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In a world where cyber threats grow more sophisticated by the day, data security in accounting software has become one of the top concerns for businesses and accounting professionals. Whether you’re a small business owner or an accountant managing a large portfolio of clients, the financial data you handle is vital—not just for your operations, but for your reputation.
A breach or loss of sensitive information could mean devastating consequences, including financial losses, legal implications, and a breakdown of client trust. An IBM survey reported that the global average cost of a data breach in 2024 was USD 4.88 mn, which was 10% higher than the previous year and at an all time high over all these years. USD 2.22 mn is the average cost saved by businesses that invested in security AI and automation compared to those who did not.
So, how can you ensure that your accounting software stays secure?
Clearly, prioritising data security is the way forward for businesses across the world. Let’s dive into some of the most effective cybersecurity practices for accountants and accounting professionals that will help you protect your financial data.
The Importance of Data Security in Accounting
In today’s increasingly digital world, accounting software plays a central role in managing sensitive business data—things like tax returns, payroll details, transaction history, and client accounts. Unfortunately, this makes accounting systems prime targets for hackers. A data breach doesn’t just put your business at risk; it also exposes your clients to potential fraud, and that’s something no company wants.
To make matters worse, the risk of attack is constantly rising. A 2023 survey by the Cybersecurity & Infrastructure Security Agency found that businesses in financial services and accounting are increasingly being targeted by cybercriminals, often with malicious intent to exploit vulnerabilities in accounting systems.
So, why does this matter so much? Simply put, if you’re handling financial data, it’s essential to take the necessary steps to ensure that data stays safe. It’s no longer a “nice-to-have” feature—it’s a necessity.
Top 7 Practices for Data security in Accounting Software
Below is a curated list of the seven most important practices you must follow to secure your organisational and financial data in 2025 and beyond.
Use Multi-Factor Authentication (MFA)
You wouldn’t leave your laptop unlocked even if it means going for a quick snack break, so why leave your accounting software open to unauthorized access? Multi-factor authentication (MFA) is one of the most effective ways to enhance security. MFA adds an extra layer of protection by requiring users to provide two or more forms of verification before gaining access to sensitive data.
Imagine this: A user attempts to log into your accounting software using their password, but with MFA, they’ll also need to verify their identity using something they have (like a smartphone app or security token) or something they are (like a fingerprint). Even if a hacker manages to steal a password, they won’t be able to break into your system without the second form of identification.
By incorporating MFA, you make it exponentially harder for someone to gain unauthorized access to your accounts. Even better, most accounting platforms today offer easy-to-set-up MFA features, making this a no-brainer step for securing your data.
Choose Secure Cloud-Based Accounting Software
Many businesses have shifted to cloud-based accounting software for its convenience, flexibility, and collaborative capabilities. When selecting a cloud provider for your accounting software, look for one that takes data security seriously.
The first thing you’ll want to check for is encryption. This ensures that data is scrambled into an unreadable format both while it’s being transferred over the internet (in transit) and when it’s being stored on a server (at rest). Encryption is a non-negotiable feature in accounting software because it prevents hackers from reading your data, even if they manage to intercept it.
Look for cloud providers that have certifications like ISO/IEC 27001 or SOC 2, as these standards demonstrate a commitment to maintaining strong security protocols. Additionally, you should ensure your provider offers data backups and disaster recovery plans, so if the worst happens—whether it’s a cyberattack or system failure—you can quickly recover your data without losing vital financial information.
Keep Software Updated
It’s easy to overlook software updates, but they are often the first line of defense against potential vulnerabilities. Cybercriminals frequently exploit outdated software, looking for holes or weaknesses they can use to infiltrate systems. That’s why keeping your accounting software updated is crucial.
Developers regularly release updates and patches to fix security flaws, so installing these updates as soon as they’re available is a good habit to cultivate. Many accounting software programs offer you automatic updates, which is a great way to ensure you’re always protected from newly discovered vulnerabilities. But don’t stop there—stay informed about your software’s security releases, as some updates may require manual installation or attention.
It’s also a good idea to stay current on security advisories from your software provider. You don’t want to be caught off guard if a new vulnerability is discovered that could compromise your accounting system.
