What Is VoIP: The Definitive Guide For 2024

Most small businesses need some kind of business phone system to communicate with their customers. But traditional landline systems tie employees to their desks, require a lot of time, effort, and money to maintain, and can even leave you missing incoming customer calls.

We understand—and you’re not alone. Thousands of local businesses have experienced these problems.

By switching to voice-over-internet-protocol (VoIP) and getting a VoIP number, you can:

• Cut down your business phone bill.
• Give your employees the flexibility to answer phone calls from multiple devices.
• Deliver top-notch customer service.
• Tap into advanced features.

But we’re getting ahead of ourselves. We’ve put together this blog post to help you understand what a VoIP phone is, how it differs from traditional phone numbers, and whether you should make the switch.

Let’s dive in.

What is VoIP and How Does It Work?

The technology of business communications has developed far beyond traditional phone systems to VoIP phone services – phones that use an internet connection instead of a landline. Upon signing up for a VoIP service, you’ll be assigned a VoIP number. It’s similar to a traditional landline number—the only difference is that it’s not location-specific.

VocalTec launched the first-ever internet phone for commercial use. Since then, VoIP technology has exploded like nothing we’ve ever seen before. A report released by Businesswire indicates that the global VoIP market will probably cross the $100 billion mark by 2026. But why would you switch from a regular phone to a business VoIP?

• Location independent – You don’t need to be stuck at your desks to make or receive calls.
• Easy set-up – There’s no calling out engineers to add new phone lines. New employees just need to download the software to their smartphone or other mobile device.
• Varied communication – VoIP isn’t limited to calling—instead, you can use your VoIP phone number for chatting or text messaging (depending on your VoIP service plan).
• Budget-friendly. You can cut down on your phone bill by 30-50% upon switching to a VoIP phone system. However, it’s completely dependent on the size of the business and the use of calls.

• Advanced features. VoIP offers a variety of advanced features like call recording, call routing, auto attendant, instant messaging, call encryption, identity management, and more.

What Is The Difference Between VoIP and a Phone Call?

A VoIP number looks just like a traditional landline number—it’s a string of digits that you enter on your dial pad. The only difference is the mode of transmission.

Traditional landline systems are based on analog technology and transmit signals via twisted copper wires or fiber optic cables. On the other hand, VoIP is a business communication technology that is used to make or receive calls over the Internet. The analog phone can be replaced by mobile phones with an internet connection.

This creates different functionality. You can do much more with VoIP technology. For example, if you’re out of the office, instead of your desk phone going to voicemail, you can pick up the call on your cell phone or put in place call forwarding to the number of another team member. There are plenty of other software integrations available enabling add-ons like video conferencing that can all be managed on a cloud-based CRM for efficiency.

Confused about whether VoIP is the right fit for your business? Check out: VoIP vs Landline Phones. 

Transferring from traditional telephone service to one of the new VoIP solutions isn’t hard. The only two things you need to make a VoIP call are a reliable internet connection and an internet-enabled device.

Once you sign up for a VoIP service provider and choose a plan, you and your team will be assigned VoIP phone numbers. And the best part is that with VoIP you’ll have the ability to choose an area code outside your city or state for your VoIP number, allowing you to expand your business operations across different areas without scaling up your infrastructure (we’ll get deeper into this later in the article).

If you want to use your existing phone number with VoIP, you can do that as well. All you need to do is transfer your phone service to any phone carrier of your choice via number porting.

That being said, let’s look at the types of virtual phone numbers.

The 4 Types of VoIP Phones

Headquartered in California and looking to expand your operations across different states? Or maybe internationally? Want to win your customers over by ensuring they don’t have to pay a single dime for making calls to your customer care representatives? Let’s learn about the different types of VoIP numbers and how they can help you accomplish your goals.

1. Local Phone Numbers

Nowadays, you don’t need to set up offices in various locations to get state-specific local numbers. When you switch to VoIP, you can choose any available area code. This is a simple way to establish local credibility. Businesses can easily set up regional customer service departments to deliver top-notch customer service to customers regardless of their location. Plus, your customers won’t get charged high fees for long-distance calls.

2. International Phone Numbers

International calling is expensive. If you cater to customers across the globe, expecting them to cover these charges will make a bad impression. With VoIP, businesses can purchase international numbers, allowing them to easily cater to their global customers.

So, if you run a business headquartered in the United States but also sell to customers in India, you can easily get a local Indian phone number that those customers can use to reach out to your customer service team. You can also buy toll-free numbers from across the globe to offer a free-of-cost communication channel to your international customers. We’ll touch on that in the next section.

3. Toll-Free Numbers

You don’t want your customers to spend money reaching out to you, do you? If you’re looking to make a good impression, it’s important to cover these costs. Setting up a toll-free number is an easy way to allow your customers to reach out to you for free, which eliminates friction and increases the likelihood that they’ll do business with you. It also increases the chances that they’ll become repeat customers.

Some additional benefits of toll-free numbers include:

• They help businesses instantly connect their customers with dedicated support agents.

• They build credibility. 

• They’re cost-effective—subscription rates for these services are typically less than traditional landline rates.

Keep in mind that toll-free numbers usually have prefixes like 855, 800, 888, 877, etc. Upon signing up for a VoIP service, you’ll need to choose the country as well as the prefix of the toll-free number that you’d like to purchase.

4. Vanity Phone Numbers

Vanity numbers are local or toll-free numbers with number prefixes along with text strings. Let’s say your company’s name is MASTERMIND. You might request a vanity number that looks like this: 1-800-MASTER-MIND. You can choose from a variety of prefixes (depending on your VoIP service provider). The reason for having a vanity number? Vanity numbers are memorable—they make it easy for customers to remember how to contact you.

