Desktop vs Cloud-based Accounting Software: Which is the right choice for your business?

Over the past few years there has been a shift from traditional, desktop and server-based accounting packages, such as Sage 50 and Quickbooks, to the newer suite of cloud-based softwares like Xero and Quickbooks Online, the latter which is very different to its desktop counterpart. In addition, sites such as Freshbooks, which is not a comprehensive accounting software, but rather an invoicing system, has grown in popularity amongst consultants and sole traders.

There are many arguments for and against the use of cloud-based accounting systems, however, the most compelling is the ability for multiple users to log in and work from any location – access to a computer and internet are the only requirements!

Cloud based software is accessed easily from a browser, similar to logging into a cloud based  email service. All information is held externally on the the provider’s system, with no back up required at the user end. Typically, the client will open the account, with a set user allowance and an extra user allocation for the designated accountant. Reports and information can be exported in excel or pdf format as required similar to desktop software.

Invoicing is done seamlessly through online software, with the ability to raise invoices electronically and send straight to the client’s email address. Clients are able to view invoices online as well as downloading a physical copy. Remittance advices are generated in a similar fashion and can be emailed directly to the client.

This arrangement is perfect for a business with an external or outsourced accountant, who infrequently visits the client premises. The client is able to take charge of their invoicing, while the accountant handles the back end accounting entries remotely. The client also has the ability to run reports and view information at their convenience, rather than requesting this from the accountant, which is useful from an efficiency perspective.

Proponents of the traditional desktop option will argue that the data is secure, located generally on a single premise, and backed up to a server to allow recovery in the incident of computer corruption or onsite disasters. Typically, desktop softwares are more technical and comprehensive than their cloud based counterparts, which tend to be focused more to the business owners and ease of use, rather than accountants. A good example is the bank reconciliation function in Quickbooks Online Global Version; once finished, it is unable to be undone. Compare this to Sage 50; reconciliations can be unreconciled and amended retrospectively.

Another consideration is whether your business is service-based or manufacturing. A services-based firm will benefit from cloud based software, however a business involved with manufacturing products will find that desktop packages allow the ‘build’ of inventory from raw materials entered into the software which cannot be done with cloud based options.

Pricing is also another factor to consider, as desktop software has an upfront price, with upgrades not normally required for a number of years, as opposed to cloud based, which is billed at regular intervals monthly. This may seem small, but can build up to a significant amount over time.

In short, there are many factors to consider as to which package is right for your business, however geography, nature of your industry and pricing will be the main ones to take into consideration.

Contact The Accounts Dept. for help in setting up an appropriate accounting system for your business, and stay in the loop on VAT announcements by following The Accounts Dept. blogs on our website, social media and Linkedin.

Written by Marie-Claire Accordino, an ICAEW Chartered Accountant, who works at The Accounts Dept. in Dubai.

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