Is Your Cloud Accounting Data Secure?

Is cloud accounting data secure?

An equally valid question after the recent spate of global cyber attacks and ransomware might be “Is local accounting data secure?” So which is best; local? or cloud?

First, lets look at holding your accounting data locally

The security of your accounting system and data is only as good as your own local policies and procedures. Any stand alone computer can be stolen. The computer can fail, leaving you unable to access the data on the hard drive. In either situation you will be reliant on a back up. If theres a fire or a flood then the backup is only any use if it is kept in a remote location.

We’ve just seen an global epidemic of computers hacked with ransom ware. Ive spoken to many small businesses that believe in idea that storing sensitive financial accounting information on the hard drive of their computer is actually protecting their identity. Nothing can be further from the truth, in fact each year approximately 15 million United States residents have their identities used fraudulently with financial losses totaling upwards of $50 billion. According to the FBI Cyber Crime Division, a stolen laptop results in an average financial loss of $89,000.

Small Business owners do not realize that QuickBooks desktop software contains huge amounts of sensitive financial information stored on their local computer which can be easily cracked by a skilled hacker. Older desktop accounting packages will contain even more vulnerabilities.

So, is cloud accounting data secure?

Just how safe is it to post your financial data to a server that is owned, maintained and secured by someone else, somewhere else? Well, most of us are happily conducting day-to-day banking over the internet. As Daniel Rissen of chartered accountants businessorchard.com points out, “the security issues are the same as with locally hosted systems – unless your business doesn’t have an internet connection. Any system can be hacked and it’s always wise to take proper precautions. Banks and cloud accounting providers pay much more attention to security and are much likely to have world class policies and processes than the average small business.

Cloud data security is world class

As a small business owner, you might be concerned about a cloud service provider storing your data. But the cloud is one of the most secure ways to store information. For example, using cloud software, if your laptop is stolen, no one can access your data unless they have a login to the online account. With cloud software, this is where the data lives – as opposed to on your hard drive.

In the event of a natural disaster or fire, being in the cloud means business productivity doesn’t need to be affected because there’s no downtime. All of your information is safely and securely stored off site. As long as you have access to any computer or mobile device connected to the internet, you’re back up and running.

In addition to this, if you invite users to view your cloud accounting data, you can control the level of access. This is much more secure than the old-fashioned way of emailing your files or sending out a USB stick with your data on it.

Cloud-based software companies ensure that the security and privacy of data about you and your organisation is always airtight. If you use online banking, then you’re already primed to use cloud accounting.

The UK government recognise that using the cloud is secure. HMRC, the tax authority in the UK, is planning to introduce the most advanced tax filing regime in the world. The program is called “Making Tax Digital”. By 2020 the only way to file your business taxes in the UK will be through the API of your accounting software.

What makes cloud accounting data secure?

One of the common questions people have about cloud computing is, “How is my data stored?”. In most cases it’s stored on servers in big data centres, which are secure and managed 24 hours a day.

And what about the journey between your computer and those data servers? Professional cloud applications use secure, encrypted connections. That means your data is encrypted on your computer before it’s sent to the server – and also when it comes back again. This means that nobody can listen in to what’s being sent or received.

Cloud software companies take data security very seriously and work hard to protect their customers’ data. So you might be wondering how data is ever hacked. It does happen, but it’s something you can help prevent. We’ll look at that next.

What about Xero security?

Xero allows small businesses to enjoy a host of security benefits from using their platform, these include:

1. Xero has servers located within enterprise-grade hosting facilities with restricted access to authorized staff. Access is controlled with a combination of biometric systems and 24/7 onsite security guards.
2. Data servers at Xero are controlled with multiple layers of firewalls and encryption technology. The same technology used by large financial institutions like Bank of America or Wells Fargo. As a result Xero has never experienced a security breach or data loss.
3. Xero security protocols are regularly reviewed and audited by external security specialists.
4. Accounting data is stored online not on your local computer. Therefore, in the event your computer is lost or stolen all of your small business financial information is still secure.
5. Xero implements automatic backup of your data on different servers located in different geographical areas. In the event one of Xero servers is destroyed the data can be easily retrieved from other backup locations.

There are big benefits from using the cloud

While storing your accounting information in the cloud can be unnerving for some business owners, it is important to realize that your identity can be easily compromised by maintaining your accounting information on your local computer. Not to mention the risk associated to data loss as a result of computer hardware failure. Are you using QuickBooks desktop, or an older desktop accounting package, to manage your small business accounting? If so, consider swapping to Xero. There are huge advantages gained from using the Xero cloud accounting platform.

So, is cloud accounting data secure? Yes it is, and once you’re satisfied with security, the benefits are apparent. The ability to manage your finances anytime, anywhere, from pretty much any web-enabled device offers greater control over your time and significant cost savings. Since switching to the cloud I’ve saved time and improved the financial information I use to manage my business immensely.