As of today, the world of accounting is shaping new norms. Remote accounting is one of the recent trending practices since 2020. The reason is obvious. The pandemic hit the world economy. In the throes to survive the ultimate game, traditional accounting is now evolving into a remote accounting solution.
But is it worth it?
Remote accounting solutions may be the new trend this year, but there was once a time when manual bookkeeping and paper accounting were the means of managing the financial health of the organization. Now fast forward to 2021, and almost every other business on the street is going virtual. The accounting world is now taking advantage of virtual platforms too. And it’s about time they did so.
This article will give a brief insight into traditional and remote accounting so that you can conclude for yourself which choice is better for your business.
What is Traditional Accounting?
Accounting known as Accrual Basis calculates the profits. The accountant sends invoices or receives them. This is despite the received or spent amount.
The cash basis accounting is based on spending or receiving money.
So the traditional accounting method usually includes two major features;
- Business Income
- Business Expenses
Both are invoiced or billed during the fiscal accounting period on the tax return. The traditional accounting method is more complex in nature. And let’s not forget the piles of paperwork mounting on the accountant’s desk.
What is Remote Accounting?
Also known as a virtual accounting solution is a cloud-based accounting technique. The modern version of accounting is based on software.
The purpose of remote accounting or cloud accounting software is similar to that of traditional accounting.
The major difference is that remote accounting is done online using accounting software. The client might be sitting in California sipping his margarita while the hired or outsourced accountant prepares the financial reports, and manages the cash flows with the help of cloud-based accounting software.
The client is notified by the accountant about all updates in the end via encrypted emails.
Incoming Differences between Traditional Accounting and Remote Accounting
Of course, the most obvious difference between the two accounting techniques is that one is obsolete (almost) while the other one is an evolving technique. Remote accounting is the new cloud accounting.
The software allows accessibility from any corner of the world. All you need is a good WiFi connection and a laptop or mobile in your hand. Then you are set to rock the accounting problems with ease in just a few clicks. Just the use of credentials can give you access to the accounting dashboard to handle the day-to-day recurring tasks.
Traditional accounting cannot show off like modern online software. The use of traditional accounting software installed on the desktop is not a competition in nature as a virtual accounting solution.
Keeping the current conditions in mind, the virtual accounting solution provides remote capabilities. It not only helps support the business growth but also removes the working barriers for the accountant.
The remote accounting solution software includes not only the accountant but also allows access to limited users of choice and clients too.
When using traditional accounting software you have to constantly reinstall the updates. It requires a lot of space on the desktop too.
The best part of the remote accounting solution is that it is cloud-based. Client data about the payrolls to bank statements and all financial pieces are stored in the remote server. The cloud-based accounting software keeps the data safe and secure. But it comes at a nominal price! No hidden surcharges whatsoever. The monthly or annual subscription fee is only required. The higher-paid subscription the more number of accounts you can manage using one dashboard.
However, with traditional accounting, the responsibility to maintain the servers falls on your shoulders. To improve the storage space you need to invest in new servers. Overall its cost consuming and can disturb the budget for the month/year.
The fact that Cloud Based Software is hosted by a business in a safe data center is a benefit. All of your financial information is held off-site and is secure from hackers and other potential risks to your company.
It is now simpler for cloud accounting software providers to identify any vulnerabilities and prevent a data breach because they have more control and visibility into their clients’ security procedures.
Traditional accounting doesn’t work like this.
Instead of using encryption and real-time updates, it relies on passwords. Because of this antiquated security measure, organizations may be exposed to online attacks. Businesses are majorly concerned about security, which has a big impact on IT costs.
Concerns about security have been linked to higher costs, longer product release cycles, and lessened corporate agility.
Data Storage and Reliability
Cloud software is more dependable and better suited for accessing sensitive or crucial information because it is always accessible and accessible from anywhere with internet access. Additionally, compared to on-premise accounting software, cloud accounting systems offer more modern functionality.
When using cloud-based solutions, you can, for instance, examine your financial data on a mobile device, which is not available with desktop programs. Additionally, it has a very high data storage efficiency, so you won’t have to worry about running out of room.
However, traditional accounting is typically configured to keep your financial information locally on your computer. This implies that you must frequently back up your data. It can be time-consuming and expensive to back up data if your desktop application fails and corrupts it.
Most cloud accounting services give customer assistance around-the-clock. Therefore, you can deal with technical assistance online if you encounter a software problem and are unsure how to resolve it yourself or simply want another set of eyes to review the situation. Technical support workers can assist users from a distance with the help of remote assistance systems. Instead, they can offer support by phone calls or online chat.
Contrary to traditional accounting software, one of the biggest difficulties for technical employees is to respond to customer requirements quickly. Customers who are trying to complete their work may find it extremely annoying as the average response time to a support request is 24 hours or longer.
Technical staff often works regular hours and may not be able to help consumers after certain hours.
By automating certain processes, integration with other accounting software can lessen the strain on your bookkeeper. Typical business tools cannot be effectively integrated with traditional accounting systems.
They are frequently only compatible with a small number of programs and are created to operate independently of other software.
Because of this, it is difficult for firms to keep all of their information centralized. For instance, it would be possible to connect your billing system and accounts payable software, but it would be challenging to do so with your payment processing system. Additionally, there are occasions when you’ll need to manually enter data into an Excel spreadsheet before importing it into QuickBooks.
This procedure could take a while and be prone to mistakes, which might affect how accurately your financial reports turn out. This problem is resolved by cloud accounting software’s smooth integration with accounting programs like MyCPADashboard.
Whatever changes are made in the payrolls, bookkeeping, or taxes, an online history of the changes made is available. This means every change is universal. The users with the given access can view the files or financial data, make the necessary changes and review them accordingly. Files are maintained in the categories, uploaded online, and downloaded as per requirement.
In traditional accounting data is updated on every device. For this purpose, you need to install the software, and then are able to update the necessary files. Another drawback is that only one user (who might be the accountant) has access to real-time data.
Another foremost difference is in the form of the carbon footprint. As a virtual accounting solution, multiple users can access the data on their own. Once they are given access they can upload, download, and create files as needed.
Online communication is part of using cloud-based accounting software. it reduces the need to travel and immensely decreases carbon emissions. Cloud has a huge capacity to store files online. It also reduces the need to constantly print the data.
In traditional accounting hardware use is common. At one point it will require replacing. Printing is also a huge part of traditional accounting to inform partners about the meeting and so on. The printed data then is displayed using the projector which also uses the energy a lot.
This also means that online communication is out of the question. The partners or clients have to travel distances to be able to attend meetings.
Which is the Better Option?
Just look at the My CPA Dashboard. If you are reading this, chances are you have checked out the website too.
The role of remote accounting is to ensure easy accounting and bookkeeping solutions for all types of businesses. Whether you are an accounting firm or a client looking to straighten up their accounts in the fastest way possible, remote accounting is the right solution for you in this technological era. For more details,