It’s interesting that even those in Redmond are seeing the writing on the wall. Cloud computing is here to stay and this is reinforced by the fact that one of the major league players in the software application development world, Microsoft, is launching an online version of Office 2010.

This move not only justifies where small businesses are going, but it also shows that pretty much everyone is moving towards an cloud driven world where your applications do not exist on your own local machines anymore. Obviously, this still requires you to have an Internet connection of some sort and the move to a cloud based solution is a difficult one still for many to swallow in the development world. But with Microsoft making the leap, it actually shows that almost all of the major software developers are now backing cloud based computing.

One of the significant key moves here is that the company that hosts the cloud now has full control over the versioning. No longer will you have support questions that are determined by older version A, B, or C but instead the questions will start migrating towards actual usability and functionality. This not only creates ease for the support staff, but it also helps the development cycle flow better.

Small businesses benefit from all of this because the cost of doing business on a cloud based system is inherently less than a desktop system. After you have calculated all of the costs associated with data retainment, the answer is simple when it comes to choosing what to use for your small business accounting, office applications, and the rest. This move by Microsoft signifies not only a competitor-driven move towards Google Apps, but the fact that Google Apps is actually making a difference. Welcome to the age of cloud computing.

One of the ways to keep your costs in check when you begin with a small business is to get acquainted with web-based products. There are many out there to choose from and the brilliance of it is that what it requires from you is an Internet connection. This way, you can conduct your business from any computer, anywhere in the world. If the computer that you were working on crashes, you probably won’t have to worry since the data is safely stored on the Interweb.

Having been a small business owner, I can definitely tell you the amount that I have saved in using web based services is incalculable. One of the cost effective moves I made was to move a lot of my administrative costs such as email and business office tools like my small business accounting to web services. This allowed me to conduct my business anywhere in the world while I traveled and didn’t have to carry a heavy duty laptop. Instead a netbook, or mobile device was all I needed to keep on top of the business while at conferences and meetings. And you can find Internet service pretty much anywhere in the world through hotels, coffee shops and Internet cafes.

Online services in the end provide a way to streamline your business costs into manageable amounts a month instead of huge fees that hit you on an annual basis. And when your monthly service fees multiplied by twelve are less than your previous annual fees, that’s when you realize that there are products out there that you should be avoiding unless there’s an absolute need for it by your business.

When you start an Internet based business, there are several steps that you have to make sure that you follow. Don’t get me wrong, there’s a lot to do, but these are a few of the major things that you should never miss out.

The first is to incorporate your business. This will make you official with the state. Being official also means that the state is now tracking where you’re going and if you will owe taxes and such.

I would also recommend getting an EIN number from the IRS. This is like your social security number for your business essentially. So it’s very important not to just toss this number anywhere and keep it safe just as your social security is used for documentation and forms but you don’t put it on your checks.

The next thing I would do is to find out what taxes and business licensing you will need. Depending on if you’re in retail or not, will determine what taxes you need to pay and licenses you need to obtain for operation of your business. You should probably determine what sort of small business accounting software that you use at this moment since it’s important to keep track of everything in your books in case the IRS comes knocking with an audit. Then you have evidence of how you spent your money getting the right documentation and such which hopefully will reduce your risk of any fines.

Finally, I would look at the tools that are needed to start the eBusiness itself. Most of the time, you’re better off with a lot of the free or open source tools if you understand how to manage them. If you do not, there are many inexpensive and/or free services out there for business use. From email to collaboration suites, it’s all out there. These keep your costs low and allow more of your funding to go towards establishing your business itself.

I often have to answer the question of why you should move to an online accounting system.

There are very simple reasons, but in the end, you’re actually looking at cost effectiveness from a small business owner’s point of view, that alone could be one of your key decisions in going with an online system. Obviously, there is also the disaster recovery, data backups and all of the good things that come with an online accounting package.

From our perspective, it’s actually easier to manage from a customer relations perspective. There isn’t the problem of asking what “version” you’re on, since what you see would be what the support personnel sees. The entire production system is always available to support without having to ask you for version numbers, training the support personnel on all the versions, and determining when to retire support for an offline version. In fact, it’s a tremendous win-win since it allows both parties to concentrate on solving the problem at hand instead of futzing with the details of versioning and inter-version discrepancies.

From an accountant perspective, it’s also better off because you can review the business without limiting the business owner from operations. One of the worst functionalities of offline locking is that the business owner is thrown into a constraint that is limited by their accountant. No longer is that an issue, due to the fact that the accountant can work concurrently with their client.

All-in-all, from our operations view and customer’s, it makes it an absolutely easy choice to make. Savings in both money and time should be the top two considerations of any business. And that’s exactly what we offer.

One of the things that I notice while working with clients over mediums such as Twitter is that there are a lot of small businesses that outsource their administrative work to virtual assistants (VAs). Most of these VAs tout their ability to use many types of mainstream accounting products but what I never did understand was why there was such a small push for cloud based products.

Web based accounting actually performs their duties at a low-cost and provides an easier way of managing bookkeeping. There are accounting solutions out there that allow multiple company support and ways to keep all of the bookkeeping in order when it comes to tracking multiple businesses. It also makes it a lot easier to accomodate the VAs since much of their data is virtual. But in the end, here’s the key point on why your VA should be using a cloud format for your accounting needs instead of an offline one:

Do you trust your VA enough to secure your business’ financial data?

A VA that uses offline accounting products does not necessarily understand how to secure and protect your financial data. Do they backup your books? Is it stored on the same drive or a separate drive. How often is this process done? Is it encrypted or out in the open? A cloud based service however, needs to take security into account and provide your business with as much redundancy as possible. Most services not only transfer your data via SSL, but also provide redundancy on the backend. Your data should be on hot-swap RAIDs and probably also have a cold backup solution.

Don’t get me wrong. Nothing wrong with VAs, nor if they use offline products. But the real question as a business owner is if you want them to work on your data without some guarantees of backing up your financials. And a web based accounting can provide all of that for you, and your VA without fail.