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Updated Dec 18, 2023

VoIP for Business: Understanding Cloud-Based Business Phone Systems

VoIP business phone systems come in numerous forms and can elevate communications internally and witzah customers. Varying pricing structures, options and add-ons can allow for cost-effectiveness.

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Chad Brooks, Business Strategy Insider Managing Editor
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This guide was reviewed by a Business News Daily editor to ensure it provides comprehensive and accurate information to aid your buying decision.

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Voice over Internet Protocol (VoIP) phone systems offer small businesses ease of use and scalability, and their suitability for remote use makes them ideal for on-the-go business owners. These systems also offer high call quality that often trumps that of landline phones. However, you’ll need a strong internet connection to run a VoIP phone system effectively. As long as you have the bandwidth, though, these business phone systems can be a boon to business growth.

What is VoIP?

VoIP is an internet-based phone service. Rather than transmitting voice conversations through traditional phone lines, VoIP digitizes and routes the conversations through internet lines.

“With VoIP, voice data is sent [via an Internet connection] in digital form rather than plugging into a traditional phone jack like you would over the public switched telephone network,” said Tina Liu, former senior product marketing manager for the 8×8 phone system. [Read related: 8×8 phone system review]

VoIP technology has improved significantly since its commercial debut in the 1990s, and since then, its popularity has skyrocketed. In the early days, users complained that the sound quality wasn’t as good on VoIP as it was on landlines, but that isn’t true today.

Editor’s note: Looking for a VoIP phone system for your business? If you’re looking for more information, use the questionnaire below to have our partner, Ring Central, provide you with information for free:

Benefits of VoIP

So, how does VoIP work, and how can it benefit your business? Essentially, computer software records your voice and then codes it into a digital signal, which is then sent over the internet. All of this happens instantaneously. Here are some of the reasons why more businesses are switching to VoIP phone systems:

Call quality

VoIP systems now take advantage of advanced high-definition codecs that have vastly improved voice quality, making modern VoIP networks sound even better than landline networks, said Matt McGinnis, former associate vice president of product marketing for VoIP provider RingCentral.

Simplified equipment

In addition to better sound quality, the cloud is also making VoIP a more viable option for small businesses. Companies that choose a cloud-hosted VoIP phone solution don’t need to purchase any equipment or employ an IT staff to install and maintain it.

“Cloud VoIP systems dispense with most of the upfront hardware and software and only require a broadband connection to activate,” McGinnis said. “This reduces the amount of capital expenditure needed and makes it easy to turn up and deploy.”

The advancement of VoIP technology and its relatively low cost make VoIP an ideal choice for small businesses, but you should still do your homework before committing.

Did You Know?Did you know
If you have landline PBX equipment that you want to keep using with a VoIP connection, you should consider SIP trunking. Most top business phone system providers offer SIP trunking services.

Ease of use

Lisa Chu, owner of the children’s formal clothing company Black N Bianco, said she likes that her VoIP system has eliminated all of the complicated tech support that her landline required.

“When the landline goes down, diagnosing and fixing the issues are never easy or quick, leaving me and my employees extremely frustrated,” Chu said. “VoIP is very user-friendly, and having the proper network, we have yet to encounter any significant issues that hinder our ability to communicate with our customers.”

Scalability

Using a cloud-based solution also makes it simple to add phone lines when new employees are hired, said Tyler Yost, director of strategy at the marketing company Blue Corona. He said his company has grown numerous times over the past five years, and each time, it was a simple process to add phone lines.

“We click two buttons on the interface online, the phone arrives a few days later, we plug it into an Ethernet port and we’re off and running,” Yost said.

Remote connectivity

One of the biggest advantages of VoIP, especially for businesses with employees who work remotely or in multiple locations, is that it allows employees to bring their business phone line with them anywhere they go. Most VoIP providers have a mobile phone system app that can be set up to ring when a customer or client calls an employee’s business line. Additionally, these apps allow employees to use their business line to make outgoing calls from their mobile phones.

 

Elizabeth Becker, a client partner for the Florida-based IT staffing firm Protech, said she likes that the company’s VoIP system allows employees to be location-independent.

“VoIP systems allow for business as usual, no matter where your employees may be physically sitting,” Becker said. “By having a VoIP system, it’s easier to give a little flexibility to employees while still staying connected.”

