Security and privacy in cloud based accounting services
Security and privacy in cloud based accounting are hot topics. This rise of cloud based accounting services highlights the importance of robust data security and safeguarding sensitive financial data.
These services are gaining in popularity, as they enable businesses to streamline financial processes and collaborate in real-time from anywhere worldwide. They offer many benefits, such as cost-effectiveness, automatic updates and enhanced collaboration among team members. Despite these advantages, the transition to cloud-based accounting introduces new challenges, particularly for data security and privacy.
Financial data is an attractive target for cybercriminals. In the cloud, where remote servers store data, concerns about unauthorised access, data breaches and privacy violations are commonplace, and we have seen a number of large corporations suffer from data hacks in 2023.
The implications of a security lapse can be severe, ranging from financial losses and reputational damage to legal repercussions.
So what can help mitigate the risk of an unauthorised breach of financial data stored in the cloud?
“Cloud accounting can improve efficiency and access — but security and privacy must be actively managed.”
Mitigating cyber risk
Encryption protocols to protect financial data during transmission and storage are commonplace. Xero accounting software, for example, has certification of its compliance with ISO/IEC 27001:2013, the premier global information security management system (ISMS) standard ISO2700. Encryption ensures that even if unauthorised access occurs, the data remains unreadable without the appropriate decryption key.
In some instances, enforcing multi-factor authentication can strengthen access controls. This adds an extra layer of security, requiring users to verify their identity through multiple means, such as passwords, biometrics or authentication codes.
It is essential to keep accounting software and systems up-to-date with the latest security patches. Regular updates help address vulnerabilities and protect against emerging threats, ensuring that the cloud-based accounting platform remains resilient to potential cyberattacks.
User permissions and access controls
While most cloud based accounting software programs, such as Xero, have excellent encryption protection built in, there is an onus on the user to safeguard their data.
By implementing granular user permissions and access controls, you restrict access to sensitive financial data. Only authorised personnel should have the necessary privileges, reducing the risk of accidental or intentional data exposure.
Conducting regular IT audits and monitoring unusual activities allows for early detection of suspicious behaviour and enables a response to mitigate any potential risks.
Ensure your business has robust data backup procedures. In the event of a data breach or system failure, having up-to-date backups ensures that you can promptly restore critical financial information, minimising downtime and potential losses.
“Strong systems and clear controls are essential to protecting sensitive financial data in the cloud.”
Training and awareness
As part of any new hire induction and the business’s ongoing professional development plan, educating employees about the importance of data security and privacy should be a priority. Training programs should cover best practices for creating strong passwords, recognising phishing attempts and adhering to security policies.
The team at North Advisory can set up the entire accounting service for your business by registering the business Xero file, creating an invoice template, setting up a relevant chart of accounts, activating relevant bank feeds and integrating any necessary external software.
We get you set up on HubDoc and establish payroll, leave and superannuation as required. We also provide a 2.5-hour in-person session that will give you all the information you need to run Xero with confidence.
You’ll also get one month’s worth of access to unlimited email, phone, and online meeting support after your training session, as well as our cheat sheet video resource.
North Advisory helps business owners achieve financial stability and growth. We aim to provide business owners with answers and advice supporting their long-term objectives, including keeping their cloud based accounting platform secure and private.
Contact us if you ever need clarification or assistance. We offer professional qualified business tax services and individual wealth management advice to our clients.
About the author
Cayle Petritsch - Director & Wealth Advisor
Cayle Petritsch, Director and Wealth Advisor, works with our existing clients who have recognised the importance of business owners making strategic financial choices not only for their company, but for their personal finances too.
Cayle saw a great opportunity to expand North Advisory’s services into SMSF/superannuation, personal wealth management, asset protection services and other crucial personal finance facets that business owners need to consider.
His approach to wealth management allows you to receive highly personalised wealth advice. Working closely with Marius, Cayle understands the unique needs of every client, from their lifestyle and business goals to their retirement plans.
Key Takeaways
Cloud Accounting Can Enhance Security
When used correctly, cloud systems often provide better security than traditional on-site software.
User Controls Are Critical
Limiting access, using strong passwords and enabling multi-factor authentication help protect sensitive data.
Privacy Must Be Managed Proactively
Clear policies around data access and sharing reduce the risk of privacy breaches.
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Frequently Asked Questions
Is cloud accounting secure for businesses?
Yes. Reputable cloud accounting platforms use advanced security measures such as encryption, secure servers and regular updates, often providing stronger protection than traditional desktop systems.
How is business data protected in the cloud?
Data is typically protected through encryption, secure data centres, regular backups and controlled user access, reducing the risk of data loss or unauthorised access.
Who is responsible for security in cloud accounting?
Security is a shared responsibility. Software providers manage infrastructure security, while businesses must manage user access, passwords and internal controls.
Are there privacy risks with cloud accounting?
Privacy risks can arise if access controls are weak or data is shared inappropriately. Choosing reputable providers and setting permissions correctly helps mitigate these risks.
What should businesses look for in a cloud accounting provider?
Businesses should look for strong security standards, Australian data compliance where relevant, clear privacy policies and reliable backup and recovery processes.
How do I reduce the risk of losing financial data if something goes wrong?
Make sure you have up-to-date backups. That way, if there’s a breach or system failure, your critical financial information can be restored quickly.
North Advisory’s Reviews 
On 
Flo Mitchell
4 weeks ago
Changed to this company in 2019 from former accountant and love their approach of organizing everything for me face to face with Xero set up plus being able to call as much as I need for set annual fee. They also picked up on something that was not done correctly by my former accountant and saved me $4k for this.
Timothy Cummins
A month ago
They the truly the best, Martin and Judy are so experienced, knowledgeable & professonal, also quite like speaking with Rose : ) all people are so lovely!
Michael Iera
2 months ago
Positive, Responsiveness, Quality, Professionalism, Value
Michael Iera
2 months ago
Excellent company in regards to service and professionalism. Very experienced in dealing with complex matters. Highly recommended.
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Recognising the uniqueness of each business, we specialise in customised accounting services crafted to meet your specific needs and drive business growth.
Don’t hesitate to contact us if you’re ready to streamline your financial management with tailored solutions. Your business’s success is our primary focus. Fill in the contact form or call us to book an initial 30-minute chat.
Suite 6, 11 Oaks Avenue
Dee Why, Northern Beaches
NSW 2099
Australia