Choosing which financial system to use for your business is a very important decision. Historically, these software purchases were made at a huge expense, and were housed on servers. The implementations were lengthy, and any future maintenance on the system involved the IT department and sometimes even a call to your software representative.

A server is a piece of computer hardware or software that provides functionality for other programs or devices. A server-based financial system sits on the server and is accessed by staff from their computers, when connected to the same network as the server. Virtual Private Networks (VPNs) allow the access of the financial system from other locations.

Limitations of server-based systems

Server-based financial systems have served their purpose for a good while (pun intended); however, times are changing and there are good reasons to ditch this method of financial record-keeping.

Accessibility

Accessing your financial system on a server involves either being connected to the same network as the server or connecting to it using a secure VPN. It has been the trend for some time now, that remote work is preferable to in-office by many employees. The global COVID-19 pandemic has completed this shift to almost completely remote for most employees in most office settings. So, strike off the first way to connect to your server-based system.

This leaves VPN connection as the go-to way to access the server. However, anyone who has used a VPN connection can attest that it leaves much to be desired, as speed can be a factor if many people are trying to access the same information remotely. Using a VPN from your home network can also affect the speed of the internet for others in your home. The ‘private’ part of VPN means that data must be encrypted along the way and this takes up a ton of internet speed.

Connectivity

When working on a server-based financial system, the unfortunate reality is that if the server is down, so is your system. Servers can go down for many reasons, probably the most common being a power failure caused by weather. They can also go down due to a failure of hardware. Whatever the reason, it often seems to be at a time when you need the system for pressing tasks! If your server is at your office and all employees are working from home, someone (usually from the IT department) will have to go and tend to the server in person. This is inconvenient, to say the least.

Lifespan

Both the server-based financial software you use, and the server itself, have finite lifespans. Occasionally, software companies will roll-out updates to existing software, to fix any bugs or to add functionality. When you are on a server, these updates are not automatic and must be planned for and executed by internal staff. The typical useful life of a server itself is 3-5 years. Nothing is guaranteed, and if a catastrophic event destroys your server, the useful life ends right then and there. Let’s hope you have a backup of your information at a secondary location! These updates and replacements are cumbersome to say the least.

As software companies focus on developing their cloud-based solutions, they are wanting to spend less and less resources servicing and updating the old legacy systems still on servers. Sometimes the companies will let you know that you have X # of months to migrate to their cloud-based offering, as their support of your current system will be ending at that time. You want to start planning for your migration to the cloud before this happens!

Introduction to the cloud

Cloud-based computing is also referred to as ‘Software as a Service’ (SaaS). Instead of having the software sit on a physical server, the system is run over the internet. You don’t have to house the software; you just need to access it with a secure internet connection. A huge benefit to this is instead of paying a large sum of money to buy the actual software, you instead pay a monthly fee to access the software. All the updates are done by the software provider themselves, so you are spared that headache.

As software companies phase out support of older server-based systems, companies are ditching their servers in favour of these cloud solutions.

What makes cloud-based software better?

Always available

The availability of cloud-based systems is better than systems on a server. This is not to say that there isn’t any downtime at all. If your internet goes down, you will not be able to access your system. Since your internet being down also prevents you from being able to connect to anything, including a VPN, this is an unavoidable conundrum if the power goes out at your house.

There also might be periods of downtime for the system when the software company is rolling out updates. All customers will be unable to access the system during the update period, but this is usually ok, since you will receive notice in advance that the system will be unavailable for a certain period. A planned outage is preferable to an unplanned one any day.

Better integrations

Your financial system is likely not the only software your company uses – not by a long shot. You might have a hybrid-model of server-based and SaaS solutions. If this is the case, it is unlikely your SaaS solutions can speak to your server-based system. Because they are continually evolving, the ability to integrate one SaaS product with another is so commonplace in the world of cloud-computing.

As an example: Your company uses the Customer Relationship Management (CRM) software Salesforce. Salesforce is used to manage your company’s relationships and interactions with customers and potential customers. When a salesperson makes a sale, what once required a phone call or email to accounting for an invoice to be created, can now be automatically triggered by Salesforce directly to your cloud-based systems (for example, QuickBooks Online). While this does not eliminate the need for accounting staff to review and authorize the distribution of the invoice, it does reduce a lot of manual work.

Reduces manual tasks

If a server-based system cannot communicate with your company’s other SaaS applications, anything that happens in any of them, must be manually input into the financial system. This is a duplication of work that can be eliminated by a cloud-based solution which integrates with your other software. These integrations do the grunt work for you.

Most cloud-based financial systems can be directly connected to your bank accounts and credit cards. When a transaction occurs, the system retrieves it directly from your bank. You then need to categorize (or ‘code’) the transaction to the proper general ledger account. Once again, these systems do not eliminate the need for accounting professionals to review the numbers. They simply reduce the volume of manual transactions, which frees up the accountants for more value-added items such as forecasting, trend analysis and tax planning.

Transitioning from a server to the cloud is something that many organizations will be faced with in the coming years. You want to make sure this transition is done properly and cleanly with the assistance of an accountant to ensure the process is audit-proof.

Still have questions or need support? Click here to reach out!

I LOVE banishing the “finance scaries” by teaching entrepreneurs in an easy-to-understand way. If you’re reading this, you might benefit from my FREE Financial Health Check, which will assess how you’re doing with the financial management of your business, and provide you with customized resources that will hopefully resonate with you.

Server-based or Cloud-based: That is the question