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 just thinking of updating your accounting software, cloud accounting tools have many benefits. But it’s often the risks and threats that loom largest in our minds when we’re considering stepping out into uncharted waters.
Of course, the risks aren’t always predictable. So here are three major risks to keep in mind before you take your business’ accounting to the cloud:
1. You could lose vendor support
Is it possible that your cloud accounting provider could simply go out of business, and all your data would go up in smoke? Well, yes, it’s technically possible. And if this did happen and you could no longer log in to your software, you’d be unable to access your data, even if it continued to exist somewhere on the cloud .
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 that they’ll evaporate overnight and leave you standing at the altar with no accounting data. Accounting software providers like QuickBooks and Xero are great resources for small businesses looking to add efficiency to their accounting operations. At FloQast, we work with longstanding ERP systems like Oracle NetSuite, Sage Intacct and numerous enterprise resource planning solutions to ensure no fly-by-night software will suddenly, well, fly by night.
Secondly, as an added measure, your accounting software should have the option of creating a local backup copy. If you download a copy of your file regularly, you’ll have access to most of your data even if something catastrophic happens and lays waste to your cloud accounting software company.
2. Your data is “out there”
When you think of the risks associated with cloud accounting, security is likely one of the first that comes to mind. We all tend to feel a bit safer when our precious financial data is all under our roof and behind locked doors. And 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. After all, you need to be able to access your accounting system from anywhere, which means someone else could, theoretically, access your data if your credentials were compromised.
Although the risk of your account being accessed is legitimate, it’s actually outweighed by the risk of your 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 even a physical disaster like a flood or fire because everything is in one place and on one machine. Not only that, but the security and backup features on your office computers are far less robust than the security on the servers used by major cloud accounting companies. When you’re in the cloud, your data is kept safe if someone should attack your computers or pull the fire alarm and set off the sprinkler system.
3. Loose lips sink ships
While this isn’t a technical accounting or data security rule, it’s still true. The biggest danger to your financial data is still human. While it’s possible that you could lose your information to a vanishing company or an advanced cyberattack, it’s much more likely you’ll be impacted by human weakness. Most breaches take place because employees take shortcuts and overlook basic security protocols. You can avoid this with simple periodic training on cybersecurity.
Make sure everyone who has access to your cloud accounting system is using good password hygiene, that you have two-factor authentication in place and that you have a sound policy for communicating sensitive information. 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 his or her part to protect their little piece of land, your accounting data will be in good hands.
The real risk
You’ve probably seen this common theme forming; the real risk isn’t in migrating to the cloud but in NOT migrating. It’s a bit like the irrational fear of flying, even though traveling by car is statistically shown to be far more dangerous.
Bad actors may be able to access your data, but it’s exponentially more likely that 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 leaves you far better off than having it in one, even if you hold the keys to that one place.
And while advanced computer warfare may seem to be looming around every corner, there’s far more danger in the average poorly trained employee who uses a string of 0’s as a password or gladly responds to every email asking for their social security number.
By taking a few simple measures, you can have the best of both worlds. With cloud-based accounting software, you can have security and convenience at the same time.