No new technology is a silver bullet. It will contain breakthroughs that drive its success but there are almost always tradeoffs. Every business must weigh up, case by case, whether the advantages are worth the pain of lost features. Here’s what you will like and dislike about online accounting software.
Why You Will Like Online Accounting Software
Accountants and bookkeepers who have adopted online accounting software as the cornerstone of their practices are very vocal about the benefits. The list below was compiled from several sources on LinkedIn and comments on Digital First.
1. Intuitive and easier to use. Online accounting software has been designed in the age of Facebook and the iPhone. Software companies put a lot of effort into how easy their business software is to use.
This is not just window dressing. A business owner who feels comfortable using their accounting software is more likely to have greater knowledge and control of their finances.
The best example of good design in online accounting software is the use of a dashboard as the opening screen. It summarises and displays the most important information in a single page.
Although dashboards first appeared in desktop software they weren’t used as the opening screen because they weren’t easy enough to use.
2. Automated data entry. The latest accounting software has eliminated the need for manual download and import of bank statements from your online banking portal. Instead, bank feeds send transactions daily straight into the accounting program.
A business can set up rules that automatically code receipts from stationery suppliers as office expenses. Online accounting software can automatically scan bills and copy individual line items, due date and total owing. Not only is account reconciliation much faster, it reduces the expense of paying a bookkeeper to enter all the data.
Automation removes human involvement which reduces the chance of errors. (Errors are not eliminated totally as there are sometimes exceptions, changed circumstances or rules applied wrongly.) This is an area of rapid innovation and most of these new features are only appearing in online software, not desktop.
3. Real-time business management. The automation in data collection opens the door to a new concept – reviewing your finances in near real time.
Business owners typically expect their desktop accounting software to run months behind. By comparison online accounting software can be reconciled daily, which makes monthly close-outs easy.
This transforms accounting software from a system of record to a rich source of business intelligence. Ask the right questions of your accounting software and the answers will help you find more sales, avoid cost overruns and run a more profitable business.
4. Real-time advice. Now your data is up to date and you’re using your online accounting software to see what is happening in your business. This is a great time to ask a financial expert what the numbers mean and the fastest or easiest way to increase them.
More accountants are seizing this opportunity to offer real-time advice and are branching out from tax returns into advisory services for business owners.
Instead of charging by the minute, some accountants offer a fixed-fee package that includes phone calls and monthly or quarterly consultations to coach you in growing your business. The accountant and business owner just log into their own browsers and can immediately review and discuss the same set of accounts.
5. Better security. Online accounting software is operated by large data centres operated by global technology companies. These data centres are far better protected than the average business server, with armed guards, 24-hour monitoring and the latest security technology.
Online accounting software is also far more reliable than desktop software; the former may experience several hours of downtime, often for upgrades and bug fixes, in a whole year. There is only one (country-specific) version of an online accounting program – everyone is upgraded simultaneously. This means accountants no longer need to keep multiple copies of an accounting program to open files from older programs.
If your computer crashes the accounting data file is unaffected. The business owner no longer needs to worry about backing up the accounting file either, as this is handled by the software company too.
Online programs can also go offline but this is very rare. The most popular accounting apps report their total time offline as less than eight hours in a year. (1)(2)
To find out more about security and online accounting software read Chapter 7: How Secure is Online Accounting Software?
6. Easier to expand. Online accounting software connects to other types of online business software very easily. You can sync your customers with an email marketing program to send them specials or with e-commerce software to record sales through your website. These connections are usually free or a low monthly cost. Some of the latest desktop software can connect to online software too, although businesses on older versions will not have the option.
Online accounting software is easier to use across different devices, whether smartphone, tablet, PC or Mac. Compatibility issues are extinguished because the software runs in the browser, independent of the operating system of the device.
Why You Won’t Like Online Accounting Software
There are some strong practical reasons to stick with desktop accounting software – the depth of features, for example. However, many reasons are also emotional. Older business owners feel more comfortable knowing that their information is within their control.
1. Too expensive. Online accounting software is sold under a different model to most desktop accounting software. Instead of buying it outright (a perpetual licence) the software is rented on a monthly basis. This can quickly end up costing much more. Older desktop accounting software includes a licence to operate five entities which makes it very cheap to track a trading company, holding company, trusts and partnerships. Online software and the latest desktop software usually only provide one licence for one entity.
True or False? True when comparing purchase price. The difference is less once efficiencies of online software are taken into account. Automation can slash the amount of bookkeeping, saving thousands of dollars a year. It’s also possible to get extremely cheap (sub $5/month) online ledgers through accountants for non-trading entities.
2. Fewer features, more limitations. Most online accounting software is less than 10 years old. Desktop accounting software is often more than 20 years old. The depth of features reflects this difference in maturity. Advanced features are more easily found in desktop software. (Online accounting software with the same set of features often costs significantly more as it is sold as cloud ERP, or enterprise resource planning software.)
