VoIP Basics for Business

What is VoIP?

Voice over Internet Protocol (VoIP) is the transmission of phone calls over the Internet, instead of using traditional telephone landlines.

VoIP (typically pronounced "voyp") is also called “IP Telephony” since it channels voice calls and voice data through IP networks, LANs (Local Area Networks) and the Internet.

To learn more about what VoIP is and how it works, take a look at our What is VoIP page.

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Benefits of VoIP

Cost Savings

This is perhaps the most appealing benefit for many small businesses looking to optimize their budgets. VoIP phone systems tend to be much less expensive than traditional systems for both local and long distance calling. And if you go with a cloud-based system, you’ll save even more money on hardware and setup costs as well as upfront capital expenditures as cloud VoIP phone systems are paid on a monthly basis.



VoIP phone systems operate over the Internet, which means they are capable of being accessed anywhere there is an internet connection. Many VoIP providers offer what’s called “softphone” capabilities, which is essentially a mobile app that allows you to use your business phone from your mobile device - that way you can make and receive calls from anywhere you’d like and it’s as if you’re still sitting at your desk!



Another extremely appealing benefit of cloud-based VoIP phone systems to small businesses and organizations is the fact that they can be very flexible and have the ability to expand or contract with your organization. If your business is growing rapidly (or has the potential to grow rapidly), or if your business is seasonal in nature, it wouldn’t make sense for you to purchase a certain number of phone lines and telephones just to have to turn around and add to or remove those resources 3 months down the road. With traditional business phone systems, growing or shrinking resources can get expensive. But not with cloud-based VoIP phone systems.

Because VoIP uses your internet connection instead of physical phone lines, resources can often be added or reduced simply and easily, making transition periods a breeze for your business.


Better call routing and screening

VoIP phone systems have the capability of using auto attendants to answer calls and route them to the appropriate location. This saves your business time, money, and frustration, as you’ll no longer be forced to pay someone to manage the often tedious task of fielding and routing initial phone calls. You’ll also get the added bonus of appearing more professional to callers.


Better connectivity

With VoIP phone systems, being away from your phone doesn’t have to limit your ability to stay connected to prospects, customers, and team members. With features like “Find Me Follow Me,” you can have your calls routed to several different locations in order to “find you.”

For example, you might want your desk phone to ring first when someone calls your extension, then if you don’t answer there, you might want the call to be routed on the second or third ring to your mobile or home phone for a couple of rings before finally going to your secretary’s desk phone. This is a great way to ensure each caller is able to reach a human being and avoid the often dreaded voicemail where possible.

Speaking of voicemail, if and when your callers are sent to your voicemail, VoIP phone systems have the capability of transcribing that voicemail and being sent to you in the form of an email. That way you can immediately see who called and what they said in their voicemail without having to physically go to your office phone or call into a voicemail system.

Another feature many small businesses enjoy when it comes to VoIP phone systems is their ability to easily host conference calls. If you’ve ever worked with third party conferencing software, you know there is a certain amount of frustration and lack of coherence that go along with those solutions. Having the ability to manage conference calls in your business’s phone system is a feature that saves time, money, and frustration.


Better internal communication

Internal communication is vital to organizations of every size, and VoIP phone systems make internal communication easier. Features such as status indicators allow team members to see who’s available and who’s not. Chat features allow direct and instant lines of communication among your team, so there’s less time wasted trying to communicate, and more time spent actually communicating.

VoIP phone systems also offer training tools that allow you to listen in to individual conversations, speak only to your team member to give pointers or other info, and even jump into the conversation when needed. These are very useful tools when training new employees or when assistance is needed during a call.


Better data and caller insight

What business doesn’t want to know more about their callers and the actions they’ve taken before and after calls with their business? With VoIP phone systems, you can integrate your calls with your business’s customer relationship management software (CRM), allowing you to get better insights into who is calling and what actions they’re taking before and after engaging with your business via telephone.


VoIP Terminology to Know

There are a couple of terms and phrases that are commonly used to describe this broad category of Internet telephony:

POTS, which simply means "plain old telephone service", and PSTN (Public-Switched Telephone Network) are terms used to describe older phone systems that use analog phone lines instead aof internet connections.

VoIP is also called IP Telephony since it channels voice calls and voice data through IP networks, through LANs (Local Area Networks) and the Internet. As bandwidth has increased, so has the demand for VoIP systems.

