Cloud Accounting Xero

Cloud Accounting versus Desktop Accounting

Written by Charlie Russell

The time has come for us to take a serious look at “Cloud” based accounting products in QuickBooks and Beyond. I know, many of you have already embraced “Cloud” accounting products, but some people haven’t really gotten started. I’m an old “Desktop” guy, and this new fangled “Cloud” stuff makes me uncomfortable. But, rather than hide from it, I’m going to start diving into the subject. So let’s get started, it is going to take some time to get through all of this.

Over the next several months I’m going to be digging in to a number of Cloud based accounting products, looking at what advantages they have, what fun features they offer. At various points I’m may be comparing them with QuickBooks for Windows (which I’ll refer to as “QuickBooks Desktop”) – although THAT MIGHT BE A MISTAKE! It may be that we have to break out of the constraints on thinking that we have, and get away from the “Desktop” mentality. A Cloud product is going to be used differently than a Desktop product, so comparisons are tricky.

Then again, since many accounting professionals and business consultants are very familiar with QuickBooks Desktop, I feel that we have to make SOME comparisons. QuickBooks Desktop is in my “comfort zone”. I know it, I can manipulate it, I can understand what it does.

Charlie’s Key Issues

Before I jump in to looking at Cloud accounting products I’d like to serve up some thoughts on how Cloud products might be compared with Desktop products, to get us started. This is not a complete list, so feel free to add your own thoughts about the subject in the comment section. Again, this is my opinion, coming from my “desktop” oriented comfort zone. Here are some issues to think about (in no particular order).

Familiarity

If you look at the CURRENT demographics of the “accounting professional community”, there are more of us on the older side than on the younger side. Most accounting professionals that I know are familiar with QuickBooks Desktop, and not as familiar with products like QuickBooks Online (and even less so the other Cloud products like Xero, Intacct or Wave). Familiarity is good – you understand how to use the product, how to get it to do what you want. The better you know a product the better the advice you give to your clients. You know the kinds of things it can and can’t do. On Since most of us are NOT as familiar with Cloud products, we are less comfortable with them. However, the times they are a changing…

Feature Rich

QuickBooks Desktop is feature rich because it has been around for a long, long time. Cloud products tend to be less feature rich, but they are improving rapidly. It is interesting to look at other products – compare Microsoft Word with Google Docs. Sometimes, however, feature rich can be a drag? Do you really need all those little things? You need to determine what features are essential to your business, then look for products that can provide those.

Product Ownership

Here’s an interesting comparison, although the lines are blurring. Typically with a Desktop product you purchase the program – you “own” your copy (I’m not going to get into the vagaries of software licensing here). Usually with Cloud software you are “subscribing” with a monthly fee. If you subscribe, and you stop paying, you lose access to the program. With QuickBooks Desktop you have it forever – I still can run my copy of QuickBooks 2005 (and you always hear of people running older versions).  HOWEVER, that distinction may not be as clear as you think. In the desktop environment, Intuit “sunsets” certain features after three years, so you can’t do EVERYTHING that you could when you first bought the program. Some features in QuickBooks Desktop require an annual fee as well as a support plan (such as Advanced Inventory). And you CAN “subscribe” to QuickBooks Desktop through the Plus program, if you wish.

Data Ownership

This is a MUCH more important issue than product ownership, in my mind. Typically in a Desktop system you have your financial data stored locally on your computer system or network. You know where it is, you have it always (if you have a program to access it), you control access. With a Cloud system, who owns your data? What if you decide to move to a different vendor? Who has access to your data? You may be able to extract it, but this is NOT the same as what we are used to on the desktop.

Data Management

What happens if something goes wrong with your financial data? Data corruption is a fact of life with QuickBooks Desktop, and there is a whole industry of people who repair bad QB data. With the Cloud products your data is managed by the provider, almost exclusively. I have a big question, does Cloud data ever get corrupted? What are your options if the provider just says “can’t fix it”? Does that ever happen? At least with the Desktop we have some independent resources for fixing things. On the other hand, when you are paying a monthly fee, the provider has a vested interest in keeping your data in good shape.

