With online, or web-based accounting, software an organization’s financial data is hosted by the vendor. In this software-as-a-service (SaaS) module, data is stored on secure servers with automatic back-up and redundancy capabilities. In recent years, these programs have become highly customizable: businesses only pay for the services that they consume. This flexibility, along with the lack of capital investment requirements, attracts small and medium-sized businesses especially.

Accounting solutions track the financial transactions within an organization. Typical features include general ledger, accounts payable/receivable, payroll, and reporting modules. Specialty systems often have additional features dedicated to a particular market. These include fund accounting for nonprofits, commission calculations for sales-oriented businesses like real estate, rate analysis for banking, or claims scrubbing for medical practices.

Online accounting systems are specifically designed to be used through the Internet, rather than being installed locally onto the company computers. This reduces information technology requirements like server hardware, backups, and maintenance, and shifts the expenditure from being a large up-front capital cost to a much smaller, but ongoing, monthly or annual fee.

There are two types of accounting software online: browser-based, SaaS and application service providers (ASPs). SaaS solutions are designed for the user to access the information through an Internet browser like Internet Explorer, Firefox, Chrome, or Safari. This allows the information to be accessed from anywhere, and it always looks exactly the same. An ASP is a client-server system, where the business installs a small software “client” onto their computers. In both models – SaaS and ASP – all of the data is hosted by the vendor on a remote server. Most ASPs are also “web-enabled,” meaning that a web-browser can be used if necessary, though it will come with a few disadvantages since it is not designed for that purpose.