Like most businesses, even work-at-home business owners must keep track of their finances and taxes. Most do so utilizing accounting software.
Cloud-based accounting software has begun to replace desktop software, as data is stored off-site and accessible no matter where you’re located. In addition to the lower cost of implementation, there are security issues that may arise with the use of cloud-based accounting software. Let’s take a look at some of the security concerns business owners face while utilizing these cloud-based solutions and how you can be best prepared.
Cloud-based accounting software provides users access to data no matter where they’re located.
When considering whether or not to use a cloud-based bookkeeping solution, there are certain questions you should ask before picking a provider:
- 1. How does the software encrypt my company’s financial data?
- 2. What is the protocol in the event my data is breached?
- 3. How is the separation of data handled?
- 4. How is my data protected in transit?
Each question should be answered to your satisfaction before you begin to use the software for your accounting needs. The company should have a way to encrypt your financial data, a protocol in the event your data is breached, a way to separate your data from other companies’ within their internal storage, and a way to protect your data whenever it’s sent and received over the Internet.
Ask About Screen Scraping Risks
If you have to provide your online banking username and password to your accounting company, they may rely on screen scraping to copy your banking transactions to import them into the software. Not only could this be against your bank’s terms and conditions, but you generally have to waive any liability to the screen scraping provider in the event your accounts are breached or your data is hacked.
Concerns have been raised that this cloud-based accounting feature could fail to meet best practice standards, according to MYOB.
In addition to an increase in data hacking and breached accounts, screen scraping may be unreliable, since the company isn’t working directly with the banks to transmit your data. Although errors in transaction records could be as low as one percent using this method, it still requires business owners and accountants to compare the data in their accounting program against the data in their bank accounts, adding unneeded time to the process and canceling out any of the savings by using the software.
Ensure your financial data is encrypted and stored redundantly in more than one location.
Encryption and Data Security
Your cloud-based accounting software should use the latest in encryption and maintain the highest security available. If you’re unsure what type of encryption and security the software uses, don’t be afraid to ask. The company should follow a recognized and independent auditing standard, like AICPA SOC2 certification, or something similar.
To encrypt your company’s data, the cloud-based accounting program should require a username and password to access the service, and a second username and password to access specific features within the program. If your business also gives an outside accountant access to your data, they should have an additional username and password to access the service and the features within.
On-Site Security and Data Redundancy
A reputable cloud-based accounting service will have on-site security available 24 hours a day, seven days a week, 365 days a year. In the event that security is breached and accounts become vulnerable, there should be a dedicated security team to handle the situation in a timely fashion. It’s important that quick action is taken in these types of scenarios, so support should be available on demand.
You’ll also want to ensure that the company has data redundancy in place. It’s not enough to store your company’s data in one location. Back-ups should be in place at multiple locations in the event that your data is destroyed or breached at its primary storage location.
Although cloud-based accounting is a relatively new concept, it’s catching on at a fast pace. Be proactive when choosing an accounting service, ensuring they deploy the latest security standards, have an on-site security team, and offer data redundancy to protect your valuable financial data.
If you have any questions about security or encryption, don’t be afraid to ask until you’re satisfied. A data breach could be devastating to you and your business, so you’ll want to make sure your financial information is in the right hands.
Brian Flax is a freelance writer based out of the Washington, D.C., area. He is experienced in a variety of topics including Internet security, education, and business management. Brian holds a master’s in education technology and a bachelor’s in entertainment business from Full Sail University.