What is Cloud Accounting? Definition, Benefits, Software

Updated Dec 5, 2022.

Wondering why so many businesses are adopting cloud technology to store, manage, and process data? The reason is simple. Cloud technology is a more effective way of storing and processing data compared to traditional storage methods.

Many SMBs deploy cloud computing in the area of accounting. As an accountant or bookkeeper, you can make use of cloud accounting to serve your clients better and increase your efficiency and productivity.

Cloud accounting helps you to streamline your financial processes, improve the efficiency of your bookkeeping, and provide real-time insights into your KPIs.

In this article, you will learn everything you need to know about cloud accounting including the best cloud accounting software options and the reasons your company should use cloud accounting.

What is Cloud Accounting?

To understand what cloud accounting is all about, you first need to understand what the cloud is and how it works. The cloud is anything that can be accessed online, rather than in the actual storage capacities of physical devices.

Cloud computing offers an endless number of features and functions, but most of them revolve around the storage of files.

The relationship between cloud and accounting is that cloud accounting allows you to do your regular accounting and store them online. Another name for cloud accounting is online accounting.

Cloud accounting involves doing everything in normal accounting procedures but doing them online rather than with messy pens and cumbersome books. This involves keeping your business accounts online and encrypting the information so only permitted users can view the data.

Cloud Accounting Statistics
Source: Hailstonco

What is Cloud Accounting Software?

Cloud accounting software is a form of accounting software that allows you to connect your accounting to the cloud. Another name for cloud accounting software is online accounting software.

Online accounting software performs the same functions as desktop or traditional accounting software. The only difference that exists between them is that cloud accounting software does all its accounting processes on the cloud while traditional accounting software uses desktop applications.

Since your accounting processes are not stored on a device but on the cloud, you can use any internet-connected device to access your cloud accounting software. All your accounting data is encrypted and stored securely on a cloud server.

Another feature of cloud accounting software is that they have open APIs through which you can integrate third-party software tools with your accounting system.

Popularity of Cloud Accounting Software
Source: Softwaresuggest

Problems of Traditional Accounting Software

Using traditional accounting software tools is not the most effective way of handling or automating your business’ accounting processes.

Traditional accounting software has several limitations that make it less suitable for SMBs and enterprises when compared to cloud accounting software.

1. Restriction

Traditional accounting software does not possess the ease of access feature that is a key feature of cloud accounting software. The data recorded and stored on traditional accounting software are limited to the storage facilities of the system on which they were recorded, and can only be accessed from that particular computer.

You have to be in the same room as the desktop computer where the software is stored to have access to its information. This makes it a bad fit for remote work.

2. Unreliable and Not Secure Transfer of Data

Although you can transfer accounting data from computer to computer through storage devices such as USB drives, it takes time to transfer large files and in the process of transferring. There is a possibility of misplacing the files due to damage to the storage device.

Transfer of data with traditional accounting software is not just unreliable but also not less secured compared to cloud accounting software.

3. Difficulty Getting Real-time Data

The data in the traditional accounting software is not always up-to-date. Even with the successful replication of the information in as many places as needed, it is difficult to update all copies accurately and in a timely manner after users have made changes to them

4. Cost Intensive

The cost of buying and maintaining traditional accounting software is more expensive than that of cloud accounting software. You need to buy infrastructures or equipment where you will store all your accounting data.

Traditional accounting software is also costly to maintain especially when you need to keep large backups. Upgrading the traditional accounting software is expensive and time-consuming compared to cloud accounting software.

Comparison Between Traditional and Cloud Computing Based Accounting Software
Source: Researchgate

Benefits of Cloud Accounting

1. Multi-User Access

With cloud accounting, anyone with permission or an invitation can access the account of the company. This makes it easy for group tasks and for verifying numbers, quickly noticing mistakes and correcting them, and making last-minute additions by group members or superiors.

2. Ease of Access

Ease of access is an important benefit of cloud accounting that people tend to underplay. Cloud accounting allows you to access and check the account books of your company from any location on any device.

3. Online Services

All you need for cloud accounting is internet access. Using cloud-based accounting ensures that your system RAM and ROM are not clogged up, giving you space to do many more things with your device.

The data you input in the cloud accounting software is automatically backed up to the cloud. You do not have to worry about losing your information on your computer due to a system crash or unsaved work. This ensures that your data is still accessible and the same way you left it even if you lose or damage your device.

4. Access to the App Ecosystem

Most cloud-based applications have other related applications that provide different but just as necessary services that are important to businesses and organizations. This ecosystem provided by the app allows you to have all your information in one database without having to input everything at each entry point.

With cloud accounting open APIs, you can add popular third-party tools such as project management tools, warehouse management software tools, and inventory management software tools. These applications help you reduce costs, save time, and improve your productivity.

5. Access to Real-time Information

Cloud accounting platforms keep your bank reconciliation and book up to date, ensuring you have access to real-time information at any time. You have access to an overview of your company’s financials.

