Online accounting: an expert guide
Until recently, only the bravest of businesses relied on online accounting systems. Those who managed their own accounts mostly used desktop applications from firms such as Sage, QuickBooks or MYOB. Others simply passed their figures over to professional accountants.
Things have changed. Online applications are becoming ever more polished and easier to use. Established accounting names such as QuickBooks and Sage are now offering online versions of their applications, and newer names are quickly establishing themselves.
Three in particular have proved popular. All are designed for ease of use – the idea being that no specialist accounting knowledge is required to use them – but they match the power of many desktop applications. Along with its business management features, FreeAgent offers a range of built-in project management tools we haven’t seen in a desktop accounting application. KashFlow includes stock management features, and Xero boasts the ability to connect to some online banks directly, which lets you keep a close eye on your business finances.
The benefits of online accounting applications are clear. You can add transactions or access your reports from anywhere, on any device with a web browser. And rather than entrusting your company’s accounts to a single user and a single PC, online services allow multi-user access, often with a hierarchy of permissions.
What’s more, with upgrades taking place on the server, you get a frequently updated program that can quickly cope when the financial environment changes. For example, an adjustment to the rate of VAT can be quickly incorporated into an online service without the user needing to upgrade, as might be the case with a desktop program.
A possible final advantage is the way online accounting services are paid for. Hosted applications generally charge a recurring monthly free, commonly ranging between £12 and £16 per month excluding VAT (although there are options both below and above this range). If your needs are simple, you might save money by paying a one-off price to buy a desktop application. But once you factor in upgrades and support, the cost of subscribing to an online accounts service could well be lower over time than that of investing in and maintaining a mid-range accounting application.
Importing your accounts
Many companies are discouraged from switching to an online service by the perceived complexity of moving what might be an intricately assembled chart of accounts over to a new system. In reality, the process is usually fairly straightforward, as long as your existing accounting application lets you export your data in either Excel or CSV format.
Most versions of Sage will let you do this, and QuickBooks lets you export all sorts of data, including reports, transactions and your chart of accounts, in CSV format. This data can be uploaded directly into your online system. The KashFlow service also offers a Sage Line 50 to KashFlow Export wizard that can automate the process of moving from Sage to KashFlow.
Another concern with online accounting is that your business-critical data is held by someone else, raising two potential security risks. There’s a transactional risk, meaning your information could be intercepted between keyboard and server; and there’s a storage risk, meaning your data could be accessed by an intruder – or, in the case of a systems failure, lost.