How can accounting firms ensure data security while outsourcing?

Introduction:

Accounting firms nationwide are increasingly outsourcing accounting functions to save costs and access specialised talent. While outsourcing offers undeniable benefits, such as operational efficiency and access to highly skilled resources, it also introduces significant challenges, particularly in data security.

NAB recently warned that cybercriminals could easily target accounting firms. This warning comes from a report by the bank, which found that last year, 11% of Australian businesses were hit by cyberattacks, losing about $19,400 on average. These attacks didn't just leak important information; they also cost a lot of money.

With so much at risk, companies often wonder what specific steps they should take to ensure the security of their data, especially when outsourcing accounting tasks. This concern is paramount in maintaining their clients' confidence in protecting sensitive information.

In this blog, we will share seven key tips for accounting firms to keep in mind when outsourcing accounting tasks. We aim to provide a detailed guide to help navigate data security challenges that ensure a seamless and secure outsourcing experience.

7 ways to ensure data security while outsourcing

Data breaches refer to incidents with a loss of control, compromise, unauthorised acquisition, disclosure, or access to physical and electronic data for unauthorised purposes. Often caused by stolen or weak credentials, these breaches are particularly concerning for accounting firms due to their reliance on accounting automation and handling sensitive financial and personal client data.

To mitigate such risks, it is crucial for firms, regardless of size, to consider several factors when outsourcing accounting tasks. Here are 7 data security tips for accounting firms to keep in mind:

Assess your internal data security protocols:

Before even considering an outsourcing partner, an accounting firm must have robust internal data security protocols. This begins with a comprehensive audit of the existing data security policy and ensures it encompasses detailed data classification metrics. These metrics help differentiate between sensitive business data and non-sensitive general data.

It’s not just about having these classifications but also about having clear guidelines on how each data type should be handled, stored, and shared. Reviewing these protocols ensures they remain effective and adapt to new security threats. Additionally, these guidelines should be accessible and understood by all organisational stakeholders, promoting a culture of data security awareness and compliance.

Select the right outsourcing partner:

The selection of an outsourcing partner is pivotal. It's not just about their ability to provide accounting services efficiently but also their commitment to data security. A thorough vetting process should include reviewing the outsourcing firm’s data security policies, understanding its procedures for protecting data from unauthorised access (such as restrictions on copying data to portable devices) and assessing its compliance with intellectual property laws.

Selecting a partner that can align with or adapt to your firm's security protocols is beneficial, ensuring seamless data protection across both entities. This may include site visits, detailed discussions about their security infrastructure, and even third-party audits of their systems.

Take active measures to protect your data:

Ensuring robust data security measures is essential when outsourcing accounting tasks. This requires adopting sophisticated security technologies like application layer firewalls and database monitoring systems. These technologies serve to block unauthorised access and shield against potential vulnerabilities effectively.

Equally important is selecting an outsourcing provider that implements these advanced technologies and fosters a strong culture of security consciousness among its staff. This involves comprehensive training in the most current data protection strategies and a deep-rooted understanding of the critical nature of protecting client information as diligently as their own.

Create an incident response system:

Even with rigorous security measures, accounting firms cannot completely rule out the possibility of a data breach when outsourcing tasks. Therefore, it is imperative to prepare for such incidents by developing a comprehensive incident response strategy.

This strategy should elaborate on the protocols for handling minor and significant breaches. It involves steps for identifying incidents, assembling dedicated response teams, and drafting detailed incident management plans.

Additionally, the strategy should specify the technical and organisational measures to mitigate risks and minimise damage. By training in-house and outsourced staff on these procedures, firms can ensure everyone is equipped to respond effectively and efficiently to any security incidents.

Establish strong security metrics:

Setting clear, measurable security metrics at the start of the outsourcing partnership can play a significant role in its success. These metrics cover a broad spectrum, from assessing the effectiveness of security procedures to evaluating both parties' physical and software security infrastructures.

Parameters include the strength and frequency of password changes, compliance with recognised security standards, and the effectiveness of data encryption methods. Regular reviews against these metrics ensure ongoing compliance and facilitate the continuous improvement of data security practices.

Regular compliance and security audits:

Regular audits of your firm’s and the outsourcing partner's compliance with agreed-upon security protocols ensure ongoing adherence to data security standards.

These audits, carried out by in-house staff or outside professionals, help identify potential vulnerabilities, assess the effectiveness of current security measures, and recommend improvements. This proactive approach reinforces the security of sensitive data and builds trust between your firm and the outsourcing partner.

Implement data access controls:

Strict data access controls are essential to prevent unauthorised access to sensitive information. This involves defining user roles and permissions based on the principle of least privilege, ensuring that individuals have access only to the data necessary for their specific roles.

Access controls should be dynamic, easily adjustable to staff roles or responsibilities changes, and regularly reviewed for relevance and compliance. Implementing robust authentication mechanisms, such as two-factor authentication, adds an extra layer of security, further protecting against unauthorised access attempts.

Conclusion

Outsourcing offers accounting firms significant benefits, streamlining operations and enhancing efficiency. However, it also introduces substantial challenges, especially in safeguarding data. Maintaining the confidentiality of client financial information is critical, driven not only by regulatory compliance but also by the imperative of sustaining client trust.

Firms can protect their client's sensitive information by being well-versed in data security regulations, selecting outsourcing partners who prioritise data safety, and implementing robust security measures. For those considering outsourcing their accounting functions, partnering with Accxpert is a wise choice.

At Accxpert, we are dedicated to upholding the highest data security standards, ensuring your client's financial data is handled with the utmost care and protection. With our commitment to excellence and adherence to stringent security protocols, including ISO 27001 certification, we stand as a reliable partner for accounting firms looking to outsource while maintaining the security and confidentiality of their client's information. Contact us to learn more about our outsourced accounting services.