Since the rise of cloud accounting in the early 2010’s, the business world has seen an increasingly large movement towards digital platforms, especially for financial tasks where enormous amounts of data are constantly on the move. The inevitability of this complete shift has been accelerated by the movement towards remote work, and a need to access real-time data from anywhere across the globe. The attractiveness of accessible and scalable financial solutions is also what drives the adoption of cloud accounting, however, particularly in the finance sector where personal and financial data are most prominently at risk from cyber threats, there has been a great deal of hesitance. 

Using rigorous cloud technology, cloud accounting platforms have been at the forefront of creating solutions to these risks, helping to facilitate the transition for enterprises advancing to digital financial management, and ensuring they feel secure when doing so. 

Going forward, we will take a closer look at the details of cloud accounting, including its benefits and security concerns, with an aim to clarify the concept for modern businesses. Later, we will balance the potential risks with significant advantages, and try to demonstrate the constantly innovating bonuses that cloud accounting can bring to expanding corporations. 

What is Cloud Accounting? 

Cloud accounting, simply put, is accounting software that is accessible through the internet while being hosted on remote servers. It means businesses or financial professionals can access accounting operations and financial data from anywhere, on any device with an internet connection. User-friendly interfaces and real-time support make cloud accounting software a great option for businesses of all sizes, although, the bonuses of real-time financial updates without geographical constraints or IT maintenance efforts do come with their potential downsides. 

While being extremely advantageous, especially today, where remote working is a common thing and the convenience of cloud technology continues to grow, such widespread access has proven to be a cause for hesitation within the financial sector. Cloud accounting is often overshadowed by common misconceptions, with most revolving around the fear of data insecurity and a lack of control. Some memorable scares from the past have also helped in giving credence to this. 

Notable breaches from cyber hackers involving personal and financial data include the 2015 TalkTalk telecom incident that affected 157,000 UK customers, and more recently in 2018, when British Airways was hacked and a whopping 380,000 transactions were affected. These breaches have in turn resulted in the UK’s Financial Conduct Authority (FCA) to emphasise guidelines which enforce much stricter data security, mandating due diligence on cloud providers to ensure compliance with the Government’s ‘data protection principles’. 

Understanding Cloud Safety 

As with most things, the media’s portrayal of cloud security has historically leaned towards the sensational. A focus on high-profile data breaches like the ones previously mentioned, and the scare of cyber threats that come with them, have been a large reason for hesitance within the financial sector to fully embrace cloud software. While these incidents really happened and rightfully warrant attention, they in turn tightened the regulations of the FCA, and do not represent the full picture of cloud security. It’s crucial to dig deeper and understand the context behind these headlines. 

Reported breaches do occur, and it is well acknowledged that the threat of cyber attacks is ongoing. That is why, to combat new threats, cloud platforms in the current year boast robust security protocols that are continuously updated. Reputable cloud accounting providers invest heavily in security measures, including data encryption, multi-factor authentication, and regular security audits to ensure that the data entrusted to them remains secure. Xero’s latest state of the industry report also details an increase in cloud software usage by accountants by 35% in just the last year, which tells us that trust in cloud-based accounting continues to grow, and that tools for accountants are still on the rise.

With regulations met and the correct practices in place to ensure security, cloud accounting can offer scalable solutions to businesses of all sizes, making finance management more efficient than at any time in history. 

The Real Risks and How They’re Mitigated 

Cloud accounting has been transformative for the financial sector, however, the risks that come about from less-than-savoury actors are real, and it is not always an external source that leads to failures by businesses to protect their customers. The following factors of breaches and their results have all contributed towards why modern regulations are so stringent for current cloud providers: 

Data Breaches: Typically, a breach involves the unauthorised access of sensitive data, and might see anywhere from personal customer data, to bank account details and billing information stolen which can be exploited. 

Financial Losses: Whether immediate or delayed, once a breach has occurred, individuals whose data has been stolen become at risk of unauthorised financial transactions or fraudulent invoicing. 

