Do you know finance and accounting outsourcing is projected to cost US$51.5 billion by 2026? Yes, you read it right! Businesses increasingly shift toward outsourced bookkeeping services to streamline their processes and cut operating costs in the long run. Now, you might be wondering why. Well, bookkeeping and accounting are primarily about transactions, which are routine and rule based. That’s the reason businesses often prefer outsourcing.
However, one of the biggest challenges businesses often face or may feel they face is sharing financial data with an offshore team. Looking at the increasing cases of cybercrimes because of the emergence of new technologies like generative AI, 64% of businesses are worried.
Let’s understand how outsourcing bookkeeping Services has become popular, the data security concerns around it, and how you can address those.
Why Have Outsourced Bookkeeping Services Become Widespread Across Horizons?
Organizations actively outsource for various reasons, such as cost savings, focusing on core activities, and addressing capacity issues. Yet it is not solely these factors driving forces that also include a desire for transformational change and an aspiration towards improved business performance.
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Cost Savings and Operational Efficiency:
By outsourcing bookkeeping, one can directly achieve significant cost savings by sidestepping the financial obligations of in-house bookkeepers. Efficiency is further enhanced, such as resources originally allocated for payroll expenses being redirected towards core operations; this minimizes overhead and maximizes productivity. To show—an increase in laborers employed by a construction business or extra cooks hired at a restaurant—serves to improve service and enhance customer experience.
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Access to Expertise:
By outsourcing bookkeeping, business owners with limited tax structure knowledge ensure the accuracy of their financial records and gain invaluable insights into finances. Continually enhancing their competencies, external accounting firms offer industry insights, access, and innovative solutions.
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Utilization of Advanced Systems:
Online portals are leveraged in contemporary bookkeeping for their streamlined processes and increased efficiency. These cloud-based platforms provide businesses and accounting firms unrestricted access to financial records, facilitating collaboration.
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Maximized Accuracy and Productivity:
Outsourced bookkeeping services provide immediate productivity, free from the transitional errors usually associated with in-house bookkeepers. Expert oversight supports meticulous financial tracking, which automated systems ensure.
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Financial Reporting and Analysis:
When bookkeeping is outsourced, it provides access to comprehensive accounting reports such as profit and loss statements, cash flow history, and balance sheets- all crucial data that informs decision-making and fuels business growth.
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Simplified Tax Preparation:
Outsourcing tax preparation services also prove to be helpful during tax season. These firms manage your records and prepare taxes for you as per regulatory compliance. Their expertise maximizes deductions and instills confidence; it enhances the integrity of financial data-a critical component for any business operation at large.
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Scalability:
Business growth necessitates upgrading outsourced accounting services to cater to evolving needs; this enhancement amplifies the potential for sustained success.
Top Outsource Bookkeeping Services Concerns Related to Data Security
Despite bookkeeping services offering numerous benefits, they instigate valid concerns regarding sensitive data security and privacy. Such worries demand dynamic deliberation. Major apprehensions include:
- Outsourcing service providers, potentially exposing client data to a higher risk of cybercrimes and data breaches, may not adhere to the stringent data protection regulations enforced in the client’s home client’s
- Offshoring bookkeeping services introduces a key concern: limited control for businesses regarding data management, storage, and security. This lack of control can potentially compromise the data’s security issue, which demands serious consideration.
- Different countries maintain unique laws and regulations concerning data protection and privacy; therefore, ensuring compliance with these provisions presents a significant challenge in offshore bookkeeping services: the task is not to be taken lightly.
- Clients frequently expect confidentiality regarding their financial information. Failure to uphold this trust, a breach that can occur quickly, may engender profound consequences such as lost faith and a damaged reputation for businesses, thus highlighting the critical importance therein.
- Engaging with professionals from diverse cultures and languages can introduce a complex dynamic. Cultural and language dissimilarities may trigger misunderstandings. If not appropriately addressed, these could jeopardize the precision and security of financial data, thus underlining their significance in our operations.
Ways to Address Data Security Concerns when Outsourcing
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Audit Your Internal Security Controls
Your own backyard initiates security. Inspect your systems for data generation, collection, and storage to identify potential leaks. Inadequate controls over access may allow an overflow of confidential or sensitive information due to excessive freedom granted by departmental affiliation with too many employees; these are the leaks you need to address. In certain cases, your company may allow outsourced bookkeeping service providers access to records unrelated to their transactional relationship.
Many outsourcing firms might fall short in data security due to a misbelief that their company presents a negligible target for malicious hackers. However, it is crucial to recognize that most data breaches involve personal information such as bank account digits, social security numbers, and passwords – all of which form part of the demographic details found within your employees as those belonging partially or wholly to customers.
You shall only gather the information you require to enhance record management and bolster retrieval. So, when dealing with a professional service provider for your accounting services, it becomes crucial to have an orderly, process-driven system of data compilation; this ensures a productive relationship. To forestall the abuse of privilege and exploit system vulnerabilities, employ both database monitoring gateways and firewalls internally and externally.
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Research the Contractor’s History
Knowing that the bookkeeping services you are considering have never experienced a data breach might not provide sufficient reassurance. You must ascertain all aspects of the company’s physical, data management, and records disposal practices, preferably through documented and written evidence.
This is a three-pronged strategy:
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Security for Physical Facilities or Remote Access Locations
Securing access points to all data is imperative, imposing restrictions on remote setups, managing entry and exit points for data, and creating user-level permissions to curtail access. Outsourcing can potentially reduce reliance on paper-based data and mitigate the vulnerability of printed materials; however, we must prioritize security measures within cloud-based systems and those related to remote access.
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Employees
The accounting outsourcing firm must actively support client security adherence. Moreover, they should be proficient in explaining their rigorous employee screening and recruitment process – particularly for those who gain access to your files. The firm needs to subject its employees to exhaustive background checks; regular reviews are also necessary to ensure consistent compliance with regulations and requirements.
Furthermore, each employee must receive thorough training on the newest strategies and technologies pertinent to data security: this ensures an updated approach toward safeguarding sensitive information at all times.
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Computer Networks and Systems
Secure facilities with robust activity monitoring systems should house data servers. We must subject each computer and critical process to multiple layers of user authentication while turning off all external storage portals – USB, DVD, and CD drives – to avert unauthorized client data downloads.
Moreover, our data transfer system should employ 128-bit encryption or an equivalent method akin to those presently utilized by banks and credit card companies. The contractor must, most importantly, possess an established data recovery plan to mitigate potential disruptions.
Should Businesses Owners Stress Over Data Exposure?
Valid concerns exist regarding data disclosure in outsourced bookkeeping services; however, these should not prevent businesses from considering this practice. Instead of being discouraged, businesses must adopt a proactive and diligent approach towards offshoring – focusing on implementing stringent security measures and strategies to mitigate risks.