Cloud Accounting versus Desktop Accounting
– Sleeter Report —
QuickBooks and Beyond
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
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
That 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!