Online bookkeeping: evolution or revolution?

Online bookkeeping has come of age, so accountants in business and practice would do well to check out the options. Lesley Meall writes

Accountants are understandably cautious when it comes to technology. Few are prepared to chance the bleeding edge if they can learn from the mistakes of others while watching from a safe distance; and for the past decade, this is the perspective most practitioners have taken to online bookkeeping. But there are signs that this is changing.

We are increasingly comfortable with all things internet. We love to google, we book our holidays online, buy our groceries, apply for jobs, administer bank accounts, file tax returns, and e-mail has become the primary form of business communication for many. From here, the move to equally widespread online bookkeeping is not exactly a giant leap - and software suppliers seem to realise this.

Over the past year, the market for online bookkeeping products has become quite crowded. Xero from New Zealand and e-conomic from Denmark have both expanded into the UK, and even Sage has taken the plunge. Now, in addition to Online 50, the Sage-based offering from IT Inside Out (which has been around since 2003), accountants can opt for something similar (but not the same), which Sage calls Sage 50 Accounts Professional Online.

Other suppliers include Bean Accounting, Easycounting, iCash (from Iris), Imbercal, Inrax (from Meier Pollard), Kashflow, Liberty Accounts, net-accounting.co.uk and NetSuite. And the accounting firms offering their clients bureaux-style online bookkeeping and accounting solutions now range from giants such as Tenon and Vantis, to smaller firms such as Cameron Baum, Critchleys and CS Corporate Solutions.

Accountants who want to exploit the benefits of online accounting are literally spoilt for choice. But it is worth wading through the various possibilities in search of something that will suit your business, whether you are employed by a small enterprise or run your own accounting firm because, in both scenarios, the online approach to accounting and bookkeeping can offer advantages over the more traditional approach.

When a bookkeeping application is provided online using the 'software as a service' model, you do not need to install and maintain the software on a PC, network multiple PCs together to enable them to share data, upgrade to the latest and greatest hardware or remember to backup your data. Anyone can gain tap into bookkeeping software and the company's financial data using a browser, as long as they have permission to do so, plus a PC, a telephone and an account with an internet service provider.

With an online bookkeeping system business users can work on their accounts any time it suits them, from anywhere with internet access, and their accountant can do likewise, making clients easier to manage and support. But not all online bookkeeping and accounting offerings are created equal, in common with traditional applications, so Tenon is using three different online bookkeeping and accounting systems to meet the needs of its various types and sizes of clients, while Cameron Baum is using two.

Accountants in business and practice who want to take the online approach need to choose their suppliers with a certain amount of care. Pay close attention to terms and conditions, avoiding lock-ins and onerous licensing arrangements, if you don't want to end up spending more than necessary; and compare features, functions and levels of complexity if you want to find the right offering for your business, or meet the needs of a range of clients.

Lesley Meall is a writer on business and technology issues.