Program Updates

Lots of issues here. If you purchase a desktop product you aren’t necessarily forced to update the program if you don’t want to. Look at QuickBooks 2013 Desktop – if you don’t like the new user interface, just stay with your older product! With Cloud programs you usually have no choice about updating, as you aren’t running your own copy of the software, you are running the latest, greatest release regardless of whether you want to or not. On the other hand, with QuickBooks Desktop you have to pay for major “upgrades” each year (if you want to keep current) and you have to install “updates” throughout the year, on each workstation you are using. Updates like that don’t always work smoothly, and can take a lot of time! Cloud “updates” are usually much less painful.

Flexibility

I’m thinking of hardware integration here, primarily, integration with scanners, barcode readers and so forth. At this time Desktop software usually offers a better interface with devices because the program can get down to the hardware level more easily than in Cloud. BUT, this may be changing as time goes on.

Extensibility

Now I’m talking about third party software integration and chunkification. No accounting product will cover EVERY POSSIBLE feature that may be needed by a particular business, so you want to have a product that is extensible. Currently, QuickBooks Desktop has more options than you will find with QuickBooks Online. In fact, in my opinion at this current time the options for QuickBooks Desktop are BETTER than the ones for QuickBooks Online. How about other Cloud products? SOME of them have a good programming interface for add-on developers, but not all. I believe that extensibility is important and it is something that you should pay attention to when evaluating accounting products. This is an area that is evolving with Cloud products, and it isn’t clear how it is going to work out in the long run.

Availability

How “available” is your data? Can you always get to it when you need to? You are vulnerable to availability issues with either approach, Desktop or Cloud, but the issues are different. Your Desktop computer system can crash, the Internet can go down, etc.  If you are switching from the Desktop to the Cloud the problems, and the remedies, are different and you have to understand them, so you can plan for problems. If you are on a Desktop system, what do you do if your computer crashes? Do you have backups of your data, can you you go to another place to get your business running again? If you are on a Cloud system, what do you do if the provider’s Server goes down? How do you keep your business running?

Security

How secure is your data? I find that most businesses don’t have proper control over security regardless of it being a Desktop or Cloud system, but the kinds of controls are different. So, again, if you transition to the Cloud, you need to consider new issues. Do you have your Desktop data on a laptop? What happens if you leave that in a hotel room? Do you have secure passwords for your Cloud data? Who can access your data in EITHER environment? This is a major area of concern for everyone – I often hear people saying that they are afraid to put their data “in the Cloud” due to security concerns. However, having worked with many Desktop clients over the years, in many ways a Cloud system could be more secure than many Desktop installations. This is something that you have to consider when looking at Cloud accounting systems – know what they are doing to keep your data secure.

Privacy

Different than “Security”. Can someone see your data other than who you WANT to? With the Desktop we tend to think of your data being private, as you have complete control. But do you? You could have some Internet integrated app that pushes your data outside your office (Sync Manager, anyone?). You could have a rogue (or just careless) employee. There could be some “bot” or virus product in your system stealing data. But, ultimately, you have control over all this in Desktop systems. With Cloud systems you don’t have as much control. Someone else is holding your data and you don’t know who is looking at it OTHER than the pledges the provider makes. Take a look at your Cloud provider’s policies on this, very closely. What, for example, are the data mining policies of the provider?

Independence

Here I’m thinking of independence from operating systems, browsers and so forth. Typically, with a Desktop system, you are absolutely dependent on the operating environment. Look at the hassles we have with QuickBooks Desktop and Windows 8 for example, with PDF drivers. Look at QuickBooks Desktop and its dependency on Internet Explorer. Do you have one person in the office who is running a Mac while the others are using Windows? Then look at Cloud systems – you might be dependent on a particular browser, but in most cases you are not. There can be issues with differences between Internet Explorer, Chrome, Safari, Opera, Firefox and so forth, but those are rarer and USUALLY not as big a deal. You are not operating system limited (just Windows, or just Mac), you can often run the product on many different kinds of hardware. There are ways to deal with this in the Desktop (hosting, for example), but the Cloud usually provides more independence.