True or False? True, although the gap is closing every year. Weaknesses in online software include complex inventory, payroll and restrictions on the number of employees. Online accounting software can connect to specialist apps with these features at an extra cost.
3. Speed. Desktop software is generally a lot faster than online software. This is particularly true for data entry, and bookkeepers and accountants often complain that they can’t work as fast in an online accounting program.
True or False? True, although this is likely to matter less over time. Improvements in browser technology and increases in the speed of internet access are already closing the speed gap with desktop software. Developers say the difference will soon be negligible.
Also, the amount of data entry in modern accounting software is dramatically reduced by bank feed automation and invoice scanning services. The key is to find an advisor who can set up your online accounting program correctly the first time.
4. Less control of data. One of the more emotional concerns is about the storage of accounting information. Older business owners can be afraid of losing control of their data. Accountants have long been the trusted holders of accounting files and some are reluctant to relinquish that role. Software companies sometimes store data in data centres in another country with different intellectual property laws.
Younger, online software companies may not survive. What happens to the data if the company fails? It’s a valid question. However, it’s also worth noting that in the technology industry, older companies are sometimes disrupted and driven out of competition.
True or False? True – a business has less direct control but the data may be safer as a result. The best answer is to think of software companies in the same way we think of banks. Just as we trust a bank to hold and secure our money, we expect a software company to hold and secure our data. In both cases we are trusting third parties to mind intangible assets on our behalf. There is definitely an element of risk but businesses are overwhelmingly deciding that the benefits outweigh it.
5. Reliance on the internet. Online business software requires an internet connection. Without it you’re out of luck. This makes it unsuitable in places where internet access is unreliable or too expensive.
True or False? True. Some businesses in this unfortunate position have decided that the efficiency of online business software is so important that it is worth installing optic fibre or microwave links to ensure internet access. Otherwise it’s a case of waiting for telcos or government to improve coverage.
6. Vulnerable to hackers. Some businesses believe their data is more susceptible to attacks by hackers because it is stored “on the internet somewhere”. This is more perception than reality.
True or False? False – cloud software is much better protected against the majority of common threats than desktop software. There are many stories of security mishaps with servers operated by small and medium businesses. Viruses, trojans, ransomware, theft of data by employees – these are regular occurrences when businesses look after their data themselves.
However, very few if any of these reports relate to the types of data centres operated by software companies. To date there have been hardly any successful, published attacks on or theft of data from online business software.
Why You Might Prefer Hybrid Software
MYOB’s AccountRight Live is difficult to categorise. It is desktop software that saves the data file to the cloud and (optionally) to the desktop. It is the only example of the hybrid model but it has a place in the Australian and New Zealand markets.
As a hybrid it enjoys most of the benefits of online software and some of the advantages and disadvantages of desktop software. These are the main points of difference for AccountRight Live (ARL) which is offered as a subscription service.
1. Stability and Speed. ARL can be used offline which makes it a good choice for places with poor internet access. The cloud-based data file can be set to sync with the desktop file so that if the internet cuts out the user can keep working. The user can carry out conventional data entry tasks much faster as there is no delay when saving to the desktop file.
However, ARL doesn’t work well on older PCs with slower processors; it works best on new, fast PCs. Users have complained that the software is slow to save to the cloud data file although MYOB claims it has resolved these issues.
2. Features. ARL is a cloudified version of MYOB’s long-standing desktop software. It has all the conventional features a business needs including payroll, advanced inventory and extensive reporting. It also has features in online software such as bank feeds and the ability to share information with your accountant online.
3. Interface. ARL has retained MYOB’s user interface from previous versions. This is an asset for business owners and accountants migrating from older versions of MYOB who want to maintain their existing processes and avoid dealing with change. It is a drawback for businesses wanting to take advantage of improvements in interface design and user experience. Online accounting programs such as MYOB Essentials and others are much easier to use for business owners.
4. Control of data. One reason businesses and accountants choose ARL is because they can save a copy of the data file to their own computer. This removes the risk of an online accounting software company going into administration. It also lets users keep a copy of their data at any point in time. They can take a snapshot of their accounts for record keeping or audits and keep the file without having to pay an ongoing subscription.
5. Connectivity. ARL can connect to an extensive range of online business software and to mobile apps such as MYOB’s mobile payments app PayDirect.
However, it can only run on PC desktops and laptops. It can’t run on Macs, smartphones or non-Windows tablets running Apple’s iOS or Google’s Android operating systems. A user must download the ARL software to a PC before they can open the data file.
Security remains one of the primary concerns in moving to online software. The idea makes some business owners uneasy because with online software they can’t see the server running underneath their desk.
The reality is that online software has far greater protections in place than the vast majority of servers sitting in offices of small businesses. In Chapter 7: How Secure is Online Accounting Software? we look at how online software is secured.
1. See Saasu’s live uptime dashboard as an indication of the reliability of online accounting software.
2. In 2012 Xero had 99.97% uptime. Xero Stays Scalable, Resilient in the Cloud (ZDNet)