Set Up Role-Based Access Control
As businesses grow, it’s natural to have multiple people accessing your accounting software. However, not every user needs access to every part of the system. One of the best ways to limit the risk of data breaches—whether accidental or intentional—is by implementing role-based access control (RBAC).
RBAC allows you to restrict access to certain areas of the software depending on a person’s role in the organization. For example, a bookkeeper may need access to daily transactions but shouldn’t have the authority to alter payroll data. Meanwhile, a senior accountant or finance manager might need full access to financial statements, tax reports, and client accounts.
By limiting access based on job responsibilities, you reduce the chances of an internal breach or a careless mistake. It’s also important to regularly review user roles and permissions, especially if an employee changes departments or leaves the company. Regular audits ensure that only the necessary people have access to sensitive data.
Encrypt Your Data
While data encryption may sound technical, it’s one of the simplest and most effective ways to keep sensitive financial information safe. Encryption involves converting data into a code that can only be deciphered with a specific decryption key. Whether your data is being transmitted across the internet or stored on servers, encryption ensures that even if hackers manage to gain access, they won’t be able to read or use your information.
For those using cloud-based accounting software, many providers already implement encryption as part of their service. But if you’re handling data on local systems or private servers, you’ll need to consider adding an encryption layer yourself. Make sure to also encrypt backups, as this is another potential vulnerability point that could be exploited.
Backup Your Data Regularly
Picture this scenario: your accounting software is suddenly hacked, or a natural disaster strikes, and your data is compromised. What do you do? Without a reliable backup strategy, you might be looking at months of lost work and financial chaos. Regular data backups ensure you can recover your records even in the worst-case scenario.
Set up automatic backups of your accounting data and store these backups in multiple locations (for example, one onsite and another offsite or in the cloud). It’s essential to test your backup system regularly to ensure that it works when you need it most.
A good backup strategy is an absolute must to avoid downtime and loss of critical data, whether caused by a cyberattack, system failure, or accidental deletion.
Schedule Team Training Sessions on Cybersecurity
The best software and security protocols are only as good as the people using them. Employee training is one of the most effective tools for maintaining strong data security in your accounting software. It’s crucial that your team understands the importance of maintaining strong passwords, identifying phishing attempts, and following your company’s security protocols.
Consider regular security awareness training sessions to keep your employees informed about the latest threats. Make sure they understand the role they play in keeping your company’s financial data secure. Remember, a single click on a malicious email link could open the door to a major breach, so ongoing education is key.
Benefits and Challenges of Data Security
Investing in solid data security in accounting software offers numerous benefits, from protecting your financial data to ensuring the trust of your clients and stakeholders. In an age where data breaches can severely damage your reputation, businesses that take data security seriously set themselves apart.
However, while the benefits are clear, maintaining strong data security can be challenging. The constantly changing landscape of cyber threats means that businesses must stay vigilant and adapt. Additionally, small businesses may face financial constraints when it comes to implementing advanced security measures. But the risks of a security breach far outweigh the costs of prevention.
Conclusion
As an accountant or business owner, data security in accounting software should be at the forefront of your mind. The best practices we’ve discussed, like using multi-factor authentication, implementing role-based access control, and ensuring your software is up to date, can help you safeguard your financial data from cyber threats.
If you want to prioritise data security, it’s highly recommended to invest in an AI-powered cloud accounting solution. Since your data is stored on the cloud, it is the most secure. Moreover, SaaS accounting platforms offer automatic updates, real-time tracking and role-based access controls for 360-degree data security. Febi.ai uses cloud-bases access on AWS and ensures end-to-end encryption of all client data. Further, it has an IT security policy and the ISO/IEC 27001:2022 Certification to ensure maximum safety against data theft, cybercrimes, and the potential fallout from privacy breaches.
Remember, a proactive approach to security is always better than reacting to a breach after it happens. Make data security an integral part of your operations, and invest in the tools and practices that will help protect your business and your clients’ financial well-being. After all, a secure system means peace of mind, and that’s something every accountant—and business—deserves.
