Virtual Phone System: What is it? How to Set Up?

In today’s fast-paced world, communication is key to any successful business. Whether you’re a startup or a large corporation, having an efficient and reliable phone system is essential for keeping in touch with clients, customers, and colleagues. These systems are becoming increasingly popular for businesses of all sizes, offering a wide range of features that traditional phone systems simply can’t match. In this blog, we’ll explore five compelling reasons why you should consider choosing a phone system for your business needs. From cost savings to increased flexibility, we’ll show you how a virtual phone system can revolutionize the way you communicate.

What is a Virtual Phone System?

A virtual phone system is a cloud-based business phone service, which works via an internet connection. Compared to a traditional business phone system, which requires a hardware PBX system, virtual telephony requires very little hardware. Businesses purchase a local virtual or toll-free number and connect it to the various departments through a virtual PBX system.

Usually, the various departments can be reached through a different extension code. Cloud-based phone systems are now widely used in all business setups irrespective of their size. Even small businesses are going for a cloud PBX system owing to its flexibility. Here are 7 reasons why you should choose a virtual phone system.

How Does a Virtual Phone System Work?

A virtual PBX system, also known as a cloud phone system, operates through the internet instead of traditional phone lines. Rather than relying on physical hardware and equipment on your premises, a virtual phone system uses a remote server to manage all your calls and other communication needs.

The system uses a combination of software and hardware to manage incoming and outgoing calls, voicemail, and other features.

When someone calls a virtual phone number, the call is automatically routed through the system and forwarded to the designated device, which could be a mobile phone, a desktop computer, or a VoIP handset.

Different Types of Virtual Phone Systems

Hosted Phone System

The first category is Hosted PBX. This is a type of virtual phone setup that is exclusively handled or managed by a third-party service provider. This type of telephone system is ideal for businesses that want an all-in-one telephone system solution, without having to deal with managing and maintaining their own hardware. 


  • Setting up and managing a hosted phone system is easy as the service provider is responsible for all maintenance and upgrades
  • These phone systems are more cost-friendly than traditional phone systems because there’s no need for expensive hardware
  • Hosted phone systems are highly scalable which means it is easy to add or remove users as the business grows and changes
  • Offers advanced features like voicemail-to-email, call recording, and auto-attendant


  • Dependence on the service provider for maintenance and upgrades may lead to downtime
  • May have limited customization options, as the system is managed by the service provider
  • Dependence on high-speed internet for connectivity can lead to poor call quality or dropped calls in areas with poor internet connectivity

VoIP Phone System

VoIP, or Voice over Internet Protocol, is a virtual PBX system that makes use of the internet for calls. VoIP systems are considered pocket-friendly than conventional phone systems and also offer advanced phone features including video conferencing and screen sharing.


  • As calls are made and received over the internet, VoIP phone systems prove to be more pocket-friendly than conventional phone systems
  • With an internet connection, VoIP phone systems can be accessed from anywhere, which makes them an ideal choice when on the go
  • These systems offer high scalability and flexibility which means users can be added or removed as and when needed


  • Depend on the quality and reliability of the internet connection, which can be an issue in areas with poor internet connectivity
  • Can be more vulnerable to security threats like hacking or malware attacks than traditional phone systems
  • May require additional hardware or equipment, like headsets or routers, to get the most out of the system

Cloud Phone System

Cloud-based virtual PBX systems use cloud technology to manage all communication needs of a business. These systems are highly scalable in nature which makes them a perfect fit for small to medium-sized businesses that are likely to expand sooner or later.