Accessibility

A key concept, one of the big differentiators between the Cloud and the Desktop. How can you access your data, ALL of your data, in all of the places that you do business? Traditionally we think of the Desktop as being just available in your office – particularly with QuickBooks Desktop. Your data is on your own computer, on a server, and that is where it lives. Cloud accounting products should be available anywhere you have access to the Internet. So, if you are “on the road”, or at a client’s location, OR if you have multiple branch offices, Cloud products are always accessible (if you have a “connection” available). Of course, there are workarounds for the Desktop as well, but they tend to either add cost, be less convenient to use, or limit the portions of your accounting database that you can access. QuickBooks hosting? Adds a monthly fee and may be inconvenient (slow response times, less flexibility to add integrated products). Remote access tools (like LogMeIn, etc)? They tie up an office computer and tend to be slow. Web enabled integrated apps? Often you find that they only let you get to SOME of your data, not all (look at QuickBooks Mobile, for example).

Backups

(update) I’m adding this, thanks to reader Margaret Carey for the reminder. It was on my list, I just missed it! All of my clients know that I’m obsessed with data backups. I hound my clients on this incessantly. This is a key feature of ANY data management system. Most businesses don’t do a good job of making backups of their data, because it is a hassle to do. But you MUST do it, and you MUST do it the right way! I like backups for several reasons:

  • What if someone deletes a large portion of your database, either accidentally or maliciously?
  • What if your database has become corrupted?
  • What if you need to look at the database as of a certain date (perhaps in an audit?).

There are lots of reasons for making backups. Most businesses using the Desktop products think they are doing it right, but they aren’t. They have an online backup service, or someone is making a backup each day (or each week, whatever) of their Server. This does NOT cover all the bases. But, with a Desktop system, at least you have the ability to make (and restore) backups. How about with Online systems? This is a key area to pay attention to. On the one hand, the Online provider is probably making some backups for you (hey, better than NOTHING!). On the other hand, do you ever get a copy of that backup? Can you restore it? How long are those backups available to you? Can you restore an older copy for some reason – one that is more than just a day or so old? This is something that we really need to look into with Online systems.

Proceeding from Here

The move from Desktop to the Cloud has been discussed in many places (See Chuck Vigeant’s wonderful articles, such as his riff on Election Results and the Pro-Advisor Community, for example). I don’t want you to think that I’m totally against moving to the Cloud, but there are things that we all have to keep in mind. The Cloud presents a different set of issues that we must consider, and this article is outlining some of the ones that I think are important.

Over the next few months I’m going to be rolling out some articles looking at Cloud accounting systems, and in some cases comparing them with QuickBooks Desktop. In no particular order I’ll be writing about:

  • QuickBooks Online
  • Wave
  • Intacct
  • Xero
  • and possibly others.

I have a set of criteria that I’m going to use to evaluate these products, so that I have some sort of “common point of comparison”. It’s going to be fun!

About the author

Charlie Russell

Charlie Russell has been involved with the small business software industry since the mid 70's, and remembers releasing his first commercial accounting software product when you had an 8-bit microcomputer with one 8 inch floppy disk drive. He has a special interest in inventory and manufacturing software for small businesses. Charlie is a Certified Advanced QuickBooks ProAdvisor with additional certifications for QuickBooks Online and QuickBooks Enterprise, as well as being a Xero Certified Partner. Charlie started blogging about QuickBooks in 2008 (Practical QuickBooks) and has been writing for the Accountex Report (formerly the Sleeter Report) since 2011. He retired from accounting and QuickBooks activities in early 2018.

Visit his CCRSoftware web site for information about his QuickBooks add-on products. He is also the author of the California Wildflower Hikes blog.

