How Safe is Cloud-Based Accounting?

The number of companies which sell cloud-based services is on the rise. In fact, according to PricewaterhouseCoopers, the trend is going to continue, growing at an average of almost 30% a year.

As with the increased popularity of any technology, so comes more in depth scrutiny. The celebrity phone hacking scandals of a few years ago still fresh in our minds, and iCloud hacking in the new this year, many of us can’t help but ask ourselves how safe cloud software is— especially when we consider placing our corporate finances and confidential documents within these systems. So, how safe is cloud-based accounting software?

Cloud-based accounting

Why are we switching to cloud based software?

Rob Nixon, co-founder and SEO of Panalitix, has said that people who rely on ‘desktop’ accounting software are in fact looking at data which has already become redundant. “To get real-time data,” he says, “you need to switch your accounting software to the cloud. You can then access richer, more accurate data on any device.”

Cloud based accounting therefore makes sense, so why aren’t we insisting that the important data we store in the web is as secure as what we might keep in a safe? Or are we assuming that there are safety precautions built in?

The cloud is just as safe as the rest of your company’s digital assets

Pandle states that cloud-based technology often makes use of secure encrypted connections or VPN (Virtual Private Network) connections for especially sensitive information. Not only that, but the physical location of the server which actively stores your data will likely be kept “in an environment that utilizes the same physical security measures as most banks.”

Daniel Rissen, from chartered accountants Business Orchard, has said that, “the security issues [with cloud-based software] are the same as with locally hosted systems – unless your business doesn’t have an internet connection.” He adds that “Any system can be hacked and it’s always wise to take proper precautions.”

Paperless accounting is actually more secure than the alternative

Specialist London accountants 3 Wise Bears have argued that digitally stored files are more secure because of the many passwords and safeguards which are required to be put in place when the software is used.

Barclays ATM
photo credit: Snapshooter46 / Flickr

Indeed, Barclays is the latest bank out of 8 to team up with software company Xero; a partnership which will allow their customers to access their transaction data via the cloud. Effectively these partnerships all serve as stamps of approval from corporate financial giants, which is nothing to be sniffed at. These major companies wouldn’t attach their name to a company which could put their customer’s data at risk.

And it’s not just the industry experts who are confident in the safety of cloud-based accounting software. According to a survey of buyers from small businesses by Software Advice, almost half of their respondents were either “extremely” or “very confident” in the reliability of cloud-based software, and 46 percent were “extremely” or “very confident” in the security and safety of their financial data. This same research also found that use of cloud based software had almost doubled in from 2014 to 2015.

Use of the cloud does not eliminate the need for a human accountant

If you’re the kind of person who fears using new technology, don’t rule out a switch to cloud-based accounting software just yet.

Sandra Jones from the online accounts firm click4bookkeeping.com says, “A human can pick up things that software can’t. It all comes down to the level of understanding of the end user.” So if you want to start using the cloud for your business’s finances, it might in fact be wise to also hire an experienced accountant to help so you can make the most of the tech. This person can also use their expertise to help keep your data secure, in addition to interpreting it effectively.