Will moving to cloud accounting practice management software really save me money?

What is cloud accounting practice management software? 

Cloud-based accounting practice management software involves web-based applications instead of being managed on-site through a server. 

Cloud accounting practice software is outsourced to a provider, hosted on their servers (aka, the 'cloud’) and accessed remotely, providing that you can connect to the internet. Online accounting software in the cloud doesn't require a local server or installation. 

Also known as software as a service (SaaS), cloud accounting solutions usually require a simple monthly subscription fee from cloud accounting providers in exchange for their services. 

What is on-premise accounting practice management software? 

On-premise accounting practice management software is where an accounting practice purchases a licence and installs a system on internal servers physically located within a building. This is the major difference between cloud accounting software and it's on-premise counterpart.

On-premise accounting practice management software requires a specialist in-house IT department to build the system and oversee day-to-day maintenance tasks - such as running updates, managing back-ups and security procedures. 

Why should you consider moving to the cloud?  

There are many benefits of cloud accounting practice software for accountants and bookkeepers, including: 

• The current on-premise servers in your accounting practice have reached the end of their life, they're slowing down to the point of impacting productivity, and the risk of failure is critical.  
• You may be using other SaaS software, meaning you no longer need vast amounts of on-site server storage.  Or your current on-premise desktop accounting software does not integrate with our other SaaS software. You need to enable a remote workforce. Cloud-based accounting practice management software is undoubtedly the easiest way to implement hybrid working, offering users a choice of working from the office or home, or other locations such as client premises.  

How much does your current on-premise accounting practice management software cost you? 

On-premise server hardware requires capital investment – likely to run into tens of thousands of dollars depending on workload requirements – which will depreciate, degrade, and ultimately require more maintenance and eventually reach the end of life (where providers no longer support outdated server systems). The decision is whether to continue that capital investment cycle and pay upfront for new hardware.   

Consider the running costs of servers for on-premise accounting practice management software:  

• Energy (power, cooling, environmental management) 
• Floor space,  
• Maintenance, 
• Insurance,  
• Network traffic. 

Not only can maintenance be one of the most expensive factors to consider, but ensuring that the servers and hardware run consistently can require around-the-clock attention. 

On-premise servers will require a capital outlay that will depreciate over time and eventually need replacing in a few years. This is a lumpy and unpredictable budget cycle – you never know when equipment will fail and to what extent, or how long it will take to purchase, install and set up a new set of servers. The energy put into this task could be prioritised elsewhere, 'time' can go hand-in-hand with financial cost and is, therefore a crucial factor to consider. 

What would be the financial implications on your business of an unpredicted period of downtime? Expanding the accounting firm and its operations organically or through acquisition can increase the demand for existing equipment and require further investment to handle additional workloads. Scaling up on-premise hardware requires an extra budget and needs to be planned for the long term to align with the business growth strategy.  

How much does a cloud accounting system cost? 

The SaaS model associated with accounting practice cloud software means that the solution is paid for on either a monthly or annual pay-as-you-go basis.  

There are a few considerations on the actual cost of cloud accounting, such as the data centre, equipment and operational costs. 

Data centre costs of cloud accounting practice management software 

With cloud accounting practice software, you're using someone else's servers in a data centre, albeit on a larger scale. It usually means that you are not responsible for the capital investment in the equipment on which your business data and systems are running – this becomes the responsibility of the data centre. As does the maintenance of the physical hardware. (The exception is a co-location option, in which case you must provide the hardware while the data centre provides floor space, power, cooling and connectivity. For our purposes here, we'll leave co-location for now).  

The cost of running the data centre is rolled up into your monthly or annual subscription proportionately to your usage and requirements, so you are sharing those overheads with other organisations in the data centre. It's worth mentioning that just because you're sharing data centre resources does not mean anyone can access your data. Data security and unauthorised access prevention are essential features of the best cloud accounting practice management software.

Operational costs of cloud accounting practice management software 

Regarding budgeting, the best accounting practice management software in the cloud switches your infrastructure from capital costs to operational costs – a subscription model based on consumption. The up-front fees of cloud accounting practice management software are much less when compared to on-premises software for your business, but there will likely be hidden costs. These will derive from various factors, such as the number of users that require the system, ongoing customisation, and staff training. 

This means predictable monthly or annual costs based on the computer and data storage you need and the number of users who need to connect to the system. It is easy to scale up or down, adding or removing users and resources as and when you need them. It becomes more accessible and quicker to increase resources to manage additional workloads as your business grows.    

Equipment costs of cloud practice management software 

The equipment costs of online accounting practice management software are rolled up into your monthly or annual fees. 

The data centre will be responsible for managing and maintaining the business hardware. If one piece of kit fails, they move your systems over to another with significantly less interruption to your service.

