Jan Brass Takes a Hard Look at the Cloud

Privacy and Cloud Accounting – Is it an Issue?

Privacy and Cloud Accounting - Is it an Issue?Cloud computing can automate many business processes and the accounting function is no exception. In spite of the popularity of cloud software in other areas, accounting departments may be reluctant to move to the cloud because of issues regarding the privacy and security of data.

Businesses have to be very careful with sensitive financial information since they have to comply with federal laws. Additionally, publicly traded companies have to comply with SEC rules as well. Whether it is your organization or accounting firm that is considering the move to cloud accounting software, managers should be aware of the privacy issues at stake. Once you know what kind of problems might arise, it is easier to formulate a strategy to deal with them.

Cloud software usually stores your information on secure data centers. Before you make a commitment to a particular vendor, discuss the reliability and security controls that they use to ensure that data is not stolen or lost. Such measures should consist of both physical and software security procedures. Apart from the data center, the Internet connection over which sensitive data is to be sent should also be encrypted. On the client-side, your organization may also consider the use of security and anti-malware software.

The cloud accounting software you are considering should have a robust system for managing access to various users. Managers should be able to approve and revoke permissions depending on security clearance and employee position. Certain situations such as an audit or the conduct of due diligence before an acquisition may also require setting up temporary accounts for access. Multinational companies may also have to adhere to international privacy laws which may be more stringent for foreign companies.

One of the biggest advantages conferred by moving to the cloud is mobility. Managers are no longer tied to their offices or desktop computers. It is possible to access financial data from any computer, whether it is a personal smartphone or a dedicated, office issued device. However, on the flipside it is also possible for the data to fall into unauthorized hands if a device is stolen. Even in a medium-sized company, there will be many employees with multiple phones or laptops. The cloud accounting software should have built in controls to ensure that selected devices or users can be de-authorized remotely.

Another important concern surrounds the issue of migration. What happens if you decide to switch your accounting software provider? Some vendors make it difficult for their clients to export data and there are plenty of other situations where you may need to do so such as if the software vendor goes bankrupt, is acquired by another company or can no longer meet the needs of your growing organization. In many cases, accounting software is integrated with other functions such as payroll. Make sure that you talk to potential vendors and discuss integration options with other specialized software before you take the plunge.

Using cloud accounting software can introduce new vulnerabilities into the system. The switch to cloud software is perhaps inevitable but implementing proper control systems can also reduce the probability of privacy and security breaches.

Edward Becker, CPA, is President of Outsource Your Books (OSYB). OSYB provides expert
outsourced bookkeeping services with Web-based access to QuickBooks. For a free consultation on how OSYB can help you save time and improve bookkeeping accuracy, contact Ed at (516) 393-5620 or email mail [at] osyb [dot] com.

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