What is VoIP & How Does It Work? A Complete Guide

The internet is changing the way businesses communicate – and VoIP technology is the driving force.

What is VoIP? 

VoIP means ‘Voice Over Internet Protocol’. 

It’s the technology that allows you to make and receive calls over the internet. Yep, that’s right: you no longer need to use traditional ISDN phone lines.

Instead, you can power your phone system using the internet.  The times are changing, VoIP is taking over, traditional phone lines are being shut down, and it’s all very exciting for businesses. 

How Does VoIP Work? 

When you use a VoIP phone system, you’re speaking to the other person over an internet connection. For example, you probably use Zoom, Teams, or Facebook Messenger, right? When you call someone on one of these apps, you’re using VoIP technology.

A VoIP system conducts calls in an easy-to-handle, modern way. When compared to making calls on a traditional phone system, VoIP is on a whole other level. From beginning to end, this is how a VoIP call happens: 

Step 1: You choose the number you want to dial

Step 2: Your phone system tells the VoIP provider to call the number

Step 3: The call begins and tiny little packets of digital data are exchanged over the internet, which allows your voice to reach the other side

Step 4: The VOIP system continuously converts digital signals into audio, meaning you and the person your calling can hear each other

Step 5: After the conversation is finished, you can end the call. 

Now that technology has advanced so far, VoIP systems now use SIP technology (which is basically the glue that holds internet calls together), meaning calls are now much faster and cheaper.  

The Strengths of VoIP 

VoIP is changing the future of business communications. Here’s what makes it so appealing:

Cost savings 

Right now, times are tough – particularly for small and medium-sized businesses.

Due to the impact of the COVID-19 pandemic, and now the cost-of-living crisis, many businesses are desperate to save money. 

Hardware – well… You don’t need any!


You are completely free to change or update your system at any time with no added installation purchases

Calling fees 

With SIP technology, VoIP systems avoid paying long-distance fees, and international calls are far, far cheaper

Remote working 

Your number represents your account, not your physical location, so it travels with you wherever you go.

Higher quality sound 

Most VoIP systems use advanced technology that processes your voice more clearly than traditional phone systems can.  After all, no customer wants to speak to a representative whose voice is crackling and hard to make out.

More advanced features  Apart from being able to leave voicemails and put customers on hold, traditional phone systems don’t have many other features, right? It’s all very basic. 

Advanced Features

VoIP systems come with tons more features than traditional phone systems.

Want to know the best ones? Here they are: 

Call recording 

Click to dial

Video conferencing 

Voicemail to email

Auto attendant

Microsoft Outlook Integration

Remote working

Over the past couple of years, working from home has become hugely popular.  Initially, remote working was only meant to last for a couple of months whilst the initial COVID-19 lockdown was taking place, and many of them decided to keep their remote work models in place.  So, if your business is currently allowing employees to work from home or is planning to introduce this soon, then a VoIP phone system is going to be a lifesaver for you. As long as employees have an internet connection, they can work anywhere. 

Less physical hardware 

If you decide to use a VoIP system, you can finally wave farewell to all the annoying hardware you usually need, from big office phones to cables and wires all over the floor. 

This is great, as it means you can free up space in your office and keep the environment nice and tidy for your employees.  Plus, you’re helping to save the environment – hooray for being greener! 


Most businesses have the ambition to grow – and you probably do, too. A big part of growing means hiring more employees, especially phone agents. This way, you can chase more leads and ultimately boost your sales.  With a VoIP system, you can save a lot of time and money as you won’t need nearly as much hardware as a traditional system. Instead, all you need to do is add another user to your VoIP database, provide your new employee with a headset, and they’re ready to go.

Call anyone, anytime 

Lastly, VoIP phone systems allow you to call people anytime, anywhere. If you want to speak to a customer with a standard business phone, you’re stuck with it in the office.  With a VoIP system, though, you can make calls anywhere. All you need is an internet connection and a mobile device with you.  For example, if you’re out on the road but know you’ll need to speak to customers during the day, all you need to do is download a business VoIP app to your smartphone and you’ll be able to do it. How cool is that? 

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