Real-time reporting helps you know your company’s financial position, plan future expenses, and make better financial decisions.

6. Secure Sharing of Data

You can easily and securely share your data with your accountant and other financial advisers through cloud accounting software. This cloud platform allows you to grant access to your accounts to permitted users in real-time.

There is no need to send emails or use USB drives to share files. Cloud accounting platforms use top-notch security features to prevent unauthorized users from accessing your financial information.

7. Live Bank Feeds

You can connect your business bank accounts directly to your cloud accounting application to enjoy live feeds from your bank. Many cloud accounting platforms allow you to view your account balance, view your bank statements, transaction history, and speed up bank reconciliation.

8. Reduce Costs

Cloud accounting platforms are cheaper to operate and maintain compared to traditional accounting software. You only have to pay for a monthly or annual subscription for the service. Cloud-based accounting software does not require you to spend on equipment, upgrades, system administration, and maintenance.

9. Provide Automatic Updates

Having to upgrade your outdated accounting platform is not a concern when you use cloud accounting software tools. Each time you log into your cloud accounting platform, your software is always up to date. You do not need to install costly and time-consuming updates.

Your cloud accounting software provider is responsible for making updates to the software. What this means is that you are not responsible for fixing security issues and bugs.

Cloud accounting software tools Provide Automatic Updates
Source: Vertacc

When Should Your Company Use Cloud Accounting?

Cloud accounting is vital for companies who want easy and fast access to detailed financial information and key performance indicator (KPI) metrics.

Your company should use cloud accounting to make your accounting process easier. It is best to adopt cloud accounting as early as possible to eliminate the problems of traditional accounting software such as restriction, unreliable and not secure data sharing, lack of 24/7 accessibility, and high costs.

1. Working Remotely

Your company should use cloud accounting if it operates a remote workforce model. Cloud accounting helps you leverage the benefits of working remotely which includes flexible working. Your employees can access your financial information from anywhere as long as they have access to the internet.

2. For Paying VAT or GST Online

Cloud accounting platform makes it easy and quick for you to calculate and pay your tasks accurately. Using cloud accounting software for your bookkeeping ensures that all your transactions are recorded and you can use this information to calculate your taxes.

Many cloud accounting software integrates with payroll software that helps you calculate taxes you are paying on behalf of your employees. Some cloud accounting platforms allow you to pay your taxes directly from your dashboard.

Cloud Accounting Software Options

When selecting a cloud accounting software to use, there are several factors you have to consider. The most important is the ease of use and backup speeds because that is essentially the reason why you are using cloud accounting software over traditional accounting books.

1. FreshBooks

Overall Best Cloud Accounting Software with Intuitive Invoice Management Options

FreshBooks is Overall Best Cloud Accounting Software with Intuitive Invoice Management Options

Freshbooks is a cloud accounting software founded in 2003 and is currently trusted by over 30 million freelancers, self-employed professionals, and businesses worldwide.

Main Features

  • Invoicing: Including time tracking capabilities, this small business accounting software provides a host of features that facilitate your invoice generation and sharing operations.
  • Integrations: Freshbooks integrates with over 100 applications such as Google, Slack, Stripe, and MailChimp, among others.
  • Reports: This cloud accounting software automatically and intuitively generates important accounting reports for you.


  • Self-help and improvement resources
  • 30-day free trial (no card required)
  • Mobile applications
  • Mileage tracking
  • Extended expense management options
  • 256-bit SSL encryption to keep users' information secure

2. Xero

Leading Cloud-Based Accounting Platform for Seamless Automated Bank Reconciliation Workflows

Xero is the Leading Cloud Based Accounting Platform for Seamless Automated Bank Reconciliation Workflows

Xero is a cloud-based accounting software dedicated to small and medium-sized businesses. This software was incorporated in New Zealand and founded in 2006.

Main Features

  • Bank Reconciliation: With Xero, you enjoy features that ensure your accounting records align with those possessed and worked with by your banking institution.
  • Expense Management: You have options that facilitate the payment of your bills and expense claims by employees.
  • Reporting: Xero also automatically captures your accounting data and provides actionable reports on them. You have access to detailed analytics on captured data.


  • Project tracking
  • Payment acceptance
  • Online file management system
  • Invoicing
  • Multicurrency

3. QuickBooks Online

Top Cloud Accounting Software with Dedicated Human Bookkeeping Assistant

QuickBooks Online is the Top Cloud Accounting Software with Dedicated Human Bookkeeping Assistant

Launched as a software way back in 1992, Quickbooks is one of the most popular cross-platform accounting software programs on the internet today.

Main Features

  • Live Bookkeeping: Quickbooks gives you a dedicated Quickbooks-certified bookkeeper, allowing you to focus on other areas of running your accounts and business.
  • Expense Management: This feature is suited for freelancers. Quickbooks equips you with comprehensive expense management options.
  • Payroll Management: Your employee payroll management operations are facilitated through time tracking and automatic payroll generation and sorting options.


