Why cloud accounting is good for business

Updated Wednesday 9th July 2025

Table of contents

• What is the cloud?
• What is cloud accounting software?
• Benefits of cloud accounting software
• Limitations of traditional accounting software
• Why the cloud and accounting software fit so well
• Make the switch to cloud accounting with Xero
• FAQs on cloud accounting software

Key takeaways

• The cloud lets you access software and data online, from any device, at any time.
• Cloud accounting software works like traditional accounting tools, but it’s more flexible, collaborative, and always up to date.
• Features like automated bank feeds, real-time dashboards, and multi-user access save time and improve accuracy.
• Traditional desktop software can be restrictive and time-consuming, requiring manual updates, backups, and data transfers.
• Cloud-based tools integrate easily with other business apps, giving you a more connected and scalable system.
• Reputable providers use advanced security measures to keep your financial data safe in the cloud.

What is the cloud?

You're already familiar with the cloud if you use internet banking. Every time you check your account online, you're accessing data stored in the cloud. The cloud makes data and software accessible online anytime, anywhere, from any device. Instead of storing everything on your computer, you can access your data from anywhere with an internet connection, without relying on a single hard drive.

What is cloud accounting software?

Cloud accounting software is hosted on remote servers and delivered over the internet, following a Software-as-a-Service (SaaS) model. It operates similar to traditional accounting software, except there’s no need to install or maintain it on your own computer. Instead, you can securely access your financial data anytime, from any device, making it simpler to collaborate and stay up to date.

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

When you decide to try out cloud accounting, you can subscribe to an online accounting software solution and 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 connect the software to your business bank account so that banking transactions flow automatically from the bank to the books. This saves you from a lot of data entry.

Benefits of cloud accounting software

Cloud-based accounting software automates time-consuming manual tasks like data entry and bank reconciliation. You can collaborate in real time with your advisor or team, whether you’re in the office or on the go. It also protects your financial information with state-of-the-art security measures, giving you peace of mind.

By centralizing your financial data securely in one place, you spend less time on daily bookkeeping and more time on growing your business. Running your business accounts online has many advantages, including:

• Data about your sales or income and purchases can flow straight from your bank to your books so you don’t spend hours transcribing them.
• You can see your current financial position at any time.
• Multi-user access makes it easy to collaborate online with your team and advisors.
• It’s online software so there’s nothing to install or update, and all your data is backed up automatically.
• You can set up a dashboard showing important financial information like who owes you money, what bills are due, and how your cash flow is looking.

Limitations of traditional accounting software

Traditional accounting software has been around for years, but it comes with a number of limitations that can slow your business down. These include:

• The data in the system isn’t always up to date
• It only works on one computer and data gets moved from place to place, for example, on a USB drive – this is not secure or reliable
• Only one person has user access which can mean key people can't access financial and customer details
• It's costly and complicated to keep backups (if they’re done at all)
• It's expensive, difficult and time consuming to upgrade compared to cloud accounting software, which updates automatically

Why the cloud and accounting software fit so well

You can use cloud-based software from any device with an internet connection. Online accounting software can integrate with a whole range of third-party business apps, letting you streamline your operations.

With cloud accounting software, there’s no need to install and run applications over a desktop computer. Instead, you pay for the software by monthly subscription.

Cloud security you can trust

Many small business owners wonder about the security of storing their data in the cloud. In reality, reputable providers use advanced technology to protect financial information, so security is often stronger than traditional on-site solutions.

In the event of a natural disaster or fire, being in the cloud means business productivity doesn’t need to be affected because there’s no downtime. All of your information is safely and securely stored off site. As long as you have access to any computer or mobile device connected to the internet, you’re back up and running.

In addition to this, if you invite users to view your data, you can control the level of access. This is much more secure than the old-fashioned way of emailing your files or sending out a USB stick with your data on it.

Cloud-based software companies use bank-level security measures to protect your business data and maintain your privacy. If you use online banking, then you’re already primed to use cloud accounting.

Work smarter with accessible data in the cloud

The beauty of online accounting software is the flexibility it gives you to run your business from work, home, or on the go. You can be confident that you have an up-to-date picture of how your business is doing, no matter where you are.

Software updates can be developed and delivered faster and more easily in the cloud. This means you always have access to the latest features and bug fixes, with minimal disruption. With your data accessible anywhere, you can make informed decisions about your business whether you're in the office, at home, or on the go.

With cloud accounting, you can access up-to-the-minute financial data from almost any device with an internet connection, whether you’re in the office or working remotely.

This real-time visibility empowers better decision-making and simplifies teamwork, as everyone sees the same information at once. Plus, you avoid the hassles of installing updates and backing up data — your provider automatically keeps the software current and secure.

Make the switch to cloud accounting with Xero

Most cloud providers, including Xero, offer step-by-step guides or migration support to help you move your data across safely. Once set up, you can connect your bank accounts, invite your advisor, and begin managing your finances in real time—wherever you are.

Try Xero for free today to get started.

FAQs on cloud accounting software

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

Is cloud accounting software secure?

Cloud accounting services typically use encryption, secure servers, and regular backups — similar to online banking. This helps protect your data, even if a device is lost or damaged. By controlling login access, you choose who can see your information.

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

First, choose a cloud accounting provider, then sign up for a subscription. Transfer your existing financial data by importing your account balances and past transactions, and connect your bank feeds so transactions arrive automatically. From there, you can manage your books anytime online.

What features should I look for in cloud accounting software?

Look for essential tools like automated bank feeds, invoicing, bills tracking, secure multi-user access, real-time reporting, and automatic updates. These features make it easier to stay on top of your finances anywhere you have an internet connection.