How Data Security Is Maintained in Outsourced Accounting

Data security in outsourced accounting is a major concern for businesses when sharing financial information with external professionals.

When business owners first hear about outsourced accounting, one of their biggest worries is: “How secure is my financial data?”

This is a real concern.

Your accounting files contain more than just numbers; your accounting files contain sensitive business information such as payroll materials, tax documents, bank account information, and vendor contracts. You also have to be able to trust the business to which you turn the management of your finances.

The good thing about outsourcing your accounting to reputable companies is that data security in outsourced accounting is typically much stronger than the systems used by most in-house accounting departments.

Why Data Security in Outsourced Accounting Matters

Cloud Accounting Systems for Data Security

Most qualified accounting outsourced firms are using established cloud accounting software instead of traditional computer storage.

Many firms use secure cloud accounting platforms such as QuickBooks to protect financial data.

Why is this important?

– Your data is encrypted (meaning protected by very strong security coding).

– Access to your data is enabled and audited.

– Your data is protected by automatic backups.

– The servers on which your data is stored meet or exceed industry standards for security.

– As opposed to all of the risks associated with an average office computer (e.g., crashing, hacking), cloud-based systems have been specifically designed to protect sensitive financial data.

Restricted Access Controls

Not everybody in an outsourcing company will have access to your data. Access generally occurs through:

Role-based
Password-protection
Multi-tier authentication (which is additional confirmation of identity, e.g., OTP code)

This allows authorized personnel to have access to your information within the company.

Data Encryption

When we encrypt data, we convert that data into an unreadable code while transmitting or storing it. If someone attempted to access the data, they would have only garbled text to read unless they had the decryption key.

Data encryption includes:

Email communication
File transferring
Access to accounting software
Cloud-based storage

4. Confidentiality Agreements

All professional accounting firms are required to abide by and sign Non-Disclosure Agreements (NDAs), have an employee confidentiality clause, and have a policy that covers all internal data handling; these legal documents assure that the financial data of clients is kept confidential and cannot be shared or misused outside of their intended use or function.

5. Regular Backups & Disaster Recovery Systems

There are numerous reasons why businesses lose their data including, but not limited to: system crashes, human error, cyberattacks, and natural disasters; professional accounting firms have systems set up to ensure proper backup, including a daily automatic backup of all data and secure off-site storage and data recovery systems designed to restore data quickly, which also significantly reduces the probability of loss as compared to small businesses that have to manage everything internally and do not maintain a backup system.

6. Compliance with The Local Area

Within an area, such as the UAE, accounting firms enforce very strict regulatory guidelines to ensure compliance with data protection, tax documentation security, and financial reporting standards; professional accounting firms know exactly what is needed to ensure compliance with the local government’s regulations and therefore, conduct themselves accordingly within the guidelines of those regulations.

Internal Audit and Monitoring

Many third-party companies provide their clients with resources to manage internal audits, access log checks, security monitoring checks, and periodic evaluations of IT Security; with these services, they are also giving their clients the ability to identify and correct possible vulnerabilities before they become more serious.

Controlled Communication Channels

In providing for the safety and security of their customers, many companies use secure portals, encrypted emails, document management systems, and strict procedural file-sharing limits to provide controlled access to sensitive information.

Is an Outsourcing Firm Safer than a Traditional Company?

This has probably surprised most readers, but generally speaking, in most cases, yes.

A large number of small and mid-sized businesses continue to practice sharing passwords with other employees, allowing for files to be stored on unsecured desktop computers and failing to complete routine backups.

Each of these activities lacks the level of structure necessary to design and implement an effective IT Security Policy.

A professional vendor has a well-developed and well-designed assurance methodology that is common across all of their clients

Things to Ask When Choosing an Outsourcing Company

Questions for assurance:

Which accounting software do you use?

How do you protect my client’s information?

Do you utilize encrypted systems?

How many people will have access to my information?

What is the frequency of data backups?

Will you sign an NDA?

A company that operates transparently will answer all of these questions very clearly.

When outsourcing your bookkeeping, you still have complete control over your information. You are partnering with professionals who recognize that the financial data of your company is one of its most productive assets.

Outsourced accounting creates the opportunity to create:

Accuracy
Compliance
Transparency
Security of data.

Ultimately, the most important thing about using outsourced accounting is finding the right partner who will maintain strong data security in outsourced accounting while handling your financial data.