Accounting firms deal with some of the most sensitive information exchanged worldwide. These often include documents like revenue statements, expenses, invoices, and more. Since the contemporary world functions largely through digital modes of information exchange, these details exist in the form of files.
This way of file-sharing has undoubtedly made the process easier for all parties involved. Even so, there are some critical concerns accounting firms often face (and overcome). Let’s take an example – an accountant walks into their office one morning to find a staff member with sweaty palms and an anxious look on their face.
They discover that a client file was backed up in an unencrypted drive which was later placed on the desk. The colleague left their cubicle for a few minutes (nature’s call) but upon returning the flash drive was gone. It turns out that they were preparing tax returns for several clients in multiple locations.
Would it not create panic and terror as to which details were exposed and what such a data breach might cost (besides a tainted reputation)?
In this article, we will discuss three major file-sharing concerns of accountants and how to overcome them.
Despite widespread tech adoption and some revolutionary changes, accounting is a largely traditional industry. In other words, accountants have been practicing their profession in a specific manner for decades.
This makes it likely that accounting firm clients are resistant to changing the way they manage their files and documents. The accounting firm has the mammoth task of convincing clients to see things from a different perspective.
For instance – suppose an accounting firm’s client is traditional but open to new file management methods. This surely must work in the favor of the accountant, right? Not until the client’s tech capabilities are at least at par with the accounting firm.
Now and then, accountants come across a client who has no clue of how to work with a particular file. The issue only aggravates when there is a hard deadline in the picture. The only way to overcome this problem is to make the document management process highly organized and smooth.
As per Mango Practice Management, this can be done using customized folder templates, built-in document previews, and role-based permissions. When done using reliable document management software, email notifications can be sent when files are uploaded to a folder. This way, clients know that a document is awaiting their review.
As our example at the beginning of this article states, file security is a priority concern for accounting firms. If a file is lost, especially to an ill-intentioned party, this security lapse can deal a severe blow to the company.
As per the Journal of Accountancy, a CPA firm must deal with numerous exposures in case of data breaches. These include –
- Claim for Damages – a client may charge the firm with indemnification charges as a result of the breach. The costs may include investigation and mitigation expenses like public relations, forensic services, etc. It may also include lawsuits filed against the company.
- Cost of State and Federal Statutes Compliance – for accounting firms in states with security breach notification laws. These will include costs for credit monitoring services, forensic investigation, and more.
- Network Damage – in case of a malware-related data breach. The entire organizational network is disrupted (sometimes even client networks).
- Reputational Damage – whether the breach is actual or perceived. An accounting firm finds itself on the precipice of losing customer trust and unwanted media exposure.
To steer clear of such threats and costs, accountants must invest in reliable client collaboration software. Companies focused on making file sharing for accounting clients secure should look for features like client portals and electronic signatures.
These ensure that the files are exchanged, and client payments are done in a frictionless and safe manner. Besides file security, accounting firms can streamline their workflow due to user-friendly interfaces, drop-and-drag functionalities, etc.
The team simply needs to upload the right documents, and they can track their work in progress.
Managing File Privilege
Accounting firms seldom perform their tasks in complete isolation. This holds even for relatively small firms with lean operations. During the process, other team members/colleagues will require file access.
This may include a colleague who must take over a particular client’s tax returns. Even an administrative assistant may require access to send the file back to the client. Here, the file-sharing risk is all about allowing the right people the right level of access.
Let’s understand using an example. An accounting team member needs access to read and write a file (as they make notable changes). However, an administrator only needs to save the file before sending it to the client. Accountants must control file access through directory or folder-based user permission levels.
This will spare serious headaches involved in maintaining and monitoring file privileges manually. Furthermore, if there is some blunder (an administrator changes some figures accidentally while saving the file), the accounting firm will be held liable by the client. All such hassles can be avoided through relevant file accessibility.
It is expected that the global accounting software market will experience significant growth between 2023 and 2030. It is growing at a CAGR of 6.73%. Accounting firms are tightening their security measures to ensure no client information is lost or stolen.
While this is crucial for all enterprises, it is more so for accounting firms in their growth-challenger stages. Cybercriminals usually target fledgling companies, thinking they may not have robust security measures in place.
Market relevance and customer trust are at stake. Only those firms that fortify their file-sharing process will survive a competitive market.