The question “how secure is cloud accounting?” is one that is raised by almost everybody making their first move to using the cloud.

The term “cloud accounting” is the use of online accounting software where your data and software are stored on a server which is accessed via the internet. This is “the new way of working” compared to the traditional method of software delivery where the software and data are stored on your computer or server hard drive.

Your data on someone else’s computer

Cloud accounting security is at the top of most cloud users’ minds. As cloud accounting allows you to access your data at any time, in any place from any device it is very attractive and brings numerous other benefits. But what about security?

The simple fact is that with cloud accounting your confidential and personal data, including for example your customer list, your bank balance and accounting information is being stored on someone else’s computer.

How secure is the cloud?

Some people argue that storing your data on the cloud can be more secure than storing it on your desktop or an on-site server. The level of physical and electronic security that cloud service providers offer may be higher, depending on the risk involved, and the duplicated continuous backup processes of cloud providers are probably going to be better than most businesses would implement.

Wherever you store your data, there are always security issues.  Most cloud computing providers take great measures to ensure your data is safe, including backup power supplies, firewalls, data encryption software and regular, third-party security audits. They can also protect your data against floods and fires by having multiple servers in different locations.

The cloud service providers take great care to protect your data, but ultimately each business needs to consider its attitude to risk, the data being stored and the implications of a security breach. If you decide the benefits of the cloud outweigh the risks and you are happy to accept the risk then you need to ensure you choose your cloud provider carefully and implement robust procedures to mitigate the risk of problems. For example, controlling access rights, regular password changes and training your staff on security risks.

Research before choosing a cloud service provider

It is important to research the various cloud service providers to ensure that the one you choose has the necessary controls in place to protect your data.

Some questions to think about include:

•    What 3rd party security audits and penetration tests are carried out, and how regularly?
•    What security certifications, code of practice or quality standards does the company adhere to?
•    What encryption software do they use to safeguard your data?
•    What security measures do they undertake?
•    Can they secure against a fire or flood, for example, at one of the servers?
•    Which country is the data physically stored or backed up in?
•    How often do they back up their servers?

Disadvantages to Maintaining your Accounting System on your PC Using Local Accounting Software

Since your accounting software and all of your data is stored on your computer, you have to make sure you have a disaster recovery plan. Your computer is a risk in the event of fire, flood, electrical surge, or a computer crash, and that can mean an interruption to your business that could cost you a great deal of time and money.

Your computer is also at risk for hackers, viruses, worms, Trojan horses, spyware, identity theft, intellectual property theft, and spam; all threats to some of the most sensitive material in your entire business.

Your laptop could be stolen along with your stored data.

Fraud risk increases when your information is maintained on your computer, and preventing unauthorized access to your bank accounts is a top priority.

Technology is always changing and improving. At the same time, additional risks arise. Unless you are an IT expert, keeping up with the latest technology in data security can be too time-consuming when you're working to grow a successful business.

Why Cloud Accounting May be More Secure Than Local Accounting Software

When using cloud accounting only authorized users have access to the software and data, system backups occur automatically, and everything is stored off-site on servers maintained by a data service center. Cloud-based accounting systems can also offer fraud protection, because they can be set up to put controls in place to prevent unauthorized access to bank accounts and provide an electronic audit trail of what actions have been performed by whom and at what time.

There are typically two organizations involved when you choose cloud accounting: your cloud computing service vendor and the data center the vendor uses to store your data. Since cloud computing has become more in demand, concern for the safety and security of data on the cloud has also been a consideration for business owners. This in itself has led to consumer demand for a high level of security offered by vendors and data centers. This can be accomplished by having a strong set of controls in place to protect the computer software and your data.

What to Look for in the Information Security in the Cloud:

•    User access methods and permissions
•    Extensive firewall technology
•    Regular security audits
•    Off-site backup methods
•    Physically secure and safe data storage locations with security presence and biometric scanners to prevent unauthorized access
•    Third-party monitoring

It is important to do your homework and make sure you choose a Cloud provider that has the necessary controls in place to protect your data. Once that research is done, you will find this option provides a much more secure environment for your accounting system and data than anything you could put into place on your local computer.

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We at Numberworks are early adopters of accounting technology, moving clients to modern paperless accounting and bookkeeping systems, virtual accounting, digital receipts, payroll and tax services.

With advisory you can trust, we help you embrace technology to ensure positive growth in your business!

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