You may have recently heard of the term “online accounting” but have no idea what it means. Don’t worry though, online accounting is fairly new and hasn’t been around that long so it understandable if you’ve never heard of it. But what exactly is online accounting and what’s the difference compared to traditional account? Let’s find out.

Traditional Accounting

Overworked Traditional Account

As the name suggests traditional accounting is doing things the traditional way, which is in case is either by hand (and a calculus) or by some professional accountancy software. In traditional accounting the accountant will still prepare the annual accounts, tax returns and other details as you would expect but the whole process is a lot different.

If you want your accounting to do all your bookkeeping you’ll need to keep hold of every receipt, invoice and expenditure which then can be passed over to your accountant. This can be a daunting task especially if you accidently lose one of these items!

If the accountant isn’t processing all your accounts by hand, then the chances are they will be using some accountancy software. This software can be fairly expensive to use and the customer will often have to pay a fair amount towards the cost.

Online Accounting

Online Accounting on iPad

Sometimes referred to as cloud accounting, both terms can be used interchangeably as they basically mean the same thing. Online accounting allows small businesses to take control of their accounts without blowing a load of money in the process. By using online accounting it allows small business owners to enter their transactions online through the online software and the accountant takes care of the rest.

Once all the data has been entered into the software and sent over to the accountant they can then prepare your annual accounts, calculate and process payrolls, complete and file the director’s self-assessment and work out and corporation tax due.

So What Are The Main Differences?

So now you have a good idea of both types of accounting what are the main differences between them and which should you be using?

Back Up

Backup Online Accounting Computers

Traditional accounting relies on manual backups of data. If all the accounts are still done by hand then they’ll usually be kept in a filing cabinet or some kind of storage. This might sound safe and secure but if you only have one copy of the data what happens if it gets lost, or heaven forbid there’s a fire! If such scenario was to happen then the data would be lost for good which would be a nightmare for you and your an account.

Even if you’re using traditional accounting software you might think you’re immune from data loss, but think again. If you know how tricky computers can be then you’ll know how easy they can break. If you have all your data stored on a computer then just a simple knock or accident could make it disappear in seconds.

Luckily some clever boffin has thought long and hard about this problem and has solved it with online accounting. When using online accounting the data is stored off site on someone else’s system that perform regular backups to ensure your data is safe and secure. If for any reason your computer breaks then not to worry, simply login on a different computer or device and the data will still be there. Simple.


Costs of Online Accounting

Traditional accounting can be very expensive as it requires a lot of manual labour and number crunching. It might sound easy but somebody has to sit there and go through all of the accounts which obviously costs money.

Online accounting on the other hand is considerably cheaper. No longer are you required to fork out huge sums of money for expensive accountancy software or licenses. Online accounting is much more affordable and prices usually start from double figures to rent out the software.


When you enter you receipts, invoices and expenditures online through the software not only does this give you a look into the numbers but allows you to communicate with your accountant easier. By keeping track of everything you are entering online it allows you to talk to your account and ask for advice about certain expenditures such as if they can be claimed on the business.

With traditional accounting there is normally less communication with the client as the accountant receives all the receipts and invoices and just works through them. A lot is based on assumptions and without the communication and feedback from your accountant you might be left in the dark not knowing how to improve.

If you’re looking to make the switch to online accounting then we have just the tailored package for you. Here at CRBH we specialise in accountancy for small businesses and offer a range of services including payroll, annual accounts and business advice. To find out how we can help you make the switch to online accounting, contact us for a free consultation.