All the rage now-a-days is to move your accounting/bookkeeping to a Cloud based/Online software provider. But is that really such a good idea? Is it really right for YOUR business?
I’m old school. I was taught and learned on old mainframes that required large cooled rooms with a large IT staff to support the system. The internet was still relatively new and we didn’t have smart phones – we had bag phones! In addition, my first job was for a company that was traded on NASDAQ so we had pretty intense internal controls on everything and I’m not sure we would have ever moved to an online accounting system. Cloud/Online software does have a couple advantages: (1) you have the convenience that you can access your books from virtually anywhere. You can log on to your provider from anywhere you have a computer with internet access or even smart phone and (2) your software is never out of date and never needs to be updated. But are they safe?
In an article by Forbes Magazine (link below), they discuss that Online Software is probably better secured than in-house server based systems. Online software providers use the some of the same security as banks do for online banking. With this you get the benefits of the economies of scale – large number of users sharing the costs of security, updates and IT personnel. But you should keep in mind that NO system will ever be 100% secure. I only need to point to the hundreds of data breaches over the last couple years, over a billion personal records were illegally accessed in 2014 alone. Target, Michaels and the IRS just to name a couple of the better known breaches. Digital First (link below) has a very good article on the comparisons of security for Online/Cloud software vs Desktop/Server based systems.
My issue with these online providers is beyond the security issue. My biggest concern is internet connectivity and cost is my second. Being in Madison, WI you would think that the internet is relatively accessible – but you would be incorrect. I have a client, literally less than 2 miles from my door that just got high speed cable last month – did I say this was almost 2016! Until then, it was traditional phone lines and if you have ever experienced slow internet from traditional phone lines, you know exactly what I’m talking about. My brother-in-law even lives less than 10 miles outside of Madison, his internet is via his cell phone so the convenience of a Cloud based system would not be a good fit for his business. Consider the following before jumping onto the cloud.
- What happens if your internet is slow or you lose connectivity all together? If this happens, are you dead in the water? Can you provide service to your customers? Can you accept sales from your customer? You should have an alternate system in place to provide these services to your customers in the event this happens. It’s not a question of if it will happen, it’s a matter of when it will happen. In the event of natural disasters or the increasing threat of grid/virtual terrorism, you need a plan in place before you move to online. If the bad guys wanted to hurt the U.S. economy (or world economy for that matter) what better way than to shut down internet commerce…. Just saying.
- How much is the monthly online subscription cost? If you are paying 10 or even 20 times more than the desktop version of the software would cost you in a year’s time, you should consider whether or not the cost is worth the convenience of being able to access your data online. Determine if there are other, more cost efficient ways to access data without breaking the bank. Or do you even need to access the data while you are on your vacation or home relaxing? There is something to be said about being able to get away from your work, even if only for a few hours each night. Running a small business is stressful and as any small business owner can attest to, you never actually can get away from the business, so do you really need to have 24 hour access to your accounting or sales software? If not, do you need both? Can you have one without the other? If you have a sales staff located out away from your home office, maybe access to sales online is all you need.
- What happens if you have a bad financial month and cash flow is tough? Do you still have access to your books? Or are you being held hostage by the software company in order to access your data? Or what happens if you close your business – what happens to the data then? You should know you are required to be able to provide this data to the IRS in the event of an audit for 7 years! So if you close your online account, can you get a usable copy so that you can comply with tax needs? Be sure you know the answer to this before you close your online cloud accounting software.
- How many users can access your data for the base subscription fee? Do they charge you for users in groups of 5, 10 or a single add-on as needed. And are those new user seats more than the cost of the base fee? You should always have separate user IDs for each user. You want to be able to track who did what in the event you have some sort of breach. Being able to track who will help you determine how that breach happened and the breach can be better addressed and secured.
- Can the online software meet your specific business need or is it relatively flat? Besides users, are there restrictions on the number of Customers or Vendors you can add? Years ago, QuickBooks started their online software which was lack luster at best. The basic model was free but you could only have 10 customers and you couldn’t run job costing. To get to the next level, the cost was $24.95 per month – the desktop version was only $189 for 3 years! So although your Accountant or Bookkeeper could get access to your data without having to run to your business (which saves both you time and money), the cost of having that convenience may not be enough of a benefit to make it worth while.
As a professional firm working with Startups and Micro Businesses, I tend to lean towards the desktop versions. I find that the overall cost-benefit analysis of having the online/cloud software is just not as beneficial as the reduction of expenses in the first years of being in business. Young businesses should focus on growing the business. Things such as inventory, marketing/advertising and employee costs eat up a lot of the cash flow in the first years. Even if the Cloud software is “free”, it may not really be beneficial if you have to pay someone to extract and recompile the data into useful financial statements. I know this probably goes against everything the guy down the road could be telling you, but is he trying to make his life simplier or yours?
Come have a chat with us! We can give you options you may not even be aware of before you leap onto the cloud.
Digital First: https://www.digitalfirst.com/online-accounting-guide/secure-online-accounting-software/