Advantages and Disadvantages of Cloud-Based Accounting

11 mins read

This article gives a high-level overview of the advantages and disadvantages of cloud based accounting software.

We know reading about accounting is boring yet is also very important to understand for the success of business. So, tape your eyes open, or do whatever you have to do to get through this invigorating information on the advantages and disadvantages of cloud-based accounting.

We get it, nobody truly enjoys reading about financials, let alone accounting… Yet here we are, as we understand the important role accounting plays in a business’s success! As the world has shifted away from manual accounting towards computerized software, there are 2 main types of software that dominate the accounting world: Cloud-Based and Desktop. Accounting relies on the ability to create, manage, and retrieve records at the drop of a hat in order to build financial reports. To gain a better understanding of this software, let’s take a look at what exactly cloud-based accounting is, along with some of the advantages and disadvantages.

What is Cloud-Based Accounting?

Cloud-based is a term used to describe data that is stored on servers that are connected to the internet. This means all data is stored on remote, external servers rather than being on internal servers. The software used isn’t hosted on one physical computer that you have in your office, it is stored in an entirely different location and is accessed through the internet. When users interact with cloud-based accounting software, the data is processed and immediately stored on the remote server.


1. Accessibility:
With cloud-based accounting software, users are able to access their data anywhere they have internet connection. This is possibly one of the biggest advantages of cloud accounting, as users are no longer tied to a desktop computer or their desk. With the world becoming more mobile, the value of being able to work from anywhere has increased significantly in recent years. Using cloud-based software for accounting, users can access information from all around the world as if they were in the same building. Sharing information also becomes much easier, as users can access it with a unique login or by sharing a link to the cloud location. This process removes the need for sharing large files in e-mail or using flash drives.

2. Security and Backups:
Cloud servers typically provide the same level of security as traditional desktop accounting software and are sometimes even more secure. Having remote cloud storage rather than storage directly on a device becomes particularly safer if the device is lost or stolen. It is much easier for someone to steal a laptop with a spreadsheet of data than it is to hack a server. Users must login to cloud accounting software to access data, and no data remains on the device as it is stored in the cloud servers. You also have access to controlling the active users that are able to access the cloud software, so you are able to disable a user at any time if, for example, they are no longer with the company and shouldn’t be accessing sensitive financial information. Another perk of cloud-based software is you can schedule backups to occur regularly, and they are securely stored on the cloud servers. If anything were to happen to your device or data, there is always a backup copy on the cloud server!

3. Low Upfront Cost:
Using cloud-based accounting software saves companies the upfront costs associated with most desktop software. You will also not need to have servers installed at your office location, as the servers are remotely accessed through the internet. Infrastructure is one of the largest costs associated with storing and managing data and information. Cloud accounting also means you will need less IT staff, as they will not need to maintain a server in-house. Labour savings are significant savings! There is also the overall energy savings from not having servers on site, which does add up.

4. Real-Time and Accurate Interaction:
When most executives need to see their financials, they need to see them now! With cloud-based accounting, the accountants, bookkeepers, and other financial staff are able to access the data at any time and the data will update instantly. No more waiting for files to be sent over from computer to computer or having to look over someone’s shoulder to save time and see the updated data. This also leaves less room for error when data is being transferred from one party to another, as the information won’t have to be converted to different formats. Higher accuracy means fewer mistakes, which leads to cost savings and less frustration – especially around tax time!


1. Internet:
One of the major downsides of cloud-based accounting software is the fact that you must be connected to the internet for access. This also means that the speed of the software depends on the speed of your internet, along with the bandwidth of the cloud-based servers. Bandwidth is the amount of data that can be transferred from one point to another in a given time period, while internet speed is how fast that information is transferred. Some cloud accounting software has bandwidth thresholds or allowances associated with different membership levels. This means your company could be faced with additional costs if you are exceeding the bandwidth allowances. Slower speeds will frustrate users and will ultimately take away from the instant access and real-time interaction components of cloud-based accounting software.

2. Security:
Although most cloud-based storage servers have the best-of the-best for security, that doesn’t mean they are invincible. In 2016 Dropbox, one of the most popular cloud-based file sharing services, was hacked. Although no data was breached in the hack, over 60 million passwords were obtained and became available for sale on the dark web. Users of the dark web that purchased those passwords now had access to sensitive data. Immediately activating a password reset protocol is how Dropbox was able to protect their users’ data, however that protocol requires the users to see an e-mail communication or to login and see the password reset is required. When choosing cloud accounting software, it is essential to do your research on what security practices the third-party uses.

3. Cost of Growth:
Although there are many up-front cost savings with cloud accounting software, there are ongoing costs associated. For many cloud-based software, the cost depends on the amount of users, the features you require, and the amount of data that is being stored. When deciding on the accounting software that is right for your company, consider what functions you need from the software, how many users will need access and the exact cost associated. When making these considerations, it is also very important to consider that your company will grow! Figure out the different levels of memberships and users, as the costs will increase incrementally depending on the needs of your company.

4. Lack of Customization:
The most popular cloud-based accounting software’s provide all the features and functionality that most small businesses would need. However, when you get into more specialized businesses and larger businesses, you may find that cloud accounting does not have all the features you require. For example, if you need to do customized invoices, desktop accounting may be required. Desktop software also allows more user defined limitations, meaning you could give certain people access to specific features while blocking those features from other users. When looking into accounting software options, make sure to consider the features you will need access to for your company now, and in the future.

Is Cloud-Based Accounting for Your Business?

Still awake, or did the tape not do its job keeping those eyes open? While reading about accounting can be dull, we hope that you now have a better understanding of what exactly cloud-based software is, along with the advantages and disadvantages of using cloud-based accounting. When choosing the right fit of accounting software for your business there are many factors to consider including what features you require, how many users will be accessing the software, and how much data you will be storing. Now the important question left to ask: “Is cloud-based accounting software for my business?”

Looking for the alternative? Read our article Advantages and Disadvantages of Desktop Accounting.

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