Three risks to consider before taking your business’s accounting to the cloud

Taking business accounting to the cloud can streamline operations, but the risks of hacking, human error and the loss of vendor support are worth considering.

By Mike Whitmire May 17, 2022
Courtesy: CFE Media
Whether you’re still adjusting to the work-from-home revolution brought on by COVID-19, looking to build a remote team to make better use of the talent pool or thinking of updating accounting software, cloud accounting tools have many benefits.
However, risks and threats loom when we are considering stepping out into uncharted waters.
The risks aren’t always predictable. Here are three major risks to keep in mind before taking your business’s accounting to the cloud:

1. You could lose vendor support

It is possible the cloud accounting provider could go out of business and all your data could go up in smoke. If this happened, you’d be unable to access your data. Even if it continued to exist somewhere on the cloud, the user could no longer log in to your software.

Fortunately, there are a couple of very simple measures you can take to reduce this risk. First, work with a reputable and healthy accounting software provider. If you know your provider is in sound shape, there’s very little need to worry they’ll evaporate overnight and leave you standing at the altar with no accounting data. Accounting software providers are great resources for small businesses looking to add efficiency to their accounting operations.

Secondly, as an added measure, accounting software should have the option of creating a local backup copy. If users regularly download a copy of the file, they’ll have access to most of your data even if something happens to your cloud accounting software company. 

2. User data is “out there”

When you think of risks associated with cloud accounting, security is likely one of the first that comes to mind. People feel safer when financial data is locked and secured. While there is truth to that sentiment, there’s also an opposite case to be made.
One of the biggest selling points of cloud-based software is how easy it is to access. Whenever your accounting data is in the cloud, rather than stored on-site on your own computer drives, there’s a possibility it could be accessed by the wrong people. accounting system need to be accessible from anywhere, which means someone else could access your data if your credentials are compromised.

Although the risk of an account being accessed is legitimate, it’s outweighed by the risk of data being stored solely on-site. While cloud data could be compromised by a hacker, on-site data is at risk from any kind of virus or physical disaster because everything is in one place and on one machine. Furthermore, security and backup features on office computers are less robust than the security on the servers used by major cloud accounting companies. When you’re in the cloud, data is kept safe if someone should attack the company’s computers or pull the fire alarm and set off the sprinkler system. 

3. Loose lips sink ships

The biggest danger to financial data is still human. While it’s possible you could lose your information to a vanishing company or an advanced cyberattack, it’s more likely companies will be impacted by human weaknesses. Most breaches take place because employees take shortcuts and overlook basic security protocols. You can avoid this with periodic training on cybersecurity.

Make sure everyone who has access to the cloud accounting system is using good password hygiene, use two-factor authentication (2FA) in place and sound policy for communicating sensitive information is in place. Social engineering scams, like a call from “someone in IT” are still the easiest way for a password to be compromised and your data to be accessed by the wrong people. If everyone on the team does their part to protect their little piece of land, the accounting data will be in good hands.

The real data risk

The real risk isn’t in migrating to the cloud, but in not migrating.

While threat actors may be able to access the user’s data, it’s more likely having access to your own books will help you avoid problems.

While a company holding your data could disappear, having your data in two places is better than having it in one.

While advanced computer warfare may seem to be looming around every corner, there’s more danger in an employee with little to no cybersecurity training.

By taking a few simple measures, companies can have security and convenience at the same time with cloud-based accounting software.

 


Mike Whitmire
Author Bio: Mike Whitmire, CPA*, is CEO and Co-founder of FloQast, a provider of accounting workflow automation software created by accountants for accountants. Prior to founding FloQast, Mike was part of the accounting and finance team at Cornerstone OnDemand. It was during the Los Angeles-based tech company’s preparations for its IPO that Mike first composed the idea for what would become FloQast. Mike began his career in audit at Ernst & Young, where his focus was on media and entertainment. During his time at EY, he performed public company audits, opening balance sheet audits, cash to GAAP restatements, compilation reviews, international reporting, merger and acquisition audits, and SOX compliance testing. Mike graduated from Syracuse University with a Bachelor’s degree in Accounting.