Identity Theft: Once an accounting system has been compromised, numerous types of sensitive data become vulnerable, with personal or corporate identities historically being amongst the most highly targeted. 

Operational Disruption: Cyber breaches do not just affect individuals but can disrupt the availability and, more significantly, the reliability of accounting systems that inevitably hinder day-to-day business, causing a knock-on effect of financial issues. 

Insider Threats: While not in the same category as an external cyber threat, regulations still encompass the necessity for businesses to be aware of the possibility that inside actors may intentionally or accidentally misuse data access leading to significant leaks. 

To mitigate the chances of these risks, cloud providers have focused their efforts on creating robust systems and advanced security protocols to stave off cyber threats, with end-to-end encryption at the cornerstone of their measures. Data, whether in transit or at its destination, is rendered unreadable to unauthorised parties, and each bit is complemented by multi-factor authentication, adding additional layers of security to the entire process. Regular security audits also help ensure vulnerabilities in the framework are actively identified and addressed to keep the cloud service a business is using secure. 

The Role of Users in Cloud Security 

We have briefly touched on insider threats and the fact that the misuse of data is not always sinister. Cloud providers ensure there is a solid foundation of security in their products which should give peace of mind to businesses and financial professionals in their trustworthiness, however beyond that there are some seemingly obvious things users should be wary of. 

Effective password management has always been important for individuals trying to protect their own data, however, within a larger corporation that is accessing the cloud, this becomes critical. Users must adopt strong, unique passwords and change them periodically to prevent any unauthorised access, keeping an awareness of phishing attempts. Phishing scams have led to some of the largest cloud security breaches seen across UK industries, and are achieved by exploiting human vulnerabilities. 

Individual users can also improve their own security by ensuring best practices like enabling multi-factor authentication and embracing audits where available. Avoiding the use of repeated passwords across sites and being informed about phishing techniques will ensure that the cloud accounting software being used, and the updates it receives, are safer internally. 

The Advantages of Cloud Accounting 

Cloud accounting has much more than resilient security to offer, boasting a plethora of benefits that comfortably cater to the scalable needs of modern businesses:

Real-time data access: With live data constantly being transferred through the cloud, this allows businesses to make informed decisions based on their latest financial information. 

Scalability of cloud solutions: Powerful cloud storage systems ensure that, as a business grows, its accounting system can also adapt seamlessly without the need for significant infrastructure investments. 

Cost Savings: Another advantage to cloud accounting in tandem with security, is it improves business finances by eliminating the need for expensive on-premises IT infrastructure, including the maintenance requirements that go with it. 

Physical space applications: Start-ups looking for premises do not need to consider physical IT infrastructure, and established firms may consider downsizing or re-purposing space. 

There are many bonuses to embracing cloud accounting, and the strategic advantages that can be gained through real-time financial insights and reporting capabilities cannot be understated. 

Parting Thoughts 

Cloud accounting has redefined financial management with modern technology, and will doubtlessly continue to with more innovative ways in the future. It has successfully merged security and efficiency, granting businesses peace of mind with regard to data, and though data breach concerns will always be a thing where massive data is concerned, regulatory bodies like the FCA will ensure they are addressed. Encryption, multi-factor authentication, and security audits have evidently granted robust protection to financial data, and going forward, it seems these protocols will continue to ensure businesses and their customers are protected against unauthorised access attempts. 

Look to The Future With Pulse 

The future of Pulse is looking bright as we gear up to combine Artificial Intelligence (AI) and Machine Learning (ML) to generate cutting-edge forecasting capabilities with the aim of improving SME cash flow. Through a personalised dashboard, Pulse can already seamlessly integrate with your Open Accounting and Open Banking software to securely access financial data. Utilising AI-powered algorithms, Pulse analyses your data and provides small business financial insights to help inform decisions for both you and your expanding enterprise. 

Pulse is free to use, and each month your inbox will be filled with in-depth data analysis and financial measurements, all intended to improve your business operations and outperform competitors, so why wait? Sign up to Pulse today!