Cloud accounting is often associated with issues such as data breaches and hacking incidents. While these are of course real and do occur, it is important to understand the story behind the headlines and see the bigger picture. This is why we've compiled this short guide for small business owners to cloud accounting software, common issues, and concerns with cloud-based accounting.
What Is The Cloud and Cloud Accounting?
Cloud Accounting can be defined as the practice of using an accounting system that is accessed via the internet. It allows users to perform basic accounting tasks (such as managing and balancing the books) using software that resides in the cloud and means a company can access its records from anywhere. In very basic terms, the cloud can be described as the internet but in a storage capacity.
In this day and age, businesses are reliant on the internet and the cloud plays a key role in this: services such as Google Docs or e-mail providers all use the Cloud because they are storing information away from physical machines.
What are the most common cloud accounting issues, concerns, and misconceptions?
There is several concerns around cloud-based software, including cloud-based accounting software. We have listed a number of the most common ones below. However, it is crucial to remember that through precaution and security measures, the risks listed can be migitated.
- Not having control over can access sensitive data: Of course, controlling the access to data stored electronically can be a real challenge. However, third parties accidentally viewing sensitive data is also an issue with physical documents. Leaving them out on a desk or a cupboard unlocked can happen easily, while passwords and other security measures can help protect your data stored with cloud providers.
- Data Theft: Of course, data theft can have terrible consequences when it happens. This is why it is important to take precautions and use security measures when storing data in the cloud.
- Isn’t My Data Safer Where I Can See It: Of course, this depends on what you understand as 'safe'. For instance, losing your data because you forget to back it up can be prevented by using a cloud accounting system. If your data is simply saved on one decide, even spilling a cup of coffee or a glass of water can mean losing all of your data. In terms of data security, this can also be improved by not having physical documents that can be left in public places by accident.
- I Keep Reading Stories About Hacking: Of course, hacking cannot be prevented entirely. Incidents of hacking tend to get a lot of media attention, so they can seem like a more prevalent issue than they are. Also, server farms have some of the most sophisticated physical and digital security in the world to protect your data stored in cloud software against hacking. In fact, in many cases, the vulnerability is likely to be created by the user, not the provider.
How is data protected in the cloud?
Security protocols in the cloud have increased significantly over the past years. Cybersecurity software is used to keep your and your company's data safe. This is mostly, particularly with well-known providers, complemented by robust password protection, data being stored on physical servers, and other measures such as two-factor authentication. There is several best practices that large providers apply to protect your (financial) data:
- Data encryption - Your sensitive data gets 'scrambled', making it considerably harder for cybercriminals to access the files.
- Automatic backups - Your cloud provider should provide you with the ability to automatically backup your files to store them safely for disaster recovery purposes.
- Consistent security updates - Large companies providing cloud services are regularly updating their security measures to protect your data against the latest e.g., viruses.
- Firewalls - You can imagine a firewall online to act a little bit like an actual wall. It protects your data by applying filters to all incoming traffic in a network. This means no suspicious traffic can get through this 'wall' and to your data.
- AI - Artifical Intelligence gets used increasingly in the world of data protection. AI can undertake an initial security analysis to seek out and identify possible vulnerabilities.
What can I do to keep my finances and data safe in the cloud?
- Secure passwords - Keep your passwords both long and secure. This means never using 'real-life' words or names, particularly if they have a personal connection with you.
- Define user permissions - A user permission refers to authorization given to users, enabling them to access specific data stored on a network. Ensure that these are set correctly to prevent unauthorised users from viewing sensitive data.
- Conscious sharing - Be careful with what information you share online. Some information can make it easier for cybercriminals to crack your passwords or answers to security questions.
- Use antivirus and malware software - This type of software is designed to prevent, search for, detect, and remove software viruses and therefore immensely important in protecting your data.
- Use multi factor authentication - These days, it has become the standard to use multi-factor authentication processes. By asking two or more pieces of evidence for a user's identity, this considerably increases data security.
- Education and training - Educating your staff and making them aware of cybersecurity is crucial. If your team is alert to fraud, you are much less likely to become a victim of it.
- Don't be afraid to ask - If ever in any doubt, speak to your cloud accounting provider - they’ll always be happy to talk you through everything they do to keep you safe.
Summary: Is Cloud Accounting safe for small businesses?
In summary, while there is undeniable risks and challenges with cloud accounting, there also are a lot of safety and cybersecurity measures you and your provider can take to ensure the safety of your sensitive data. Also, traditional accounting software and physical copies of documents come with their own (and considerable) risks in terms of data security. Taking these measures is incredibly important and, if you do, cloud accounting solutions can be a comparatively safe and very efficient way of storing your company's data.
Cloud Accounting FAQs
- How safe is cloud accounting software for clients?
With the improvements in cybersecurity (e.g., backups, encryption, and firewalls), client data stored in cloud services has become a safer than it would be if you were using traditional options.
- Is cloud accounting secure?
While data can never be 100% secure (traditional accounting comes with its own safety concerns), the cybersecurity measures taken by large cloud accounting providers have made it the safer option terms of data security.