What’s the Difference Between Cloud Accounting and Desktop?

Accounting software has come a long way over the last couple of decades. One of the most noticeable shifts has been the move from traditional desktop-based software to cloud-based accounting systems.

If you’ve ever wondered what the real differences are — and which one makes sense for your business — this guide breaks it down clearly.

What Is Desktop Accounting Software?

Desktop accounting software is installed directly onto a computer or local server. The data is stored on that machine, and you typically pay for it via a one-off licence fee or periodic upgrades.

Familiar examples:

• Sage 50 (desktop version)

• QuickBooks Desktop (no longer sold in the UK but still used in some places)

• Older versions of MYOB or TAS

Advantages of Desktop Accounting:

• Offline Access: You don’t need an internet connection to access your data.

• Data Control: Everything is stored locally — some feel reassured knowing the data is physically on their machine.

• Familiar Interface: Some people prefer the layout and familiarity of long-used desktop programs.

• One-Time Cost: Often, desktop software is bought with a one-time licence fee (though some require annual upgrades).

Disadvantages of Desktop Accounting:

• Limited Access: You can only use it on the computer where it’s installed (unless complex remote desktop setups are involved).

• Manual Backups: If your computer crashes, your data is gone unless you’ve manually backed it up.

• Updates Are Manual: Software updates, tax table updates, and compliance changes require manual installation or buying new versions.

• Difficult Collaboration: If your accountant or bookkeeper needs access, you have to send files back and forth — prone to version errors.

• Vulnerable to Local Issues: If your machine is lost, stolen, or damaged, the data goes with it (unless backed up externally).

What Is Cloud Accounting?

Cloud accounting software is hosted online. You access it via a web browser or app from any device with an internet connection. Your data is stored on secure remote servers managed by the software provider.

Familiar examples:

• Xero

• QuickBooks Online

• FreeAgent

• Sage Business Cloud Accounting

• Zoho Books

Advantages of Cloud Accounting:

• Access Anywhere: Use it from any device — computer, tablet, or phone — from anywhere with an internet connection.

• Automatic Backups: Data is continuously backed up to the cloud by the provider.

• Easy Collaboration: Your accountant, bookkeeper, or team members can log in to the same live data anytime.

• Automatic Updates: The software is always up to date with tax rules, features, and security patches — nothing to install.

• Better Integration: Easily connects to other tools like payment platforms (Stripe, PayPal), receipt capture apps (Dext, Hubdoc), payroll, and inventory.

• Supports Making Tax Digital: HMRC’s MTD requirements are built into most cloud platforms.

• Improved Security: Despite fears, reputable cloud systems often have better security than local systems — with encryption, redundancy, and professional data centres.

Disadvantages of Cloud Accounting:

• Needs Internet Access: No internet? No access (though some apps have limited offline functionality).

• Subscription Costs: Instead of a one-time purchase, you pay a monthly or annual fee. Over several years, this can cost more than desktop software.

• Data Ownership Concerns: Some worry about their data being stored remotely, though cloud providers generally have robust security and privacy controls.

How Making Tax Digital Changed Things

The rollout of Making Tax Digital (MTD) by HMRC accelerated the shift towards cloud accounting. MTD requires businesses to keep digital records and submit VAT returns using compatible software.

Many older desktop systems weren’t MTD-ready or required clunky bolt-on solutions. Cloud platforms, however, were designed to comply from day one, making them the go-to choice for VAT-registered businesses.

Which One Is More Secure?

It’s a common assumption that desktop software is safer because your data is stored on your own machine. But this isn’t always true.

Cloud security:

• Professional-grade encryption

• Multiple backups across secure data centres

• Protection from hardware failures, theft, or disasters

Desktop security:

• Relies on your own antivirus, firewall, and manual backups

• Vulnerable to physical damage (fires, theft, hard drive failure) if not backed up off-site

In most cases, cloud systems are objectively safer, unless you have an exceptionally robust local IT setup.

Who Still Uses Desktop Accounting?

Desktop software is still used by:

• Businesses with very poor internet access (remote locations).

• Companies that prefer offline systems for security reasons.

• Long-established businesses heavily invested in older software setups.

However, even these businesses are gradually migrating to cloud as older desktop systems phase out.

Are Costs Higher or Lower?

Desktop:

• Typically a larger one-off licence fee (e.g. £500–£1,000+)

• Annual support or upgrade costs often apply

• Additional costs for backups and IT support

Cloud:

• Monthly fees usually range from £10–£50 depending on features (invoicing, VAT, payroll, multi-currency)

• No separate upgrade or support fees — it’s all included

Over time, cloud can cost more in subscription fees but saves on IT maintenance, backups, and reduces the risk of data loss.

Is Cloud the Future?

In short — yes. Most major providers are shifting entirely to cloud-based systems. QuickBooks Desktop has been retired in the UK. Sage has heavily promoted Sage Business Cloud over its desktop products. New businesses overwhelmingly choose cloud.

The benefits in flexibility, collaboration, automatic compliance, and security have made it the default for most small businesses and accountants.

Summary: Cloud vs Desktop Accounting

Cloud AccountingDesktop AccountingAccess from anywhereAccess limited to one machineAutomatic backups & updatesManual backups and software updatesEasy collaboration with accountantsFile-based collaboration (clunky)Subscription-based pricingOne-off licence + optional upgrade costsBuilt for MTD and future complianceOften outdated or needs add-ons for MTDHigher ongoing costs but fewer IT headachesLower upfront but higher IT responsibility

For most modern businesses, cloud accounting makes day-to-day financial management far easier. Desktop software still has its place in limited scenarios, but its role is shrinking fast.