41 Comments

  • Hi Charlie – a couple of other points are Backups – good and bad, firstly it is done by the cloud provider so no problem if business forgets but – if the business wants a backup at a certain date to restore & refer back to later – this may not be available.
    Second postitve point is businesses can avoid the need for costly IT infrastructure – you no longer need that server nor the IT consultants to look after it – software as a service has many key advantage for the small business in that regard

  • One problem with the cloud, well one of many, is that you are held hostage to the providers price structure. Desktop does that too to some extent, but you can -if you want- do without the Intuit add on services, like payroll, online banking, etc that they disable after three years.

    If I want to change from QB to peachtree or Simply Accounting, or visa versa there are utility programs out there to help. Not so if I want to move from one brand of cloud accounting to another – at least that I can find.
    Being locked in is a major concern to me.

    • Jim, pricing was my point in the “Product Ownership” paragraph. I agree with you – it is something that is different and you have to take into account. And as far as moving – that is a part of what I was aiming at with “Data Ownership”. Moving from one system to another is complicated, EVEN with desktop products. Moving from Peachtree to QuickBooks isn’t always a smooth transition. Several Cloud products have QuickBooks import features – and many have export features that can be used to extract data. It isn’t a simple task – but I think that over time you’ll see more options here from add-on developers.

  • Aloha, Charlie. I really enjoyed this article. One of the points that you didn’t raise is the monthly cost for hosted QB.

    I realize that it may not be an issue for larger businesses, but for a small company that needs 3 – 5 users, the $150 – $250 per month PLUS the cost of the software (which must be upgraded every three years) would be costly.

    Just my two cents.

    • Patti, I didn’t get into “Hosted QuickBooks” here, but that is another consideration. That is kind of a hybrid – you get the familiarity of your QuickBooks desktop product, but you have restrictions and concerns. And, the cost. There are advantages and disadvantages. Regarding the monthly cost, though, you have to consider all of the variables. If I go “hosted” in some fashion (there are several ways) then you ARE paying a monthly fee on top of the cost you normally have, BUT keep in mind that you might be able to get away from the cost of purchasing, installing and maintaining your own local area network. Maybe you can get away from having that Windows Server system that you either have to spend a lot of time maintaining, or you pay someone a lot to keep up to date, or (worse yet) that you never get updated so it is dangerously vulnerable to problems.

  • With the online version, you have to hope Intuit gets every update/upgrade right the first time. Online users are forced to except the changes, like it or not.

    As we desktop users know, Intuit never gets the first update/upgrade right. I would never us/recommend Intuit’s online service for this very reason.

    One recent example of this was a sales tax change/update. Intuit released a sales tax update in October that had all sorts of missing features and problems. It took about 3 weeks for Intuit to regroup and release a new update Tax Update 11.8.12. As a desktop user, we can control our destiny by waiting to install updates/upgrades.

    Here are links to the Intuit blog, and followup sales tax update notice. You have to register to read the blogs.

    http://blog.qbo.intuit.com/2012/10/18/new-and-improved-sales-tax-with-multiple-tax-items-and-better-reporting/

    http://blog.qbo.intuit.com/2012/11/08/qbo-sales-tax-update-11-8-12/

  • Great article Charlie! Very thorough. The one cloud accounting package you did not include is perhaps the biggest one, NetSuite. Although, this does bring up the fact that there are multiple levels of cloud accounting packages: Small business/starter level: Xero, Wave, Freshbooks and the larger business/ERP systems, Intacct, NetSuite. Sure there are others, just the ones that come to mind, but this should generate some great discussion, looking forward to the future articles.

  • This is a good place to get to grips with what migh be involved in switching to cloud services.

    Is cloud cost effective for small business? I would hesitate to invest in new technology unless it brings clear business benefits.

    • Lots of benefits for SOME kinds of business, Chitra. The simplest one that comes to mind is for a business that has multiple locations. Also, it tends to be easier to collaborate with an accountant, in some cases. There are other advantages, but in the end it all depends on what your particular company needs. It is good for some, not as good for others.