Cloud accounting practice management software vs on-premise accounting software 

Without going into the finer detail, as these will vary depending on your business requirements, the ongoing cost of both solutions will be pretty similar.  

The critical difference is the investment cycle to replace your end-of-life servers on-premise which can increase overall costs and add to the capital expenditure element of your IT budget – something you won't have to deal with if you move to cloud technology.   

So, if you want predictability and scalability, cloud accounting software is a great option. It is not necessarily going to be any cheaper for your business if you host in the cloud, but it can be more cost-effective and easier to manage.   

Performance and reliability   

The operational set-up of a data centre may not rock your world, but it is important to know how they provide a first-class service.  

In addition to the hardware, they provide – the servers, racks, SSD storage, RAM, CPU etc. – they also provide protections for the integrity and performance of your systems.   

• Redundancy: a system designed with duplicated components so if it fails there will be a backup (either equipment or data)  
• Security: most data centres provide physical security to access sites 
• Environmental management: cooling, fire suppression systems optimised for sensitive data equipment  
• Power: dedicated power into the data centre, with diesel fuelled backup generators in the event of supply interruption  
• Uptime: the guaranteed availability of your systems, other than planned outages for maintenance and updates.  

Responsibility for the above shifts from the firm to the data centre. Instead of spending time keeping things running, your internal IT resource can be deployed onto more strategic developments to support plans for business growth.  

The modern accounting practice 

Another big factor is the modern accounting practice and what an online accountant expects from the software and systems they need to do their accounting and bookkeeping work. 

At the risk of referring to the over-used phrase "post-pandemic”, accounting firms and their employees were forced to make fundamental changes to how they used and managed their IT – those who were already invested in cloud computing had few problems transitioning from on-site to remote working, while those who were firmly rooted in on-premise IT systems had major problems providing secure remote access to a home-based workforce.  

Post-pandemic, the expectation of users is for a more flexible hybrid approach to where and when they work, and on whichever device is most appropriate.   

This is where cloud-based accounting practice management software really can provide added value. Being able to log on to work systems securely from any location on any device can boost productivity. No longer tied to a desktop PC, accountants can update files, collaborate on projects, and manage their time more effectively. But that doesn’t just mean being able to work from home. The possibility of getting work done in different places will make workers more efficient whether they are working from the office, from home, or other locations such as client premises.    

Having a modern IT infrastructure that is highly performant and offers flexibility in how, where and when accountants do their work can have a positive impact on accounting firm growth and can set a firm apart in a competitive talent market.   

Read more on the digital workplace for accountants here: Digital transformation in accounting. 

The added benefits of cloud accounting practice management software 

If we look again at the question “will I save money moving to cloud practice management software” the answer is no. If we rephrase the question to “is accounting practice software in the cloud more cost-effective than the IT infrastructure around on-premise practice management software” then the answer is yes, it certainly can be.    

The decision-making process will predominantly be driven by costs. But there are other benefits that could sway the argument for moving away from on-premises infrastructure and some genuine value to be gained from moving to the cloud.  

From relieving your IT team of the burden of constantly managing, maintaining and updating on-premise hardware, to easier, more predictable budgeting based on actual usage, cloud accounting platforms can support a more agile, strategic approach to IT operations and firm productivity, and provide a platform that supports forward-thinking accounting firms to innovate through technology.   

If you’re thinking of moving your current accounting practice management software to the cloud, read our guide to cloud accounting practice management software. 

Conclusion 

If you are considering cloud accounting software options, you’re not alone. One of the first questions asked when accounting practices consider moving from traditional accounting software to cloud practice management software is usually around cost.  

However, as we've uncovered in this article, it is not a simple question. And often the answer will be more around how to maximise the value of cloud practice management software for businesses rather than costs.  

Every accounting practice will have different requirements, but top accounting practice management software in the cloud will usually be positioned as more “cost-effective” across the board due to the ability to scale up and down as needed. However, this doesn’t necessarily mean you’ll save money. It ultimately depends on what you want to achieve by moving your IT infrastructure to cloud accounting software. This often includes considerations not only in terms of monetary cost but in terms of resources, time and user experience. 

What is certain is that there are various reasons for considering cloud accounting practice management software, and all of these should be included in a business case for making the decision to move to a cloud accounting platform. 

After exploring your options in detail, we hope you have all the information you need to make an educated choice. 

At Access, we’re specialists in supporting firms of all sizes with cost-effective cloud software for accountants, including accounting practice management software. 

Access Handisoft Cloud is an all-inclusive cloud-based accounting solution for small accounting practices. Book a demo today. 

For larger practices, we have APS software which is used by large scale accounting firms, due to its capacity to access everything you’ll need in one powerful cloud. Book a demo today.