Data Security for Small CPA Practices: Offshore Provider Selection and Best Practices

When offshoring accounting, the tasks of a small CPA firm are undertaken by a team in a geographically dispersed country. The offshoring partner then becomes responsible for overseeing the day-to-day operations and attaining the needs of the clients. They also take care of completing the tasks, financial reporting, and planning. 

The streamlining of workflows enables small CPA firms to manage the workload, not get overwhelmed, and deliver jobs on time. Although there are so many advantages of offshoring, some CPA firms are not too inclined towards undertaking this approach. 

One of the main issues that the teams are concerned about is data security. With critical financial data being handled by a team in a different location, different time zone, and different culture, many CPA firms fear the worst in terms of cyber security. Can they ensure data security when offshoring? Or what are the levels of protection that are expected from the provider? Such concerns are especially valid for a field like accounting. 

Several business owners also worry that they lose control when offshoring. Ensuring proper physical and cyber security measures is a must-have to ensure that critical data is being safeguarded the right way.

Data security questions to ask before selecting offshore provider

Finding and hiring the right offshore accounting and bookkeeping provider is a rigorous process that needs the right questions to be asked. If you are one of those firms that is heavily concerned about data security in offshoring, here are some questions that you must ask:

1. If they hold any quality or process certifications: This helps gain an understanding of the degree to which they take data security seriously.
2. What is the expertise of the team to handle technology: The world is changing and so is the tech used in accounting. Understanding the team’s ability to keep up is important.
3. Compliance with International Data Protection Regulations: A reliable offshore provider should comply with internationally recognized data protection regulations, such as GDPR (General Data Protection Regulation). Compliance with these regulations ensures that they have established robust data protection frameworks.
4. Secure Data Transfer: Offshore providers should use encrypted channels for data transfer. Secure protocols like SSL (Secure Sockets Layer) or VPNs (Virtual Private Networks) are essential to protect data during transmission.
5. Physical Security: Inquire about the physical security measures in place at the offshore provider’s facilities. This includes restricted access to data centers, surveillance, and backup power systems to prevent data loss during emergencies.
6. Access Control: Ensure that the offshore provider has strict access control policies in place. Data should only be accessible by authorized personnel, and role-based access should be implemented to limit the exposure of sensitive information.
7. Data Encryption at Rest: Data should be encrypted when it is stored, both on the offshore provider’s servers and during backups. Strong encryption methods provide an additional layer of security, making it nearly impossible for unauthorized parties to access the data.
8. Regular Security Audits: Ask about the offshore provider’s regular security audits and assessments. They should conduct vulnerability assessments, penetration testing, and security audits to identify and address potential weaknesses in their systems.
9. Non-Disclosure Agreements (NDAs): Ensure that the offshore provider is willing to sign legally binding non-disclosure agreements to protect your data and your clients’ information. This adds an extra layer of security by making the offshore provider legally liable for any data breaches.
10. Employee Training and Background Checks: Verify that the offshore provider conducts thorough background checks on their employees and provides ongoing training in data security and confidentiality. Employees should be aware of the importance of data security and adhere to best practices.
11. Disaster Recovery Plan: The offshore provider should have a comprehensive disaster recovery plan in place to ensure that data remains accessible and secure in the event of unexpected incidents or disasters.

These data security questions for CPAs are pivotal in understanding the nature of the offshore firm, the mindset of the leaders, and their urge to meet the client’s needs.

Besides asking these important questions, it is also important to follow certain practices that help avoid chances of data leaks, data theft, phishing, malware and attacks.  

Best practices to ensure data security while offshoring

With data breaches happening worldwide, small CPA firms need to lay special focus on protecting critical information to safeguard their clients. Since the pandemic, remote working has become a norm and more and more companies are starting to build trust in this model. However, in accounting, firms need to be careful about data security and stay ahead of the competitive market. 

Here are some important steps to follow for data security when offshoring your accounting business:

1. Secure all appliances and devices: Data configuration, timely security software updates, limited access of devices and passwords, antispyware, and firewall installation are some of the right things to do for data security. Accounting firms are one of the major targets of data breaches because of the kind of data they deal with – financial. Imposing such measures would prevent hackers from accessing your internal systems. External hardware and employees’ desktops should be encrypted to keep the data safe. In case your offshore team needs remote access to sensitive information, make sure to keep a system of authorization in place.
2. Build a two-way partnership: Small CPA firms need to invest time and resources in managing offshore accounting teams. To ensure smooth operations, make sure the connections are made from both sides. Now the question is “How do you do that”? Share the company’s goals, visions, and challenges with the offshore bookkeeping team. Make sure that the remote team and the in-house team are on the same page about any development or changes. Another important aspect to focus on is communication. It is imperative to interact with the offshore team regularly and understand their working patterns. Regular video or voice calls, emails, and chats can help everyone on the team stay aligned and raise concerns when something alarming related to cyber security happens.
3. Safe and secure monitor networking: As a small CPA firm owner, it is crucial to secure the network used by the offshore teams. Encourage the offshore accounting partner to use a reliable and updated network to protect sensitive data. Make sure to check if the offshore team is using a firewall, ask them if their Wi-Fi networks are secure, and make sure that they change their passwords regularly. Discuss with the teams about the latest version of antivirus software and the training process in place. Asking these essential questions will help make sure that the partnership will not lead to a data security failure.
4. Database activity monitoring: Most of the projects in accounting firms contain sensitive information of the clients. So it is essential to make sure that the offshore team understands the severity of it. Before hiring an offshore team, make sure to question and understand if they have an active network monitoring system that allows the identification of security breaches with regular security monitoring, stringent IT policies, firewalls, and anti-malware software. A small CPA firm should always withhold autonomy and control, and implement policies that help overcome business challenges with ease. Make sure to keep track of the information that is being used and in what way. This will help you find the people accountable in case of a data breach. This also helps control fraud and data leakage.

Keeping data secure with offshore teams

Offshoring is all about hiring the best of the talent available and reaping most of the benefits from it. The above measures, when followed the right way, are bound to help in securing data. It is important to hire a provider that understands cybersecurity and the measures needed to control it in case of a breach. With offshore teams working at different geographic locations, and time zones, not undertaking the right measures can put the entire business at risk.

Want an offshore partner that abides by data security and ensures growth and success? Write to us at connect@finsmartaccounting.com 

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Maanoj Shah

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.