Cloud Bookkeeping vs Traditional Bookkeeping: What Actually Changes

The debits and credits have not changed in five hundred years. What has changed is where the books live and how the data gets into them. This guide compares cloud bookkeeping with the traditional way, so you can decide whether a switch is worth it.

What is cloud bookkeeping?

Cloud bookkeeping means your accounting file lives in online software such as QuickBooks Online or Xero rather than on one computer. Bank and card transactions flow in automatically through secure feeds, sales channels and payroll connect directly, and you and your bookkeeper log in to the same live file from anywhere. There is one version of the truth, and it is current.

How is traditional bookkeeping different?

Traditional bookkeeping runs on desktop software or spreadsheets. Statements and receipts are collected on paper or by email, someone keys them in, and a backup file is sent to the accountant at year end. It works, but the books are always weeks behind, only one person can work in the file at a time, and a lost laptop can mean lost records.

What are the benefits of cloud based bookkeeping?

• Current numbers. Transactions arrive daily, so you can see cash, receivables and profit without waiting for month end.
• Less data entry. Bank feeds, receipt capture and rules remove most manual typing, along with most typing errors.
• Shared access. Your bookkeeper, tax preparer and you see the same file. No emailing backups.
• Integrations. Shopify, Amazon, Stripe, Square, Gusto and hundreds of other tools post directly into the books.
• Automatic backups and updates. The provider handles both.

Are there any downsides?

There is a monthly software subscription rather than a one-off purchase, you need an internet connection, and bank feeds are not magic: they bring in transactions, not understanding. A feed that imports a Shopify payout still needs someone to split it into sales, fees, refunds and sales tax. Automation makes a good bookkeeper faster. It does not replace one.

Is cloud bookkeeping secure?

Major cloud accounting platforms encrypt data in transit and at rest, support two-factor authentication, and keep an audit log of who changed what. Bank feeds are read-only, so nobody can move money through them. In practice this is safer than a desktop file on an office PC with a shared password. The weak point is almost always the user: turn on two-factor authentication and give each person their own login.

How much does cloud bookkeeping cost?

Software runs roughly $35 to $235 a month for QuickBooks Online and $20 to $80 for Xero, depending on the plan. A cloud bookkeeping service on top typically costs $300 to $1,500 a month for a US small business, based on transaction volume, number of accounts and whether payroll and sales tax are included. Because less time goes on data entry, that is usually cheaper than the same work done the traditional way.

How do you move from desktop to the cloud?

1. Pick a cut-over date, ideally the start of a financial year or quarter.
2. Clean up the old file first: reconcile accounts and clear old uncategorised items, so you do not migrate a mess.
3. Convert the data. QuickBooks Desktop files can be imported into QuickBooks Online; otherwise bring over opening balances, open invoices and open bills.
4. Connect bank feeds, sales channels and payroll.
5. Run both for one month and compare the reports before retiring the old system.

Who should stay on traditional bookkeeping?

Very few businesses. A company with unusual inventory or job-costing needs that only a desktop product handles may have a reason to stay, and so may a business with no reliable internet. For everyone else the question is not whether to move, but when.

Cloud Accountants provides cloud bookkeeping services on QuickBooks Online and Xero for US small businesses, including the move from desktop. To see where your current books stand, request a free books review.