There used to be a very dominant image of accountants as bespectacled people who were always hunched behind a desk full of long ledgers and notebooks, working hard to balance their books. This is no longer what accountants are like thanks in part to COVID-induced work from home, but also because how data is stored online have drastically changed. Today, a majority of accountants’ work happens in front of a screen, and the files they would have to open physically are now all stored as documents on their computer.
Still, if you are a growing business, then you have an option between traditional accounting and online accounting software. This decision can have a drastic impact on the way your company operates on a day-to-day basis as well as what will end up happening if you choose to opt for a route that you haven’t already set up for your company. First, let’s take a look at what these two terms mean, and then see how each impacts the overall functioning of an organization.
Traditional Accounting
As ways of data storage and management, so too did the fat notebook with dates and receipt numbers become an excel sheet on the computer. This has had many lasting changes on accounting across industries, and when we refer today to traditional accounting, we are referring to a scenario in which the entirety of the financial data is stored on one system.
This has both advantages and disadvantages and depending on the nature of your business, this could be the best fit for you. However, many companies today are opting to go online – and for good reasons, which we will explore below.
Online Accounting
Online accounting is the same as traditional accounting, only there is no dependence on a single machine – or single person – to execute all accounting functions. With online accounting, the storage of data moves online.
This helps in a multitude of ways, and also ensures that people can access the data even without being physically present in one location. However, there are some concerns for being vulnerable to security lapses – which have been addressed over the years as online accounting software has developed.
Difference between Traditional and Online accounting
There are a plethora of differences, primarily owing to how the data is stored and how the machines are operated. Depending on what ticks off the most boxes for your business, you can decide which type of accounting to go for.
- Accessibility
This is by far the most impactful area in which online accounting makes a difference. With traditional accounting, there was only one system – or a handful of them – in one physical location, which could only be accessed by a few people only from that location itself. With online accounting, the scope for access increases vastly and facilitates people working from home as well, which has been a boon during the COVID-era.
- Security
With online accounting software, there is an additional later of data security – considering just how valuable data has become today. Traditional systems were vulnerable only to attacks that could happen on-premise on their systems, and an argument can be made that that was theoretically safer for data security than storing something online. However, given how much time has passed – and how much cybersecurity has grown as a field – there is absolutely no cause to worry about data security, as its importance cannot be understated.
- Collaboration
Online accounting software facilitates a great deal of collaboration since now people across the world can access the data that earlier was available to only the one person who was at the office. And it’s not just the access to data – modern online accounting software is designed with collaboration as a key feature in mind. This means better usability, a more hands-on experience for each user, as well as more touchpoint to interact with the data at hand – and the ability to do this at scale.
- Scale
As a company grows, its accounting needs also undergo a drastic transformation. This is where the flexibility provided by online accounting software can make the biggest difference. It completely removes the needless stress of buying software for eternity and having to replace it once your time size doubles. This is why companies that are concerned about scale prefer online accounting software over the more traditional methods.
- Cost
Traditional accounting methods require a lot of maintenance and heavy upfront investments, depending upon how many people will be accessing the financial data. This is where online accounting software makes the clearest stand for itself – it requires no heavy upfront investment or regular time-consuming integrity checkups at all! All the data is safely stored and can be retrieved at any time in online accounting software, while the cost of storing massive amounts of data on-premise can be quite a hefty amount.
In conclusion
These are some of the basic differences between traditional accounting and online accounting software. When you consider the needs of your organization in the short and long term, you can make an informed decision about which accounting practice will fit your business the best! If you are considering online accounting software, take a look at Dext’s online accounting software.
