Cloud-based accounting solutions are here in a big way. Technology in this area has evolved significantly over the last several years. Even people's comfort level with keeping both applications and data in the cloud has evolved. Whereas many people were uncomfortable, even a few years ago, with the thought of their confidential data being "in the cloud," that's changed for many individuals and businesses.
Now, the convenience and security of cloud-based accounting solutions have been confirmed. In fact, many companies now run all their business applications, not just accounting, from the cloud. And, while this can be a plus in many ways, even with the potential to mitigate certain accounting malpractice risks, it does mean that there are new challenges to overcome.
For accounting firms, this means, more than ever, that they need to understand cloud-based accounting solutions, both their advantages and their risks. Accounting malpractice is an important issue and understanding the danger areas with cloud-based accounting is the starting point for managing that risk.
Capabilities of The Cloud
One of the best ways to start managing risk in cloud-based accounting is to understand the capabilities of these applications. There are many different products available. A firm needs to look to its needs and those of its clients. Not all cloud-based accounting applications have the same features. However, some of the elements should probably be non-negotiable at this point.
Bank feeds and data-syncing can be real assets, decreasing work and the potential for data-entry errors, and should be part of any solution that's selected. These features essentially allow different computers to talk to each other and transfer data automatically. This helps to take away things like data-entry errors and human misunderstandings of numbers or amounts.
Applications like QuickBooks Online, Zero, and NetSuite, are three that utilize bank feed and data-syncing technology currently. But, others are on the way and will integrate these technologies soon if they haven't already.
Another way that bank feeds and data-syncing can potentially help mitigate risk can be with small-business clients, especially those that might have only a few staff employed. Where these types of clients may have previously relied on the firm's bookkeeping services, they might now be able to handle more of their own bookkeeping if these technology features are in place.
Often, the client or client staff have a much better idea of what exactly happened with a transaction. So, instead of the potential risk of miscommunication when the bookkeeping is outsourced, the transaction can be handled correctly right at the time it occurred.
Of course, getting client staff up-to-speed on using the application can be a challenge. But, the potential for increased accuracy in the accounting records can be well worth the effort. Plus, that can leave client resources available for more substantive accounting-related services than just bookkeeping.
Data Security With The Cloud
Security is another vital element when using a cloud-based accounting solution. An essential feature to look for in the application is the use of two-factor authentication. This means that the application is using two ways to authenticate a user.
You've probably seen this security when you try to log in to your bank from a new device. The login can't be completed without a second method of verifying that you are who you say you are. Maybe you get a text with a code that needs to be entered to complete the login successfully. Or, perhaps it's an email.
It should be the same with the accounting application that's being used. Firm and client financial information should be as secure as at the bank, so using similar technology to authenticate users is a must.
Data security is vital no matter whether storage is in the cloud or not. When data is stored on firm computers, it's up to the firm to make sure that the information is secure. And, just because data is now stored in the cloud doesn't mean the firm's responsibility has diminished. It's merely changed.
When data is in the cloud, the firm needs to make sure that it's comfortable with the security measures in place by the solution provider. Things like the backup procedures, server locations (including how access to these locations is limited), and disaster-readiness practices should be confirmed and included as part of the agreement with the solution provider.
The firm should also have processes in place on its end to protect data. Use the data permission features included in the application. There is probably no reason why everyone at the firm needs to have access to all data, whether the
Limiting access to specific clients or even specific pieces of a client's information can help to keep data secure. And, when a firm or client employee leaves employment, remove access immediately. This helps to eliminate the possibility of unauthorized access after employment has terminated.
Advantages of Cloud Based Solutions
Another advantage that a cloud-based application has is that every session that a user has is with the most current version of the app. New features are available sooner, meaning things like security and technology should always be at their highest levels with the cloud-based application.
Mobile versions of cloud-based accounting solutions can help accountants provide better service on the go. With people on the move now more than ever, these mobile solutions can keep work flowing even when someone is on travel status. The ability to not only assist clients but also help firm staff get things right when you're out of the office can be a crucial way to manage risk while away from the office.
Technology in the accounting world is continually evolving. And, while it's important to stay up-to-date with that technology, it's also imperative to remain aware of the accounting malpractice risks involved and how to manage them.
One significant way to manage risk, including those involved in operating your cloud-based accounting applications, is to carry accounting malpractice insurance. Even with the best risk management practices, errors still can and do occur.
Things like disgruntled clients and frivolous lawsuits can happen in any environment. So, take advantage of cloud-based accounting to ensure that your firm is getting the best risk management that technology has to offer. But, back that up with professional liability insurance to make sure all risk bases are covered.