  • Along with what Cliff was saying, online is not posting COGS when an inventory item is sold, the solution so far was to tell folks to make a journal entry – this is the result of an “upgrade”

    • Inventory in QBO is very simple (even simpler than in QB desktop). If I were an inventory-centric business I wouldn’t be using QBO by itself – I would be looking at an addon product (or not using QBO at all).

      • I wouldn’t either, but people starting a business believe the PR that you do not need accounting, and they believe the PR that online is great and pay more monthly for the plus subscription to have inventory.

        The point I was making is Intuit pushed an update, and world wide all those who use inventory on line – no longer post to COGS when an item is sold. A few noticed it and brought to light in the forums, Intuits response was make a journal entry we are working on it (over a week ago) but how many people never noticed???
        How many people will not catch that they are effectively selling at a 100% mark up (with no cost being posted)…

        • All good points, Jim. I’ll note that there are bugs in online products as well as in desktop products (as you well know). The big problem here with online is that you don’t have control over what version of the software you are running, as others have commented earlier.

  • One thing you didn’t mention is cloud services that host the FULL version of QuickBooks (or other accounting software). I did not want to use ANY online versions of products because as you stated they are usually not full versions with all the capabilities. I love my desktop version of QB. So I use a service that hosts the full software on a secure server. It is my desktop. It is just a desktop that I can access from anywhere.

    • You are right, Becky, I didn’t mention hosted QuickBooks. It is a hybrid – it has some of the advantages of the desktop and some of the advantages of the cloud. HOWEVER, a lot of the issues I raise for Cloud computing still apply to hosted QuickBooks. It is a mix. I’m wondering, in the back of my mind, if this is a long term solution or just an intermediate step while the industry transitions? I may get into this more in the future.

  • I have met some CPA’s & CFP’s who came right out and said that they do not want to have the “Cloud”. I did not get into an in-depth conversation why but I had the distinct impression that they are either:

    1. Very weak in skills/knowledge with technology and won’t admit their
    weaknesses.
    2. Have a strong fear of control and of security issues.
    3. Refuse to adjust or change their method of keeping clients books &
    records, thus making their work load longer and more difficult.

    • Marian – all of that is true, at least for some people. A lot of that is what I am aiming at with the “familiarity” paragraph. So, we’ll try to expose everyone to this new world, and see if we can broaden their horizon!

  • Thanks Charlie, for the informative article. I have used two different cloud services (Cloud9 and Insync)with the full desktop version of QuickBooks Desktop running on both. One thing to note is you are not required to upgrade to the newest version of QuickBooks in order to use their services. As long as the QB version is still supported by Intuit, you do not have to upgrade. Also, if there are any data integrity issues of the QB data file, it was just a matter of copying the data file off of the host drive and paste over to your local drive to run the rebuild, and the copy and paste back onto the host drive. The only concern I’ve had in the past is making sure the hosting service supports additional 3rd party software which integrate with QuickBooks such as Fishbowl. I know this required more space to run both at the same time which meant additional fees.

    • Thank you, Sandy. I didn’t get into details on “hosted QuickBooks” as there are a whole set of different issues to consider there. Integration with add-on products can be a major issue for some hosting vendors – I’ve run into quite a few issues with some of them. Some vendors are better than others. Also, sometimes a higher end hosting plan (which costs more) is more flexible than the basic ones in this regard. I’m not sure that your comment about copying and rebuilding covers all the bases – many users don’t have that technical ability and don’t have a local copy of QuickBooks (which is why, of course, they should be working with a qualified accounting professional who can help them!), and rebuilds don’t fix all file corruption issues.

  • Thank you Charlie – I look forward to your analysis. I do hope you consider including Hosted QuickBooks – that is a step that many clients are going towards now and that has a variety of solutions as well.

  • Watch the data integrity controls in the new cloud accounting systems.

    Can closed periods be protected from changes with a password?
    Is the audit trail report useful?
    Is the bank rec report correct?

    Many of the newer cloud accounting systems lack all of the above.

