7 Key Differences of Traditional Accounting and Cloud Accounting

The latest features of numerous accounting software and technology solutions are specifically designed to make the work of accountants easier and improve the services of accounting firms.  

However, like with any new technology, not all small and medium-sized businesses (SMEs) are willing to adapt as they can be a bit skeptical if investing in new accounting technology can really help them, among other reasons. 

Hence, as an accounting firm, it is your duty to help your SME clients understand the benefits of using cloud accounting tools in their daily operations. By initiating the transition to cloud accounting software, you empower them to greatly enhance their financial data management and accessibility. 

In this article, we will discuss the differences between cloud accounting software and traditional accounting methods. 

By Definition: Cloud Accounting vs. Traditional Accounting 

Cloud accounting refers to a method of managing and securely storing your financial information via an internet-based platform. This software allows you to access financial reports and update them from anywhere at any time. 

On the other hand, traditional accounting is the conventional method of managing your records and financial transactions. This often involves desktop-based software or even manual paper-based systems. 

Key Differences Between Cloud Accounting vs Traditional Accounting 

Here’s a table comparing the key differences between cloud accounting and traditional accounting: 

1. Accessibility 

The use of traditional accounting is mainly limited to the computer where the software is installed, while for cloud accounting, you and your team can access your financial data from anywhere with an internet connection.

Read: Cloud Accounting 101: How Does Cloud Accounting Work? 

2. Security 

With traditional accounting, physical records are susceptible to damage or loss.  

Cloud-based applications offer enhanced security measures and store data remotely, safeguarding your pertinent records against physical damage. 

Additionally, cloud-based applications not only offer protection from physical threats but also equip your system with advanced cybersecurity features. These applications usually use encryption, multi-factor authentication (MFA), and regular security audits to ensure that your customer data remains inaccessible to unauthorized users. 

3. Updates 

Traditional accounting requires manual installation of software updates, which can be time-consuming.  

On the other hand, cloud-based systems excel here by delivering automatic updates, ensuring businesses always have access to the latest features with only a few clicks. 

4. Collaboration 

Collaboration is a cornerstone of effective accounting operations. If your SME client is still entrenched in using conventional accounting methods, collaborating with their in-house team will be inefficient.  

On the flip side, encouraging your client to adopt cloud accounting can enhance real-time teamwork even if you’re working in different locations, as this platform is accessible through the cloud instead of the same computer network. It also supports access for multiple users, depending on the subscription chosen.  

5. Cost 

Let's face it, whenever businesses consider adopting new software, most of them want to ensure that the price is reasonable in terms of the benefits they can get from using that software.  

For traditional accounting, the cost usually involves an upfront software purchase and ongoing maintenance costs. On the other hand, cloud accounting follows subscription-based pricing with potentially lower overall costs.  To learn more about the cost, you may read this article from Investopedia.

6. Flexibility

Cloud accounting offers flexible plans , providing small and medium enterprise owners the option to start with basic services and scale up as necessary. In contrast, flexibility in traditional software can be a bit tough as changes to services or additional features can involve costly investments, limiting flexibility for growing businesses. 

 Read Next: 5 Ways Cloud Accounting Improves Financial Efficiency 

7. Integration with Other Applications

Lastly, cloud-based systems often offer superior integration capabilities with other business applications, facilitating automated workflows and data sharing. With traditional accounting, integration is typically more complex and can involve significant customization costs. 

Cloud Accounting vs. Traditional Accounting: Which is More Beneficial? 

While traditional accounting has its roots deep in business history, cloud accounting represents the future. It aligns more with the way modern businesses operate—on the go, securely, and efficiently.  

It's not just a passing trend—it's a major improvement that can help your small business clients get a handle on their finances easier.  

Encouraging your SME clients to switch to cloud accounting can lead to significant benefits. It can help their businesses save time, manage their money better, and prepare themselves against the unforeseen challenges of tomorrow.

Looking for a Trusted Cloud Accounting Partner? 

Consider D&V Philippines. When you choose us, you're choosing a team that understands the ins and outs of modern accounting challenges and opportunities. 

With our robust experience in a variety of industries and proficiency in advanced cloud software, we can be your team’s reliable back-office team that can assist and support you in serving your SME clients. 

Contact us today and take the first step towards smarter financial management. You can also download our whitepaper Business Analytics to know more about how we can help leverage you and your client's data to drive business forward.