To dial a vanity number, you press letter-by-letter to the corresponding keys. If your number is 1-800-MASTER-MIND, your customers will dial 1-800-627837-6463.

How do VoIP phones work?

You may be wondering how it’s possible to take phone calls over the Internet instead of running through traditional phone lines. The audio of the phone call is broken down into digital data packets then these travel over the IP network and are resembled as it reaches the recipient. Essentially, digital signals are transferred by your VoIP service provider over a public switched telephone network (PSTN).

To set up a VoIP phone system, follow these steps:

1. Choose your VoIP service provider.
2. Check your internet connection by running a VoIP speed test.
3. Get your hardware—a VoIP desk phone, headset, or softphone (an app for smartphones).
4. Get a business VoIP phone number or keep your existing one through porting.
5. Test your new setup and get used to it!

Pros and Cons of VoIP Phones

Whether a VoIP phone service or a traditional phone system is best for you depends on your business needs. While there are a lot of benefits to transferring to VoIP calls, there are some downsides to be aware of too. Here are the main pros and cons to weigh up.

Advantages of VoIP phones

1. It’s budget-friendly.

You don’t have to spend too much time or effort setting up and maintaining it when compared with traditional landlines, cutting costs. It doesn’t rely on specialist equipment like physical phones and handsets – just a smartphone or other mobile devices. Kim Sayers, Content Creator & Marketing Specialist at United World Telecom, said, “VoIP is highly affordable as it doesn’t require additional equipment, routine maintenance, and infrastructure upgrades.

And since it uses digital pathways to transmit calls instead of traditional phone lines, businesses also save on long-distance and international calling fees.”

2. It offers advanced features.

The functionality of the VoIP phone system is itself advanced, offering excellent call quality even over long-distance phone calls as well as call forwarding, call recording, conference calling and more. IP phones also integrate with other software to expand capabilities to instant messaging, video conferencing and other capabilities.

3. It’s portable and flexible.

Instead of being stuck at your desk or even in-office, you can use a VoIP number to make calls from any internet-enabled device you own—whether it’s your desktop, cell phone, or VoIP phone. You can make outgoing or take incoming calls from literally anywhere at any time with a good internet connection.

4. It can help you deal with security threats.

A VoIP phone system can be stored in the cloud for scalability, ease of use and robust security. Measures like call encryption and identity management can be put in place to protect the privacy of the business and customers alike.

Disadvantages of VoIP phones

1. It requires upgrading internet speed.

Voice over IP relies on a strong internet connection. This is the main potential weakness. The company office may need to have its internet connection upgraded to support the transition to VoIP calls. Consider the volume of VoIP calls that will be coming in and ensure the office broadband bandwidth can support it.

2. It has a higher learning curve.

Changing to a completely different system for managing phone calls will take time to adjust to. Training the workforce so they can confidently use VoIP technology and all the advanced features available is a must to make the change worthwhile.

3. It depends on your internet connection.

While employees can connect their mobile devices to an ethernet connection in the office, when they are out of the office they could struggle with patchy Wi-Fi or internet outages. This will disrupt communication and their ability to do their job with location independence.

The Best VoIP Phones for Businesses

Check out our top recommendations.

1. Podium

If you provide omnichannel customer service, Podium is the solution for you because it keeps phone calls, SMS messages, and social media conversations all in one inbox.

2. Poly

This VoIP service provider is known for being simple, high quality, and affordable with pricing starting around $100.

3. Cisco

Cisco has a varied range of VoIP phone systems with different features to suit a range of needs and budgets, making them very popular.

4. Panasonic

For small businesses looking to customize their VoIP phone system to meet their needs and budget, Panasonic is a good choice.

5. Vtech

Get a reliable phone system at a reasonable price with Vtech as a service provider. It’s very cost-effective considering the quality and features.

Features to Look For in a VoIP Phone

With so many options to choose from, how do you know what VoIP phone is the right one for your business? There are some key features to look out for and compare against your business needs.

Scalability

As well as taking into account the number of VoIP phone users and volume of calls going through your system now, consider the long-term growth of your business to ensure your VoIP provider meets your scalability needs.

Advanced Features

What additional capabilities will support your business operations? For example, will you be taking international calls or conference calls? Make sure you transfer to a system with these features.

Compatibility

You may want to keep some of the systems and software currently in use. Your new phone system should be compatible with the integrations you are looking for, whether a CRM system for management or a cloud-based storage solution.

Customer Support

If customer calls are the main use of your phone system, consider the measures you can take to improve the customer experience. You could benefit from call routing to cut down wait times and interactive voice response for effective automation.

All-in-One Phone & Growth Solution

Getting a VoIP number can help your business cut down costs, avoid unnecessary maintenance, deliver superior customer service, and more. Interested in modernizing your phone strategy? At Podium, we understand the importance of business communication and keeping up with emerging technology in order to meet customers where they are.

We also understand how challenging it can be to manage various communication channels and deliver high-quality and efficient customer service. That’s why we create an all-in-one communication solution that allows you to manage your business and grow at the same time. From voice calls to SMS to social media messaging, we have it all covered. Business communication is easy with Podium.

VoIP Phones FAQs

What is the best VoIP phone?

It depends on the size and operational needs of your business. The best fit for a small business will be different from that of a call center. Consider the key features we mentioned and our top recommendations detailed in the article above.

Can I use my computer while talking on the phone?

Yes, the softphone on your mobile device should be able to independently handle the phone call.

Does my computer have to be turned on?

Only if the VoIP phone system is on your computer and not on another mobile device like a smartphone. All you need is a mobile device with VoIP capabilities and an internet connection.