  • These systems are very much scalable and flexible. According to the need of the business, users can be added or removed
  • There’s no requirement to invest in costly hardware or equipment as everything runs over the internet cloud
  • When it comes to security and reliability, these systems can be completely trusted as data is backed up in multiple locations and is also protected by the service provider
  • Accessing a cloud phone system is extremely easy – do it anywhere in the world with just an internet connection


  • Depend on the service provider for maintenance and upgrades, which may lead to downtime or service disruptions
  • Reliance on the internet for connectivity can lead to poor call quality or dropped calls in areas with poor internet connectivity
  • May have limited customization options, as the system is managed by the service provider

Top Features of Virtual Phone Systems

Some of the top features of virtual or cloud-based phone systems are Voicemail-to-email, Business phone numbers, Automated attendant or IVR, Call Recording, Custom greetings, Mobile apps, Analytics, Reporting, etc.

Reasons to Use a Virtual Phone System

1. Cost-Effective Solution

A virtual phone helps companies save a lot of money as they do not need to buy additional hardware and networking equipment. Most existing phones can be used with the new solution for connecting the call.

2. No Infrastructure Required

As it’s a virtual solution, you do not have the need to create a large infrastructure set up.  There is no complexity to use the phone system as you will get an online interface to manage everything. You do not bear the pain to understand a network infrastructure.

3. Helps in Managing Multiple Calls

Businesses having a bigger client base often receives a lot of inbound calls. It is also the case when these companies run marketing campaigns. In order to handle such high volume of inbound calls, a proper system is required, which can route the calls to the right department or agent. A virtual phone system excels in the scenario as calls are routed through the virtual PBX.

4. Quick Deployment

A Virtual PBX System can be deployed quickly compared to a hardware-based phone system as there are no installation hassles. Imagine the setting up of a hardware-based system, which will need connections and wiring, which can take anything between 5-7 days depending upon the size of your organization. This is completely the opposite in the case of a cloud PBX system, which can be deployed and set up in a few minutes.

5. Rich Features

When you are moving ahead with a Virtual PBX System, you can expect some really interesting features such as Click-to-call, Multi-level IVR, Video Conferencing, Text to Speech translation, Mobile App to name a few. These type of features increases the efficient level of businesses.

Apart from the above reasons listed, the cloud-based phone system is preferred due to the additional flexibility it provides. Companies can get a free demo from service providers so that the features can be tested. Moreover, flexibility exists also in terms of payment plans, which are sometimes monthly or quarterly.

How do I Set Up a Virtual Phone System?

Setting up a virtual phone system involves several steps, but the process is generally straightforward. Here are the general steps to set up:

Choose a Virtual Phone System Provider

Research and compare virtual phone system providers to find the one that best fits your business needs and budget.

Choose a Phone Number

Select a phone number for your cloud PBX system, which can be a new number or a transfer of your existing business number.

Set Up Call Routing

Determine how calls will be routed, such as forwarding to a specific person or department, an automated attendant, or a voicemail box.

Customize Greetings and Call Handling

Create customized greetings and call-handling instructions for your automated attendant, voicemail, and other features.

Set Up User Accounts

Add users to your phone system and assign phone numbers and call routing settings as needed.

Test the System

Once user accounts are set up, it is time to test the system. This step is important to ensure that all functions are working correctly.

Train Users

Now the next step is to provide training to the team to make them familiar with the working and usage of the cloud phone system. Here employees or agents can be taught about making and receiving calls, accessing voicemail messages, recording calls, and all other important features.

Monitor and Adjust

The final step is to monitor the phone system on a regular basis to ensure all functions are working properly. This may include adjusting the phone system time-to-time as per the requirements of the business.

Final Words

In conclusion, virtual phone systems offer numerous benefits to businesses and individuals seeking a cost-effective and flexible communication solution. With features such as call routing, customized greetings, and analytics tools, these phone systems can help improve productivity, enhance professionalism, and provide valuable insights into call patterns and customer behavior. Additionally, because virtual phone systems are cloud-based, they can be accessed from anywhere with an internet connection, making them ideal for remote teams and businesses with multiple locations. Overall, cloud based phone systems are a valuable tool for businesses of all sizes, providing a scalable and reliable communication solution that can help drive success in today’s fast-paced business world.

Note: This post has been updated with latest information on 02-03-23.

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