Online Accounting Software – Freedom of doing accounting from anywhere!
Accounting software programs are branded and packaged products marketed by different software companies. Different accounting software have varying complexities of output but essentially, they perform more or less similar functions. In the earlier days, accounting in business establishments was more of a manual activity. Accounting staff of the organization and these essentially in paper form or hard copies maintained multiple registers, vouchers, files etc. However, with increase in size of business establishments, manual accounting has been largely replaced by computerized form of accounting.
Online accounting is the latest development in modern accounting software technology. This option gives the user flexibility to perform these accounting functions from the comfort of home, while being on the move, or practically from any location where from a person has access to the Internet.
The basic pre-requisite of online accounting software to perform efficiently is a safe and secure Internet connection. This is because accounting information is of confidential nature and unless the Internet connection used by the business owner is secure, there are chances of data loss or data pilferage. Most of these software available in the market have inbuilt data protection functionalities to prevent unauthorized access of business confidential information.
How do they work?
The software is usually hosted in a domain or server space created exclusively for the user. The software is usually linked to the server of various external parties which whom the business owner interacts in normal course of operations, for example banks, suppliers etc. Once linked, all relevant information like bank statements, supplier invoices and vendor quotations can be directly uploaded to this software and necessary accounting information can be fed in, without any manual intervention. These uploads can be designed to happen periodically as per the business requirements of the owner.
Needless to mention that online accounting software are costlier than their offline or conventional counterparts. Before deciding on whether to use this kind of software, detailed cost benefit analysis should be done by the owner of the business to determine whether the advantages are actually more than its cost. Very few software vendors sell such programs and therefore the reliability of the after-sale service should also be carefully verified.
Nature of business is another important criterion to be considered before deciding to invest in this version of accounting software. If the nature of business is such that it can be conducted from a fixed location and without involving too much mobility, then it is a better alternative to perform accounting functions by way of a conventional accounting software package.
Some Drawbacks
1. Limited flexibility: It usually has limited data handling capacity. Before selecting an online variant therefore, the owners of the business or commercial establishment should consider the possibilities of future diversification programs and determine the suitability of such software in such appropriate context.
2. Customized reporting options: One of the principal benefits of using accounting software is their ability to produce multiple accounting reports. These reports could be of different types like sales projections, profit and loss analysis, cash flow statements etc, etc. Conventional accounting software have inbuilt reporting options like Cash Book, Ledgers, Sales/Purchase Registers etc. However, it may not have customization options, i.e. the possibilities to create user defined reports almost are non-existent. Even if the business size is small, but the requirements are to produce multiple, different varieties of reports, use of this software might not prove to be effective.
The use of online accounting software is gradually increasing in the modern business world. Because of its mobility and automation related advantages, a large number of entrepreneurs these days, are going for this version of accounting software.