Cloud accounting: What it is and how it helps your business

Published Friday 10 April 2026

Table of contents

• What is the cloud?
• What is cloud accounting software?
• Is cloud accounting secure?
• Benefits of cloud accounting software
• Limitations of traditional accounting software
• Make the switch to cloud accounting with Xero
• FAQs on cloud accounting software

Key takeaways

• Implement cloud accounting software to automate routine financial tasks like bank feeds and data entry, saving time while ensuring your financial records stay current in real time.
• Prioritise cloud-based solutions over traditional desktop software to enable multi-user access and real-time collaboration with your team and advisors from any location.
• Utilise the enhanced security features of reputable cloud accounting providers, which offer bank-level encryption and automatic backups that exceed what most small businesses can achieve independently.
• Connect your business bank accounts directly to your cloud accounting system to eliminate manual data entry and maintain accurate, up-to-date financial records automatically.

What is the cloud?

The cloud is a network of remote servers that stores and delivers data and software over the internet. You can access your information from any device, anywhere, without installing programs on your computer.

You're already using the cloud if you check internet banking online. Every time you log in, you're accessing data stored on remote servers rather than your own device.

What is cloud accounting software?

Cloud accounting software runs on remote servers, and you access it through the internet. Unlike traditional desktop software, you don't install anything on your computer.

This means you can access your financial data securely from any device with an internet connection. The software automatically updates itself and backs up your data, making collaboration with your team and advisors much simpler.

In the case of cloud accounting, you keep your business books online. That includes records of income, expenses, assets and liabilities, so you can access and update them from anywhere. Most systems come with tools for quoting, invoicing, managing bills and more.

Learn more about what cloud accounting software can do.

How cloud accounting software works

Getting started with cloud accounting involves three simple steps:

• Subscribe to cloud accounting software: Choose a provider and sign up for a monthly subscription
• Move your financial data: Import your existing account balances and transaction history
• Connect your bank feeds: Link your business bank account so transactions flow automatically into your books

This automated connection eliminates manual data entry and keeps your records current in real time.

Is cloud accounting secure?

Cloud accounting is more secure than traditional desktop software. Reputable providers use bank-level encryption and advanced security measures that exceed what most small businesses can implement on their own.

Disaster protection is built in, so you can keep working even if something happens to your office equipment or location. Your financial data stays safe, backed up off site, and accessible from any internet connected device.

This means you can continue running your business from anywhere, even during unexpected disruptions.

You also have full control over who sees your data. You can invite your accountant or team members and set specific access levels for each person. This approach aligns with professional standards such as the revised Accounting Professional and Ethical Standards (APES 305) on Terms of Engagement. This is far more secure than emailing sensitive files or sharing data on a USB stick.

Benefits of cloud accounting software

Cloud accounting software saves you time by automating routine financial tasks and enabling real-time collaboration from anywhere.

Key advantages include:

• Automated data entry: Bank transactions flow directly into your books
• Real-time collaboration: Work with your team and advisors from any location
• Advanced security: Bank-level protection keeps your financial data safe
• Automatic backups: Your data is always protected and accessible
• Time savings:Spend less time on bookkeeping, more time growing your business

Key benefits of online accounting include:

• Automatic data sync: Bank transactions flow directly into your books without manual entry
• Real-time visibility: Check your current financial position anytime, anywhere
• Team collaboration: Multiple users can access and work on the books simultaneously
• Zero maintenance: No software to install, update, or back up manually
• Custom dashboards: Track who owes you money, upcoming bills, and cash flow in one view

Limitations of traditional accounting software

Traditional desktop accounting software can slow down the way you run your business.

Common limitations include:

• Outdated information: Data isn't updated in real time across your business
• Single computer access: Only works on one device, requiring USB transfers that aren't secure
• Limited user access: Only one person can use the software at a time

• Manual backups: You need to set up and maintain your own backups, which can take time and add cost

• Costly upgrades: Time-consuming and expensive updates compared to automatic cloud updates

Make the switch to cloud accounting with Xero

Switching to cloud accounting can be simple, and you can get support at each step of the process.

Here's what to expect:

• Migration support: Step-by-step guides help you transfer your existing data safely
• Bank connections: Link your accounts so transactions flow automatically
• Team setup: Invite your advisor and team members to collaborate in real time
• Immediate access: Start managing your finances from anywhere with an internet connection

Start a free one-month trial of Xero

FAQs on cloud accounting software

Common questions about cloud accounting software and how it can help your small business:

Is cloud accounting software secure?

Yes, cloud accounting software uses the same security standards as online banking. Encryption, secure servers, and automatic backups help protect your data to a higher level than most desktop software.

How do I switch from traditional accounting software to cloud accounting?

Follow these steps to switch from traditional accounting software:

1. Choose a provider: Select cloud accounting software that meets your business needs
2. Import your data: Transfer existing account balances and transaction history
3. Connect bank feeds: Link your business accounts for automatic transaction updates
4. Start managing online: Access your books anytime from any internet-connected device

What features should I look for in cloud accounting software?

Essential features to look for include:

• Automated bank feeds: Transactions sync automatically from your bank accounts
• Invoicing tools: Create and send professional invoices to customers
• Bills tracking: Monitor what you owe and when payments are due
• Multi-user access: Allow your team and advisor to collaborate securely
• Real-time reporting: View current financial position and generate instant reports
• Automatic updates: Software stays current without manual intervention