Cloud based accounting systems like Quickbooks Online, FreshBooks, Xero and others are becoming popular with the entrepreneur and small business owner, but are there potential security problems? Do you really want to trust your most critical financial data to an outside company that hosts the information in the “cloud”. The “cloud” referring to storing the information on secure servers accessible by an Internet connection.
Today’s online or cloud-based accounting systems have come a long way, but in light of the recent hacking events from major companies like Sony, Ashley Madison, Internal Revenue Service and the Pentagon, do you really think your financial information stored in the “cloud” is safe? There is a saying in the website security industry, “It’s not about if your company will ever get hacked, but when.” Now, that is a scary thought, and I would caution any small business owner to stay away from the trendy cloud-based accounting systems and stick with traditional desktop accounting software.
Is desktop accounting software safer than cloud-based accounting software?
There are trade-offs. With desktop accounting software you have more control over your data. The data are usually controlled by one or a few key people, which can become a security issue. Desktop systems and network servers are vulnerable to malware and viruses that can easily compromise them. Cloud-based accounting systems have better security, but no provider can provide 100% security against hackers.
Nevertheless, things are changing and more and more businesses are moving toward web-based accounting systems, despite the security risks. Why is this? The benefits are notable including a simplified graphical interface, access from anywhere with an Internet connection, integration with related cloud-based applications, integration with banking websites, better backup solutions, faster troubleshooting, and convenient access to upgrades.
This new approach to decentralize accounting systems can help businesses overcome the limitations of spreadsheets, and static accounting systems that infrequently get upgraded. The efficiencies of cloud-based accounting software include the ability for staff to work from virtually anywhere and the convenience to create and access reports remotely.
Are cloud-based accounting systems better than desktop-based systems?
Web based accounting systems are not as full-featured as their desktop counterparts. Most are fine at handling the basic accounting tasks, but fall short on complex areas such as detailed fixed assets and advanced inventory management. Web based accounting systems are also geared towards the online world and the mobile user who wants to access the system with iPhones, iPads and other mobile devices. For those that need the convenience of cloud-based accounting systems, you should definitely consider FreshBooks. PC Magazine has a useful article, Best Choice in Cloud-Based Accounting Services.
In my opinion, you should wait a few more years as cloud-based accounting systems evolve with higher security and better data encryption. Healthcare providers are required to protect patient health information under HIPAA Compliance Federal Regulations with secure storage and data encryption. To my knowledge, none of the cloud-based accounting systems offer HIPAA compliance and only a few cloud storage companies offer this. You can read more about HIPAA compliance and cloud storage here.
On traditional systems, security is also an issue when individuals are responsible for securing the data and protecting the network. These too can be hacked. Security is said to be better with cloud-based accounting systems with the chances of human error become less likely, but they aren’t necessarily safer. Technology will be one of the key factors for cloud-based accounting systems in the future. One day, there will be a time for entrepreneurs and small businesses to move on from desktop accounting systems for the potential offered by cloud-based solutions, but the time is not yet.
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To your success!
Noel B. Lorenzana
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