Cost considerations

Cost is another reason businesses are making the switch to VoIP. Most VoIP providers charge a monthly per-user fee, rather than a fee based on how many minutes everyone in the company spends on the phone. In fact, some VoIP services are free, although free providers typically offer fewer features than paid services do. In addition, companies don’t have to spend exorbitant amounts of money on special equipment and the IT staff to keep it running, resulting in further cost savings.

Some cloud-based solutions cost as little as $10 to $25 per user per month.

“A major advantage of VoIP and internet telephony is that it avoids the tolls charged by ordinary telephone service,” Liu said. “In addition, all of your business phone service, IM/Presence, mobility, video conferencing service and calling charges — including local, long distance and toll-free — can be consolidated with one VoIP provider.”

Advanced features

VoIP can match traditional calling features, like holding, transferring, call forwarding and caller ID. And with VoIP, features like call recording are much easier. The call is already digitized, so it’s extremely easy to add a feature to record the digital file.

VoIP services can also integrate with other communication services, like chat and email. These features can organize communication by party and time, meaning you can seamlessly review a conversation that took place across multiple channels. Plus, VoIP offers powerful conferencing features, such as video integration.

“For businesses where VoIP does make sense, there are many benefits, including [a] reduction in costs in terms of both maintenance and monthly recurring usage, ease of use and enhanced features that you would previously only find in an enterprise-level PBX,” said Chris Sherwood, an Oregon-based phone system consultant.

Voicemail, virtual receptionists, call forwarding, call recording, on-hold music, voicemail-to-email, conference calling, video conferencing, instant messaging, call screening, missed alerts and call logs are among the many features offered by most VoIP providers.

Is VoIP right for you?

Determining if a VoIP phone system makes sense for your business depends on the quality of your network and your needs, Sherwood said. For example, despite the many benefits of VoIP, it might not be a good choice for your business if your internet provider can’t support it.

“Most importantly, you want to ensure they have enough upload bandwidth for the amount of phone calls they expect to have running concurrently,” Sherwood said.

Switching to VoIP also might be inadvisable if you don’t have enough bandwidth to handle the other traffic on the network or your firewall and router can’t prioritize VoIP traffic over regular internet traffic, Sherwood said. On the other hand, if the network can support the extra traffic, VoIP is likely a good option.

The best VoIP phone systems

If you think a VoIP phone system is right for your business, check out our recommendations for the best business phone systems and VoIP providers:

  • RingCentral MVP: VoIP business phone systems are great for collaboration, and this system maximizes those capabilities. The platform allows for up to 200 attendees for HD video conferencing, and business phone numbers are available in over 100 countries. Thousands of available integrations allow for a truly customized experience. Check out our in-depth RingCentral MVP review to learn more about the pros and cons.
  • Zoom: Wait, Zoom for VoIP? That’s right! And for cost-effectiveness, it’s our pick. A metered, pay-as-you go option is great for businesses that use phones infrequently but still need the service. And all phone plans come with the option to switch calls to video. Read our Zoom review to see if this option is right for you.
  • Dialpad: With its AI-powered capabilities and 100% uptime guarantee, Dialpad is truly a modern VoIP option. AI plays a big role, with note-taking tools that give you post-call summaries with action items. This can be a real time-saver when your employees need to move on to other tasks after a call. Our Dialpad review will help you determine if this system is right for your business.
  • NextivaONE: This phone system makes it easy to use analytics to adjust your practices, thus helping you pinpoint busy times across time zones and locations. You can also expect 24/7 customer service with all plans, as well as flexibility with the system’s mix-and-match plan options. Read our in-depth NextivaONE review to learn more.

The right business phone system can take your company and practices to the next level. Choosing the best fit for you is all about knowing your needs and network capabilities.

Interested in learning more about what to look for in a business phone system? Check out our phone system buyer’s guide for guidance on how to choose the best phone system for your business.

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Chad Brooks, Business Strategy Insider Managing Editor
Chad Brooks is the author of How to Start a Home-Based App Development Business. He has spent more than 10 years guiding prospective entrepreneurs and business owners on the ins and outs of launching a startup, scaling a company and maintaining profitable growth. Within the world of entrepreneurship, he is particularly passionate about small business communications tools, such as unified communications systems, video conferencing solutions and conference call services. Brooks, who holds a degree in journalism from Indiana University, has lent his business expertise to a number of esteemed publications, including Huffington Post, CNBC, Fox Business and Laptop Mag. He regularly consults with B2B companies to stay on top of the latest business trends and direct growing enterprises toward the modern-day business technology required in today's digitally advanced world.
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