  • Payment management
  • Invoicing
  • Integrated banking system
  • Integrations

4. Sage 50cloud

Hybrid Accounting Software with Highly Centralized Account Management Dashboards

Sage 50cloud is a Hybrid Accounting Software with Highly Centralized Account Management Dashboards

Sage 50cloud is a cloud accounting software program that focuses on automating and speeding up your accounting workflows.

Main Features

  • Centralized Dashboard: Through a comprehensive dashboard, you track your incoming and outgoing cash flow, expenses, and manage your entire invoicing workflows.
  • Payments And Banking: This cloud accounting software also automates your data entries by connecting to your bank feeds, automates your reconciliation operations, and serves as a one-stop platform to manage your payments.
  • Advanced Inventory Management: You maintain a complete view of your stocks and inventory to simplify your inventory management operations.


  • Job costing
  • Payroll management
  • Reporting
  • 30-day free trial, no credit card required
  • Integrated marketplace

5. NetSuite

Best Cloud Financial Management Solution with Comprehensive Data Reporting Options

NetSuite is the Best Cloud Financial Management Solution with Comprehensive Data Reporting Options

NetSuite is a unified cloud accounting and business management software offered by Oracle, aiding your ERP, financial, CRM, and eCommerce management operations with reliable solutions. This software is trusted by over 27,000 customers.

Main Features

  • Real-Time Reporting: Through a centralized dashboard, you are presented with insight on your profitability ratios, liabilities, fixed assets, and inventory margins, to mention a few.
  • Automation: You have options to automate journal entries and account reconciliation workflows.
  • Integrations: To improve your overall business management operations, NetSuite offers seamless integrations with financial management, inventory and order management, HR, and CRM software tools.


  • Real-time reporting
  • Cash management options
  • Tax management
  • Payment management
  • Portability

6. Kashflow

Simple Cloud-based Accounting Platform with IRS-Dedicated Options

Kashflow is a Simple Cloud based Accounting Platform with IRS-Dedicated Options

Kashflow is a cloud accounting software founded in 2005, offering dedicated solutions to small businesses.

Main Features

  • Invoicing: With Kashflow, you have access to intuitive invoicing options. These are options that let you convert quotes to invoices and send these invoices branded with logos and colors to your customers.
  • Reporting: You easily generate reports supported by intuitive charts and graphs. Generated reports cover your profitability, self-assessment processes, and stock control.
  • Payroll Management: Kashflow offers you intuitive features covering your employee payslip generation and workplace pensions.


  • Easy to use
  • Fast payment processing options
  • IRIS-dedicated options
  • Seamless sharing

7. Zoho Books

Powerful Automated Cloud Accounting Software with Comprehensive Tax Accounting Features

Zoho Books is the Powerful Automated Cloud Accounting Software with Comprehensive Tax Accounting Features

Zoho Books is a powerful automated cloud accounting platform patronized by over 50 million customers worldwide.

Main Features

  • Tax Compliance: This cloud accounting software automatically updates task rates, making your audit report creation seamless and accurate when compared to IRS guidelines.
  • Invoice And Expense Management: You maintain constant visibility and tracking of your account receivables through comprehensive dashboards and scheduled reminders. Your purchase orders are also easily created and managed.
  • Banking: Data entries are automated and reconciliations are made seamless when you connect your bank with the software.


  • 14-day free trial
  • High-quality native integrations
  • Mobile application
  • Time tracking

Cloud Accounting Software FAQ

Is My Data Secure with Cloud Accounting Software?

Yes, your data is secure with cloud accounting software. These software tools use industry-grade data encryption and security infrastructures to protect your data from cyber threats and other unauthorized individuals.

Each time someone tries to log in to your cloud accounting software account, your service provider will notify you by mail. You can also set two-factor authentication and use strong passwords to better secure your data on the cloud. These security features ensure that your data is secure at all times.

Will Cloud Accounting Software Save Me Money?

Although cloud accounting software tools charge you a subscription fee, they are affordable compared to other traditional accounting software. You save money by not having to install expensive equipment, make regular maintenance, and costly updates.

Cloud accounting software tools improve the efficiency of your accounting process, helping you automate many administrative tasks.

How Much Does Cloud Accounting Software Cost?

Cloud Accounting software prices differ from platform to platform and even from one pricing plan to another within the same platform. The cost of cloud accounting software tools for as low as $6 per month or as high as $1,200 per month.

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Anastasia Belyh

Editor at FounderJar

Anastasia has been a professional blogger and researcher since 2014. She loves to perform in-depth software reviews to help software buyers make informed decisions when choosing project management software, CRM tools, website builders, and everything around growing a startup business.

Anastasia worked in management consulting and tech startups, so she has lots of experience in helping professionals choosing the right business software.