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Accounting, budgeting, and financial technology for businesses

Is Cloud Accounting Safe for Your Small Business?

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The things your business cares about are only as secure as the weakest link in your security system.

If you care about your computers, don’t leave your office door unlocked. If you care about your website, don’t give every employee administrative access. If you care about your accounting software, don’t leave it in the office.

Despite the headline-grabbing nature of online hacks, the web is still a safe tool for businesses—as long as you take the necessary precautions. Let’s look at what cloud accounting offers, why you should make the move, and what risks the cloud brings.

How cloud accounting keeps your data safe

The computers in your office are not safe. Even your computer—yes, yours—isn’t a great place to keep valuable information, especially if you’re not regularly generating external data backups.

Local storage poses two main problems:

  1. There’s no redundancy in local storage. Data stored on a single computer is subject to everything from viruses to flooding to a beverage that spills all over the machine. If you’re dragging your laptop to Starbucks every day, you’re risking theft, random falls, and lattes gone wrong. If all your accounting data is on your laptop, you’re subjecting your data to those same catastrophes.
  2. Local security is weak security. Data on your computer is subject to viruses and ransomware, a risk that increases as your knowledge of IT security decreases. You’re responsible for your computer’s security, which means your computer isn’t secure. On top of data security risks, you face physical theft threats. As the old adage goes: everyone with a brick has a copy of your house key.

Both of these issues disappear when you move your accounting into the cloud. Any decent cloud accounting vendor will give you tons of backups. Not only will there be more than one backup, your data will also be backed up in multiple locations.

This is a hedge against fires, floods, hurricanes, and even terrorist attacks. Xero, for example, “performs real-time data replication between [its] geographically diverse, protected facilities.” QuickBooks Online’s “data centers are geographically separated, to minimize the chance that a natural disaster in one location might prevent [users] from accessing [their] data.”

The cloud in all its glory. [Source: Wikimedia Commons]

Not only are you protected from a misplaced beverage, it’s unlikely that even a major catastrophe could damage your accounting data.

When it comes to security, the line is even more stark. QuickBooks says that its data centers and offices have 24/7 onsite security and strict access controls.

On top of physical security, data centers maintain the most sophisticated digital security possible. Meanwhile, your employees are—like most of us—leaving their laptops in cars and walking away from unlocked screens at whatever coffee shop they’re working from.

How does the cloud work?

The cloud refers to a collection of servers held in a remote location. There is no Cloud with a capital C; each cloud services company runs their own. These remote systems give users an alternative to local storage and provide a number of benefits, including those outlined above.

While there are common system between cloud options, there are also a lot of differences. Some clouds are designed to crunch numbers quickly, others are incredibly flexible, and some are designed to simply hold huge amounts of information.

Security also comes in multiple flavors, with the option to encrypt data on a server and/or while data is in-transit. Depending on the value of the data in question, different providers may blend these options to provide clients with a tailored approach.

On top of all this, you can grant access to cloud data to others or lock it with a digital key.

Microsoft’s Azure cloud (well, one specific version of it) in action. [Source: Wikimedia Commons]

Before you move anything of any value into the cloud, review your chosen cloud provider’s data and security systems to see if they align with your needs. Capterra’s IT Management blog is a great place to brush up on what challenges IT departments currently face, especially if you need to familiarize yourself with the industry.

Risks of transitioning to cloud accounting

Every choice you make is a balance of risks. Putting your money under the mattress trades the risk of bank failure for the risk of theft and inflation. Putting your data in the cloud trades local and personalized risk for global risk.

Each business has unique needs and concerns, but there are a few major risks of moving to the cloud that are widely applicable.

  1. Access to data at a reasonable speed. I’ve been trapped in horrific systems that take minutes to load and routinely scare me into thinking that my data isn’t being saved as I work. It’s the opposite of fun. If you’re concerned about productivity, try before you buy.
  2. Hacking. The Equifax hack should be a warning to us all. Even large businesses that seem like safe places to hold data are subject to hacking—especially if they don’t keep their security up to speed. No matter who you work with, trust and a proven track record are important.
  3. You give up some control over your data. Depending on how your data is stored and encrypted, you may be handing access over to someone. If an outside party—such as the U.S. government or a determined divorce lawyer—were to demand access to your data, denying or granting that request might be outside of your control.

Some aspects of these risks are conquerable. You can find encryption options that give you more control over who can see your data, and select vendors that actually care about their customers and respect their data. Test the product before making a purchase whenever possible.

Keep in mind: your accounting data is incredibly valuable. Where you put it and who you trust to store are massive decisions. If you’re overseeing other people’s data, there’s added pressure to avoid mistakes and security breaches.

Evaluate your needs and choose the right solution

If you’re thinking about moving to cloud accounting, take the time to understand the individual components impacting your decision. Security should be your top priority, but you’ll have other considerations along the way.

Capterra’s Accounting Software directory has over 350 options for you to pick from. To help narrow it down, the directory offers reviews and selection filters to generate a select list of options relevant to your needs.

I filtered out the directory’s 100 or so cloud-based accounting systems with more than four stars that also offer a bank reconciliation feature to get you started.

For more information on cloud offerings or to help you decide what kind of features your business needs, check out Capterra’s Finance blog.

Looking for Accounting software? Check out Capterra's list of the best Accounting software solutions.

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About the Author

Andrew Marder

Andrew Marder is a writer for Capterra. His background is in retail management, banking, and financial writing. When he’s not working, Andrew enjoys spending time with his son and playing board games of all stripes.

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