There has been about a 300% rise in cyber attacks in the accounting industry since the beginning of the Covid-19 pandemic, as per Accounting Today. Hackers are getting smarter, and their mode of attack is sophisticated. In their way of obtaining critical data from CPA firms, network accessing, backup destruction, and data encryption have become common. This is why it’s important to think about data protection and privacy while outsourcing bookkeeping work.
For small CPA firms, dealing with critical financial information, data protection and privacy has become a huge concern, especially when tasks are being outsourced to a different geography altogether.
When small CPA firms outsource their tasks to a different geographic location, there is no physical verification involved and hence, the risks are higher. Some of the most common threats include:
1. Risk of network breaches
2. Leak of intellectual property
3. Physical access to unlocked data, especially the ones that use traditional methods
4. Cultural differences
5. Constant regulatory changes in the offshore location
6. Changes in taxation, VAT, and other pricing
7. Inadequate levels of compliance and internal control
These are the reasons why Finsmart Accounting – trusted globally for accounting outsourcing services – decided to share everything about data protection while going for offshore staffing. Let’s start by understanding the current offshoring market status!
Current Offshoring Market Status
Technology has become an integral part, especially in the way we manage data. And cybercriminals understand how sensitive online data works. Every day, they adopt new strategies and tools to access private information. And that is why firms are taking new measures to tighten the security system.
Since data has become a top concern, 68% of outsourcing companies are gradually shifting to cloud-based technology, which makes the data less prone to attacks.
Before learning about the security checks, let’s understand the nature of cyberattacks to apply data protection tips in the right way.
Understanding the nature of Cyberattacks:
From malware to phishing and data theft – there are wide variations in the kind of data attack. Before learning how to handle the attacks, it is important to understand the nature of cyberattacks that small CPA firms should be prepared for:
1. Cyber attacks that disrupt the accounting practices of the firm lead to loss of data. They result in business loss.
2. Data breaches can happen when a resource with lots of information discloses discreet, critical information in exchange for money.
3. In case a virus enters the client’s network, it can lead to data exploitation.
Security checks before hiring an offshore accounting partner:
Offshoring has made lives easy for small CPA firms. But that does not come without challenges. As a small firm, before hiring an offshore accounting partner, it is important to conduct a few checks. Here is the list of checks that you must conduct for data protection and privacy while opting for offshore staffing:
1. Information about the country: A country’s political and socio-economic landscapes and time zones play an important role in business. These factors help determine the ability of the offshore accounting partner to meet the obligations and maintain a standard.
Conducting thorough research on the country’s cultural values, crime data, and political scenarios will help avoid threats from fake call centers, diversion of funds, and bribing employees to get access to client data.
2. The reputation of the business: The testimonials, performance record, and the wide variety of work determine the offshore partner’s ability and capability. In case, this information is not readily available, it is better to ask the company to provide it. Make sure to check for any violation of consumer law, fraud attempts, and poor service.
3. Compliance: Before hiring an outsourced partner, make sure to get familiar with the local compliance of the country where the vendor is located. This includes laws, rules, regulations, internal policies, and ethical standards of the country.
4. Security policies: Incorrect disclosure of information can lead to loss of data and put your business at risk. Common data security measures like secure network monitoring, no remote access to sensitive data, no authorization of sensitive data to everyone within the organization, and a two-step authentication system are some of the common methods to maintain security when working with offshore accounting partners.
Now that we understand the different kinds of checks that small CPA firms must conduct, let us understand how firms can protect themselves against cybersecurity threats while offshoring.
Accounting Cybersecurity Tips:
Below are some tips to protect your accounting data from cyberattacks while offshoring:
1. Login credentials: To ensure that the data stays safe, secure, and accessible, grant login credentials, and passwords to authorized personnel only. Even among the offshore team, the login credentials should be shared only with the ones who, maybe, work on a specific project or client.
Make sure to create strong passwords and the ones that can’t be guessed easily. This is the first step in ensuring cyber security.
2. Make the networks secured: Keeping the networks foolproof is another important step in ensuring no data leaks happen from your workplace and unauthorized access can be blocked easily. Hiring a technically sound person might be helpful in gaining assistance in network security.
3. Keep communication lines open: The success of an offshoring relationship lies in effective communication. A robust channel of communication with the team helps prevent misunderstandings and enables timely issue resolution. It is important to conduct regular meetings daily/weekly/monthly to foster great relationships.
4. Performance review and audit: Besides being a great way to analyze the quality of jobs done, performance reviews and audits help keep a check on any data error or leakage. It helps mitigate the risks of offshoring.
Keeping a check helps make sure that the offshore team meets the performance standards and abides by the contract.Audits also help in timely problem identification and resolution. With these valuable insights, it is easier for the offshoring partner to stay on track.
5. Provide proper training to the employees: No matter the number of rules you implement, complete data security is never possible unless the staff is informed and equipped to handle them the right way. Some of the rules that your offshore team must follow are:
I. They should never write passwords or IDs on paper or on systems
II. No critical information should be shared with anyone, including managers and CEOs
III. Passwords should not contain personal information like birthdays or anniversaries
IV. They should develop a habit of changing passwords frequently.
V. There should not be any set patterns for updating or changing passwords
VI. Teams should not be allowed to use pen drives, hard disks, or Bluetooth devices
VII. Use of phones should also be limited during work hours
Data Protection While Offshore Accounting: A Necessity
Data protection, especially with offshoring, is a challenge for sure – but not something that can’t be tackled. Following stringent measures can go a long way in ensuring that you reap maximum benefits from the offshore staffing partnership.
When it comes to safeguarding critical financial information, data security lies at the core. It is fundamental in helping maintain client trust, achieve compliance, maintain the reputation and secure the future of the firm.
Want to protect your data from cyberattacks while offshoring accounting and bookkeeping work? Write to us at connect@finsmartaccounting.com
Discover our most-subscribed services:
Outsourced bookkeeping services for global CPAs and accounting firms
India entry consulting services for global MNCs
Accounts payable outsourcing services
Also read:
Tips for monitoring offshore accounting teams
Data security for small CPA practices
Accounting software integration while outsourcing
Risk management in accounting firms
Tax management in accounting firms
Director Growth Strategy & Alliance
Maanoj Shah is a finance and outsourcing expert with strong Business Strategy and Scaling-up experience. Over the last 20 years, he has incubated multiple businesses and helped build global enterprises in verticals as diversified as hospitality, technology, and healthcare.
