If you’re wondering how cloud accounting is different from traditional accounting and which option is right for you, this article will share all you need to know. 

Cloud Accounting

Cloud accounting software allows for data to be accessed through the cloud from anywhere in the world with the aid of credentials. Cloud accounting software connects via the internet to run on remote servers. The end-user will be able to access their crucial data through a web-based interface, rather than through an installed desktop application. 

Traditional Accounting

Traditional accounting refers to desktop-based accounting software. Before cloud accounting, accounting applications were installed and run via the hard drive of the office desktop computer. As such, access to stored data can only be done through a specific computer, which limits accessibility. 

Key Differences

1. Accessibility

The biggest difference between cloud and traditional accounting software has to be the ease of access. In traditional accounting, real-time financial data can only be accessed by an individual using the computer the software is installed on on-site. 

In cloud accounting, the data can be readily accessed by anyone anywhere as long as they have a stable internet connection.

2. Collaboration

Cloud accounting provides access to all your accounting records, corporate taxes and other crucial information at the same time from different locations and devices. This makes it easier for you to collaborate with others as work meetings can be carried out seamlessly over the internet. 

On the other hand, traditional accounting is more restrictive and discussions over financial matters can only be done when all concerned parties are within the same room. Moreover, information has to be manually updated on the computer and sent to others, which can be a time-consuming process.

3. Scalability

Scalability is one of the key features of cloud-based systems. They automatically update to fit your changing demands— be it accommodating for business growth or an increase in users. 

With traditional accounting methods, you will need to regularly update your system to ensure uptime responsiveness. This will have to involve purchasing new packages and installing them onto your desktop computer. Overall, it is less flexible and cost-effective as compared to cloud-based systems.

4. Security

Safety and security are important when it comes to managing key financial information. In the case of cloud accounting, you can have a peace of mind since your data will always be available and accessible through multiple servers. Moreover, regular security checks and updates are automatically done by the system, giving cloud accounting systems an additional layer of security.

On the contrary, if you use traditional accounting systems, your data is prone to be  compromised, especially if the computer you use malfunctions, gets stolen or damaged. You will also need to keep track of the latest updates and carry them out manually to not put your financial data at risk.

5. Cost

Last but not least, traditional accounting software is arguably a heavier investment as compared to cloud accounting. In traditional accounting, besides the software, you will need to allocate a budget towards the maintenance of the hardware. As your financial data expands, so will the need for additional storage space and the purchase of new hardware to keep up with changing demands.

With cloud accounting systems, however, you just need to pay for the software’s monthly subscription fees. The software automatically updates to fit your business requirements, and IT assistance from the software provider is available round-the-clock.

Choosing the right accounting solution for your business

When it comes to choosing accounting software, it is important to ensure that it can meet your business needs. If your company values accessibility, then cloud accounting may just be the right solution for your business. Alternatively, if you want tighter controls over sensitive financial information being open to wireless access, then traditional accounting may be the better option.

Nevertheless, no matter which accounting solution you may find more suitable, your financial records still need to be overseen by professionals to maintain accuracy and reliability. At Thong & Lim, we have a team of highly-trained and experienced Chartered Accountants and professionals. We provide a full range of consultancy services that include corporate tax and bookkeeping.

Get in touch with our professional consultants at +65 6224 1076.