Web-based accounting is a new, dynamic way to deliver full-featured accounting applications in a robust and affordable manner to small businesses over the internet. The key strategic differentiator is the delivery of a service versus an application. A web-based accounting package is a complete accounting system that resides on a web server. To use web-based accounting solutions, you need only a browser on any computer and a connection to the Internet. With web-based accounting, you avoid paying large sums of money up front for hardware, software and installation/customization. Instead, you pay a monthly subscription rate based upon the functionality desired.
On-line or web-based accounting services are generally delivered in one of two ways: either by an Application Service Provider (ASP) that owns the software package (like Intuit or ACCPAC), or by a Managed Service Provider (MSP), which is usually a datacenter hosting contractor.
The ASP model delivers a service and allows many users to remotely access the accounting application via the web. Through hosting, ASPs remove the burden of day-to-day IT management by assuming total responsibility for the system, updates and on-going maintenance, support, and backup. This is a great option for many small businesses that want to "drink the milk but not own the cow."
An MSP, on the other hand, is like owning a cow but paying a farmer to take care of it, so that you can drink the milk from your own cow. The client owns their own software and server and the MSP provides all the IT staff with a variety of skills to manage the system. Each server is customized to meet the needs of a particular customer. The MSP provides the technical support, software updates, backups, hardware, bandwidth, firewall, and other support services. However, the MSP model is more expensive and often not economically feasible for small businesses. Because of this, we will focus the remainder of our discussion on the ASP solution.
What are the advantages web-based accounting?
Lower Costs - Businesses avoid paying larger up-front costs to purchase software, hardware and professional services time, not to mention the ongoing cost of IT support staff. Furthermore, fees for annual upgrades are avoided as well. With the web-based model all costs are included in one low monthly rental fee.
Ease of Implementation - The implementation time frame is significantly reduced because the system is already up and running. This allows the business to focus on issues of training and data entry and/or conversion, which is the same as with a normal in-house application.
Robust Tools and Databases ? One of the historical shortcomings of low-end accounting systems has been that they incorporate weaker database technology. Alternatively, some of the most popular web-based solutions use extremely robust and secure databases, such as Microsoft SQL. Therefore, even the smallest business can now have access to the same high-end database technology as the big boys.
Backup ? Only a small percentage of small businesses perform regular backups and storage off-site. With web-based accounting solutions, backups are maintained on a daily basis which further protects small businesses in the event of data loss or viral attack. With web-based accounting, the option of maintaining your own local backup still remains.
Universal Access - To use web-based accounting solutions, all you need is a browser and a connection to the Internet. This makes it very easy to deploy the system throughout your organization. It is an "anytime, anywhere" computing service model and a quick and easy way to deliver access to everyone in your business.
Up-to-date Application Code ? Under the ASP model, web-based accounting solutions apply enhancements and patches to their product on a continual basis, compared to the older method where customers receive patches and enhancements once or twice a year.
Security and Viruses - Most companies are very concerned about sending their data over the internet. The reality is that your data over the internet is probably far safer than whatever you are currently doing now. Security professionals agree that web-based accounting often results in a more secure solution than most traditional file server based systems, especially for the small business.
Who are some of the market leaders in web-based accounting?
What are the challenges with web-based accounting?
Speed ? In most instances a dial-up internet connection is inadequate. It takes cable, DSL, or other high-speed internet access to make web-based accounting work at acceptable levels of performance.
Reliability - Web-based accounting relies 100% on the internet being up and running and available. If your connection to the internet goes down, then your accounting system is inaccessible. If this situation would create a customer service nightmare, then web-based accounting may not be right for you.
Portability - Sticking to a well known and stable back-end database can always allow you to more easily transition the data later if required. Using a provider with a long history in the enterprise application market for stand-alone systems assures you of application compatibility and portability if you should decide to bring it in-house.
Back-end Security - While SSL, the standard web security system, makes sending your data over the internet very safe, this does not mean your ASP's servers and systems are secure on their end. Business owners should ask potential ASP providers about firewalls, virus protection, backups, physical data center security, and database (not internet) encryption methods for particularly sensitive data.
ASP Stability - The biggest area of exposure when using an ASP is the chance the ASP will be acquired or go out of business. Business owners should ask about the vendor's financial stability, uptime guarantees (at the vendor's site), number of other users of the service, and your contractual rights in case of disaster, acquisition or bankruptcy (such as how to get your data back). Using an ASP means someone else has physical control of one of your company's core assets, and care must taken to ensure it's in safe hands.
Conclusions
Web-based accounting solutions can provide small businesses with superior solutions at a lower annual cost than traditional in-house systems. Whether they are used as a permanent accounting solution or just until your business grows enough to bring your accounting systems in-house, web-based accounting can provide your business with flexibility and a level of technical support previously available only to larger companies. Web-based accounting is not the perfect solution for all business; however, most small firms should evaluate the possible benefits of this solution.
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