How does VoIP work?

On its most basic level, Voice over Internet Protocol (VoIP) is the process of turning analog audio signal into digital “packets” that can then be delivered over the Internet. Simply put, VoIP enables you to make a phone call in much the same way as you would send an email.

Like most other internet technologies, VoIP has the distinct advantage of being capable of use across multiple internet-connected devices. This means VoIP phone services can be accessed from your computer, on your mobile device, or from a desk phone.

On a more technical level, VoIP is a way to make calls across your Local Area Network (LAN) and or Wide Area Network (WAN). The technology behind VoIP converts your analog voice into digital packets which are then sent across a network using the Internet Protocol (IP) to their end destination.

A VoIP phone system uses your Local Area Network (LAN) as the backbone of your system. When you connect your VoIP phones and your VoIP service provider to the VoIP PBX, you'll probably use HD IP phones to communicate. A VoIP phone system uses IP technology to handle your call control and manage your connections to the Wide Area Network. Even though a VoIP phone system uses VoIP and is connected to your LAN, most systems can connect directly to the Publicly Switched Telephone Network (PSTN). This gives you the ability to use both VoIP and the PSTN for your calling.

VoIP protocols and codecs

A VoIP protocol determines how your voice packet is transported across a network. A VoIP phone will typically support one protocol.

One of the most popular VoIP protocols is SIP (Session Initiation Protocol). SIP is a standards-based protocol that is used and supported by the vast majority of VoIP phone systems and services.

A voice codec is responsible for the conversion of your analog voice stream into a digital packet. Voice codecs also determine sound quality and bandwidth required to send the packet. A VoIP phone typically supports multiple voice CODECs.

The most common voice codecs are:

  • GSM – 13 Kbps
  • iLBC – 15 Kbps
  • G.711 - 64 Kbps
  • G.722 - 48/56/64 Kbps
  • G.726 - 16/24/32/40 Kbps
  • G.728 - 16 Kbps
  • G.729 - 8 Kbps

How much does a VoIP phone system cost?

One of the main benefits of VoIP phone systems is their affordability, but the actual price of a VoIP phone system depends on how you use (or deploy) it.
There are two basic options when it comes to VoIP phone systems:


On-premise VoIP phone systems are what you might picture when you think of a traditional business phone system. They include on-site hardware and IP phones, as well as any other necessary equipment to connect to your VoIP network.

IP PBXs can save businesses money, time, and IT resources, and they also have the added benefits of increasing flexibility, scalability, and ease-of-use. Those are the benefits of all IP PBXs regardless of deployment type.

On-premise solutions are great for businesses that expect their communication needs to remain relatively stable in the near future and are ready to make an upfront investment that will save money and improve business communication.

The main advantages of on-premise VoIP phone systems are stability, quality, and capability. Because you’re operating off dedicated equipment that is on-site, on-premise VoIP solutions tend to be capable of offering more reliable service and better quality, even at higher volumes.

Take a quick look at our Budget Calculator to get an idea as to how much an on-premise VoIP phone system could cost your business.

Hosted (a.k.a. “Cloud”)

Hosted VoIP phone systems are often called cloud or cloud-based phone systems, because they operate in the cloud. The “cloud” is an obscure term that gets thrown around alot these days, but just think of the cloud as a server or network of servers that store information or deliver data. For example, a traditional phone system would require you to keep all of your communication hardware in a closet somewhere in your building.

A cloud (or hosted) phone system, on the other hand, requires no physical hardware on your end. That’s why it’s called “hosted”. The entire phone system lives (or is hosted) on a server someplace else, that way you don’t have to purchase, install, and maintain expensive hardware. Cloud phone systems also allow you to access your phone system on pretty much any device that has internet access, which is a huge advantage for more mobile or remote operations.

Another big advantage of a hosted VoIP phone system is the pricing structure. Because hosted phone systems require no physical hardware, the upfront investment is significantly less than on-premise phone systems. Pricing structures usually involve either paying a flat amount each month for unlimited use, or paying a metered amount based on how much you actually use it. Both of these monthly payment structures tend to be valuable to growing or seasonal businesses.

Not all businesses have the capital to purchase a new phone system then have it installed and maintained. Not to mention the growing pains associated with paying to have new equipment installed or upgraded to facilitate new employees.

Next Step:

To get a better idea as to how much a hosted VoIP phone system would cost your business, check out our cloud phone system pricing page.

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