What is cloud accounting?

Cloud accounting provides the same functionality as on-premises accounting software—with a crucial difference: cloud accounting software connects through the Internet to run on remote, vendor-managed servers. The user works from a web-based interface and data is sent into the cloud (i.e. the Internet), where it is processed and stored on a remote infrastructure. The results are then sent back to the user. All accounting functions take place off-site, not on the user's computer.

Cloud accounting eliminates the need for the customer to install, manage, and maintain software and hardware devoted to accounting or perform data backups. All of those functions are managed by the cloud accounting vendor. That frees IT personnel to devote their resources to other initiatives. What’s more, cloud accounting facilitates easier, secure information sharing by employees in other departments, branch offices, subsidiaries, auditors, and regulators as needed.

Cloud accounting typically uses subscription-based or usage-based pricing (e.g. per-user/per-month.) Users can access the software from any location and from most any connected device, including smartphones and tablets.