  • I am old school still with it comes to the desktop. I have ‘grown up’ through the tech world leaving my old typewriter behind so many years ago. The change has been awesome! I now play online games with my grandchildren and they live 1300 miles away! Face phone calls, etc…priceless! BUT…I do not believe that everything is safe via the cloud/internet. You see it every day. I would rather have a lost laptop with a password on my data than have my data available to millions when a hacker breaks in. It happens to major companies, and I do not think Intuit or any other cloud based options are any safer.

    Thank you for the great article.

    • A good point, Jimmie, but remember that a lot of your data is “in the cloud” even if you don’t want it to be. Your checking account, any time you use a credit card online, so it is something we don’t have total control over any more…

  • Charlie,

    If you’re looking at Wave, you should also look at Kashoo. Their data entry interface is very efficient, and if you want to try to convert to QuickBooks, their export provides more detailed data.

    Thanks again for your interesting, useful articles!

  • I’m am still somewhat “old school” with regards to desktop accounting software, but I believe that “cloud computing” is where the accounting industry is headed. It does offer many advantages that desktop accounting doesn’t offer – read 24/7 access from anywhere and no dealing with Accountant’s Copies and Transfer files (which can be a hassle). However, as an “old school” guy, your article has helped me understand better why the thought adopting SaaS models still leaves me with a lingering queasiness – data security, data ownership, quirkie upgrades, and portability to other platforms.

    One issue that you touched on was the issue of being able to access your data if you stop paying the monthly fee. What happens in the case of the SaaS provider going out of business? Will you still be able to access your data? Probably not. This begs the question of the financial stability of the provider as well as the operational issues discussed. This applies to SaaS or “hosting.” I don’t know if there’s a way to address this aspect in future articles, but it would be both interesting and valuable information.

    • Thank you, Karl. Note that if you use a “hosting” service you should be able to copy your QuickBooks company file to a local system if you decide that you are going to move away from that host. That file can be used locally, or with a different hosting company.

  • Availability: Universal braodband is still an oxymoron. There are still places in the US where access to broadband connections does not exist.

    Looking forward to your Cloud series.

  • You can have the best of both worlds. You can deploy however you like – in the cloud or in-house. You can have as much control and flexibility as you want. And its more cost effective. Its called Open source accounting (ex. xtuple postbooks)

    • Flagel – what if your local office server fails if you have the Desktop version? Hardware failure is an issue no matter what approach you use. When looking at a Cloud product you need to look at the uptime statistics. Note that in many cases your Cloud based system is going to be more reliable and have better availability than your office system.

  • We transitioned to a cloud server when our in-house server needed to be replaced. Initially we had some issues with some add-ones but we have worked those out. I still periodically do a local backup of client files ( maybe I am just paranoid) – but overall I like the cloud desktop for accessibility and flexibility. But you make some really good points, things to think about. Looking forward to your upcoming articles. Thanks.

  • Very good points comparing desktop & online apps. A virtual desktop is a nice little hybrid that combines the two. The beauty in a virtual desktop is that the files and applications can be accessed remotely. With accountants who go directly to their clients to work, having these tools remotely accessible adds flexibility to when and where we can get work done.

    My firm uses solvco.com and we rave over how we can move files between the virtual system and our local system. With sensitive information, it is very important to have backups locally and virtually. We have both so we are prepared for a server failure or an office break-in.

  • We don’t like the QB online edition and do all we can to convince our clients to convert. We consider the online version the “half” version. We back up portAble files every time we work on our books and our clients books. My policy is to back up to a flash drive as well as our in house backups. We use go to my pc occasionally for certain clients..but we try to keep up our face to face service. In this press 1, press 2 world, our clients love the personal touch

  • There are levels of Internet service between “up” and “down”. I’ve seen many occasions where the quality of service is just poor – long latency times, every fourth ping is dropped etc. If you’re watching videos or supporting clients via Remote Desktop the problem is obvious – the video halts or stutters, or your remote dekstop connection is dropped. However I wonder how that would impact a service like Quickbooks Online. Perhaps your browser will experience a timeout error after you have just attempted to post a transaction – did it post or not, or maybe halfway? I don’t know.

Leave a Comment