Cloud accounting has been around a while. When I began covering accounting nearly 10 years ago, I was NOT interested in the cloud, and ignored much of what the talking heads in the accounting world were yakking about.
Eventually, however, I surrendered to my curiosity and looked into this cloud accounting thing. What I learned was that accounting software and its data were, more and more, located on the Internet, and, I admit, that seemed to be a big deal.
A fair number of accountants didn’t let their skepticism go so easily. They had questions: Can we trust this cloud? Where is this cloud and who owns it? How secure is it?
These questions persisted despite sweeping cloud adoption in accounting. Today, if you follow accounting news, you’ve probably noticed that the cloud is kinda old hat. Everyone seems to be on the cloud.
Still, we all know that, there are businesses and accountants who haven’t jumped on the cloud bandwagon. And hey, you might even be among them.
This post will answer common questions about the cloud. It should be helpful for anyone who’s thinking about moving their clients or firm to the cloud. If these questions sound like the ones you might ask, then you’re in the right place.
1. Where is the cloud?
It seems like lots of “experts” skip over this question because it seems so obvious to them. Everyone knows where the cloud is. It’s in the cloud! The cloud is the cloud, so the cloud is everywhere the cloud is.
Sigh.
So I’ll settle this once and for all (hopefully): The cloud is the internet. The internet is the cloud. When someone says, “We keep our accounting in the cloud,” they mean “Our accounting is on the internet.”
2. What does that mean, “The accounting is on the internet?”
It means that your accounting information is stored on a remote server (i.e., a computer) rather than on the hard drive of your computer or on a local server. This means you can access your accounting whenever you like, from wherever you want. All you do is log onto the service (e.g., QuickBooks Online or Xero) and voilà.
3. What benefit is there to having accounting on the internet?
There are several, but the main ones are:
- You can access it anywhere. Because it’s on the internet, you do not have to be working on the computer that houses the software on its hard drive.
- Faster updates. Updates to cloud accounting happen regularly, without you having to buy a new version of the software. That saves you money, too.
- It’s cheaper. You don’t need a server to store all your information on, and you don’t need to build an elaborate backup system. A cloud accounting platform does all that for you.
- They work with other software applications. The buzzword people throw around is “integrations.” Cloud accounting software is built so that it will work (i.e., integrate) with other software such as payroll, point-of-sale, or online banking to simplify processes. No more manual entry!
4. Is cloud accounting secure?
I try to think about it from a practical standpoint. There are countless things that are in the cloud that we don’t give a second thought to. Email. Banking. Amazon. Google. Facebook.
All them contain private information that you wouldn’t want hackers to get ahold of. Names, addresses, Social Security numbers. Bank account numbers. And yet, we blithely spread our sensitive information all over the internet.
With this kind of perspective, what do you care if cloud accounting is secure?
But seriously, cloud security is actually pretty simple. A cloud accounting service such as QuickBooks Online or Xero is run from a data center. Data centers are basically warehouses for digital information. They are never onsite (i.e., not at Intuit HQ), and they use both digital and physical security measures to keep the stored data safe. For cloud services in sensitive areas, such as accounting, health, and other fields, cloud providers often use bank-level digital security and encryption to ensure your most confidential information is safe.
Furthermore, the data is encrypted which means that even if someone hacks into it, they can’t read it. Yes, some super hacker could try to break the encryption, but if it’s, say, 256-bit encryption—common among cloud accounting platforms— that means there are 2256 possible encryption keys, and it would take 3x1051 years to break it.
That’s security, my friends. And good cloud accounting software comes with all that included. It’s a good deal.
5. Is there anything else I can do to keep my data safe?
There are lots of things you can do! Yes, the cloud is very secure, but nothing is ever 100% secure. The reality is big hacks happen regularly, so it’s essential to use best practices when it comes to data security:
- Require your team to use strong passwords—This means no “password1” or your pet’s name. These days, your best bet is to use a passphrase, a combination of several unrelated words. You can make a virtually impregnable good one with Diceware, or Correct Horse Battery Staple.
- Be careful with saved passwords—Browsers that save your login are great, but be sure the device is secure and that others do not have access to it.
- Multi-factor authentication—Multi-factor (fka two-factor) authentication adds an extra layer of security by requiring users to enter an additional code to confirm that it is indeed an authentic user. Usually, the way it works is that a user logs into a platform or system like normal, and then a numerical code is sent to their mobile, often a smartphone. Here’s an example:
The user enters the code into the prompt, the system verifies the code and then allows them access to the system.
Insert_Gusto_MFA
- Monitor the activity of your systems—Lots of software allows you to review who has logged on, for how long, and even their geographic location. Administrators can review this history to look for any unusual patterns or activity.
- Use anti-malware—Aka “anti-virus” software. This may seem obvious, but be sure that you’ve installed it on all your devices where you use cloud accounting and other cloud-based platforms.
- Stay vigilant for phishing scams—Phishing scams usually come via email, so be wary of an unexpected message that asks you to click on a link to change personal or password information, have attachments, bad spelling, or is from someone at your company but the email is slightly erroneous (e.g., a zero instead of a letter O).
The best way to ensure that these data security methods are followed is to train your staff and make sure to update software regularly.
6. Is cloud accounting expensive?
Cloud accounting is a service, and its users subscribe to it like, say, HBO, making it relatively inexpensive. Very simple plans can be as low as $9 per month, and range up to $50-$60 per month. You can stop the subscription at any time, and software updates—which happen automatically, remember?—do not require you to upgrade to a new version. Presumably, you’re already shelling out a monthly fee for internet service, so there’s no additional cost there. Again, it’s a good deal.
Cloud accounting has come a long way over the past decade. Even if you’ve been skeptical or been confused by it in the past, hopefully this post has cleared up any questions you may have. It’s a great product for firms and their clients to use together, and it will only continue to improve. Cirrusly
Caleb Newquist is Editor-at-Large at Gusto. Newquist is also founding editor of 'Going Concern.'
This content is sponsored by Gusto. Gusto is reimagining payroll, benefits and HR for modern companies by making the most complicated business tasks simple and personal. Gusto serves over 60,000 companies nationwide and has offices in San Francisco and Denver.