically. You don’t have to wait for a new version to arrive to fix an issue you’re having.

Local Accounting-users must download (and perhaps pay for) updates. Installing and using new updates will require some searching and using on the user end.

Capabilities and Integration

Cloud Accounting– has an app store where you can purchase specific software to perform nearly any new accounting task you might encounter. Effectively you are able to customize your SAAS cloud accounting system to work for you. Setting up your software and optimizing it can be a daunting task. Vertical CPA makes it a priority to set up new clients with the right tech stack, thereby optimizing efficiency painlessly.

Local Accounting– may have add-on options to meet your specific needs but integration these will take time to implement. Still most accounting software is built to meet your needs. New businesses or those looking to streamline their processes, may find it difficult to update their local accounting software system should they accrue new accounting needs. This sort of software solution is easy to out-grow once your needs change and evolve.

Your Accountant

Cloud Accounting– remotely and instantaneously provides your accountant with all registered financial data. Your accountant can monitor, process, and advise based on information that is available to everyone instantaneously. Meetings can be remote and may not be necessary since information is passed seamlessly through the platform.

Local Accounting– requires meetings or emails to transfer and review financial data. Since all relevant information is stored locally at your workplace, your accountant will need to stop by your office location and retrieve information. Alternatively you can send files for review via email or other file sharing services.

Read this article for a review of some of the best cloud accounting services for small businesses

Key Takeaways

Cloud Accounting Software

In conclusion, Cloud Accounting takes the gold medal. It’s easier to use, more capable, more efficient, and more integrated. Cloud Accounting speeds up connection, interaction, and process tracking.

• Overall, Cloud Accounting beats local accounting in most metrics of comparison.
• Cloud Accounting streamlines and automates accounting processes so that tasks are completed in real-time and from anywhere

Local Accounting Software

There are good reasons to prefer local accounting, especially if it’s the system that’s worked for your business in the past.

• Local accounting is more secure from hacking but less secure from loss due to physical damage.
• One of the major drawbacks to Local Accounting software is that it requires more leg-work and physical presence to transfer files and share information.

Whether you opt for local or cloud accounting, it pays to partner with a fractional or virtual CFO to manage the accounting process. Book a consultation with VerticalCPA here to answer any specific questions you have about which accounting system that’s right for your business.