Cloud accounting: Benefits, features and how it works

Published Tuesday 6 January 2026

Table of contents

• What is cloud accounting?
• Benefits of cloud accounting
• Cloud accounting security you can trust
• Cloud accounting vs traditional accounting software
• Why choose cloud accounting for your business
• Make the switch to cloud accounting with Xero
• FAQs on cloud accounting

Key takeaways

• Access your financial data from any device with an internet connection by choosing cloud accounting software that operates entirely online through your web browser.
• Automate routine bookkeeping tasks by connecting your business bank account to cloud accounting software for automatic transaction feeds and real-time financial visibility.
• Enable team collaboration and advisor access by selecting cloud accounting software with multi-user capabilities that allow simultaneous work on your financial records.
• Trust reputable cloud accounting providers that use bank-level security measures, including advanced encryption and 24/7 professional monitoring, to protect your financial data more effectively than traditional desktop software.

What is cloud accounting?

Cloud accounting is accounting software hosted online that you access through the internet rather than installing on your computer. You're already familiar with this concept if you use internet banking.

Cloud-based systems offer several key benefits:

• Access anywhere: View your data from any device with internet connection
• No installations: Software runs online, not on your hard drive
• Always available: Access your accounts 24/7 from any location

How cloud accounting works

Cloud accounting software operates like traditional accounting tools but runs entirely online. Instead of installing programs on your computer, you access everything through your web browser.

How it works:

• Remote hosting: Your data lives on secure servers, not your computer
• Browser access: Log in from any device with internet connection
• Automatic updates: Software stays current without manual installations
• Real-time collaboration: Multiple users can work simultaneously

When you subscribe to an online accounting solution, you can move your books to the cloud. From then on, you can access your accounts from any web browser or from an app on your phone. You can also connect the software to your business bank account so that banking transactions flow automatically from the bank to your books, saving you from hours of data entry.

Benefits of cloud accounting

Cloud accounting benefits centre on saving time and improving business efficiency. The software handles routine tasks automatically, freeing you to focus on growth.

Core advantages:

• Time savings: Automates data entry and bank reconciliation
• Real-time collaboration: Work with your team and advisor simultaneously
• Enhanced security: Bank-level protection for your financial data
• Centralised access: All financial information in one secure location
• Mobile flexibility: Manage finances from office or on the go

By centralising your financial data in one secure place, you spend less time on daily bookkeeping and more time on growing your business – backed by a report showing that 74% of cloud-based firms report growth, compared to 65% of traditional firms.

Key operational benefits:

• Automated data entry: Bank transactions flow directly into your accounts
• Real-time visibility: Check your financial position anytime, anywhere
• Team collaboration: Multiple users can access and work simultaneously
• Maintenance-free: No installations, updates, or backups required
• Smart dashboards: Track outstanding invoices, bills due, and cash flow

Cloud accounting security you can trust

Cloud accounting security often exceeds traditional desktop software protection. Reputable providers use bank-level security measures to safeguard your financial data.

Here are some ways cloud accounting keeps your data secure:

• Advanced encryption: Military-grade protection for all financial data
• Disaster recovery: No downtime from fires, floods, or equipment failure
• Offsite storage: Data safely stored in multiple secure locations
• Instant access: Resume work from any internet-connected device
• Professional monitoring: 24/7 security teams protect your information

Cloud-based software companies use bank-level security measures to protect your business data, and a 2025 report found that 97% of accountants “mostly” or “totally” trust the cloud, demonstrating professional confidence in its privacy and security.

Cloud accounting vs traditional accounting software

Traditional desktop software can make it harder to grow because you are tied to one machine and manual admin. With cloud accounting, you and your team can access your data anywhere and cut down on routine tasks.

Why choose cloud accounting for your business

Cloud accounting flexibility lets you run your business from anywhere with real-time financial visibility. You always work with current data and the latest software features.

Cloud accounting gives you flexibility to run your business from anywhere:

• Location independence: Work from office, home, or while travelling
• Real-time updates: See current financial position instantly
• Automatic upgrades: Access new features without manual installations
• Informed decisions: Make choices based on up-to-date information
• Minimal disruption: Updates happen seamlessly in the background

Online accounting software connects with many third-party business apps, so you can simplify your day-to-day work and set up tools that fit how you run your business.

Make the switch to cloud accounting with Xero

Switching to cloud accounting is straightforward with proper support. Most providers, including Xero, guide you through each step of the migration process.

Here are the steps to get started:

• Migration support: Use step-by-step guides to transfer existing data
• Bank connections: Link accounts for automatic transaction feeds
• Team setup: Invite your advisor and team members
• Real-time management: Start managing finances from any location

Try Xero for free and get started today.

FAQs on cloud accounting

Here are some common questions you may have about cloud accounting software for your business:

Is cloud accounting software secure?

Cloud accounting security uses the same protection standards as online banking. Your financial data stays safe even if you lose or damage a device.

Security measures:

• Data encryption: Information is scrambled during transmission and storage
• Secure servers: Professional-grade facilities protect your data
• Regular backups: Automatic copies prevent data loss
• Access controls: You decide who can view your information

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

Switching from traditional software involves four main steps:

1. Choose provider: Select a cloud accounting service that fits your needs
2. Import data: Transfer existing account balances and transaction history
3. Connect banks: Set up automatic transaction feeds from your accounts
4. Start managing: Access your books online from any device

What features should I look for in cloud accounting software?

Essential cloud accounting features to prioritise:

• Automated bank feeds: Eliminate manual data entry
• Online invoicing: Create and send bills instantly
• Bills tracking: Monitor what you owe and when it's due
• Multi-user access: Enable team collaboration
• Real-time reporting: See current financial position anytime
• Automatic updates: Stay current without manual installations