Is cloud-based accounting software secure for UK accountants?

Cloud accounting has become the backbone of many UK accountancy firms but is it secure enough to handle confidential financial records and personal client data? Yes, it is generally secure, provided accountants choose reputable providers and follow proper security practices. Cloud platforms often offer stronger protection than in-house systems; however, security is a shared responsibility. This detailed guide explains how cloud accounting software protect data, UK legal requirements, common risks, and best practices for accountants.

Why Cloud Accounting Is Often Safer Than In-House Systems 

Leading UK cloud accounting platforms provide security measures that most small and medium-sized firms cannot realistically implement with traditional on-premise software. Here is a deeper look into why cloud systems are often more secure.

1. Data Encryption 

Cloud accounting software uses end-to-end encryption, meaning data is scrambled both in transit (when you send or receive data) and at rest (when stored on servers).

• Transit encryption (TLS/SSL): Ensures that any data exchanged between your device and the cloud cannot be intercepted or read by hackers.

• At-rest encryption: Even if someone accessed the physical server, the information would still be unreadable without decryption keys.

• Advanced key management: Providers store encryption keys securely in separate systems to avoid unauthorised access.

This level of encryption is the same standard used in online banking.

2. Certified Security Standards 

Reputable UK cloud accounting providers follow internationally recognised frameworks to ensure consistent protection:

• ISO 27001 certification: Shows that the provider follows a strict information security management system (ISMS).

• SOC 1 & SOC 2 audits: Independent auditing of internal controls, data handling, uptime, and cybersecurity practices.

• GDPR compliance: Providers ensure data processing, storage, and transfers meet UK GDPR requirements.

• Regular penetration testing: Ethical hackers test the system to identify weaknesses before cybercriminals exploit them.

These certifications give accountants confidence that the software is held to a higher security standard than most in-house setups.

3. Secure Infrastructure & Redundancy 

Cloud systems rely on world-class infrastructure designed for continuous uptime and protection:

• Multiple UK-based or EU-based data centres: Data is mirrored across separate, secure locations.

• Automatic backups: Your accounting data is regularly backed up, often multiple times per day.

• Disaster recovery plans: In case of fire, hardware failure, or cyberattack, the system can switch to a backup data centre instantly.

• Physical security: Data centres include biometric access control, CCTV, 24/7 guards, and fire suppression systems.

This level of redundancy ensures your accounting data is safe even if your laptop is stolen or your office suffers a technical failure.

4. Automatic Updates & Patching 

Traditional desktop accounting software requires manual updates something many firms delay due to cost or downtime. Cloud software, however, updates automatically:

• Instant security patches: Providers fix vulnerabilities as soon as they’re discovered, blocking new threats.

• Always on the latest version: No need to download or install updates; the platform updates silently in the background.

• Consistent performance monitoring: Providers monitor systems 24/7, detecting unusual activity or attempted breaches.

• Reduced human error: No reliance on staff remembering to update their software or antivirus tools.

This eliminates one of the biggest cybersecurity risks: outdated or unpatched software.

UK Legal Requirements: What Accountants Must Follow

Using cloud-based accounting software does not remove or reduce an accountant’s legal responsibilities. Even when data is stored or processed by a cloud provider, UK accountants remain fully accountable for compliance and data protection. Below is a detailed breakdown of the major legal and regulatory obligations.

1. UK GDPR & Data Protection Act 2018 

Under UK GDPR and the Data Protection Act 2018, accountants remain the data controller even if a third-party cloud provider processes or stores client information.
This means accountants must:

• Ensure lawful processing: Data collection and use must be fair, transparent, and necessary for the purpose.

• Choose compliant providers: Cloud systems must meet GDPR data-processing standards.

• Conduct Data Protection Impact Assessments (DPIAs): Especially when transferring sensitive or large volumes of personal data to cloud environments.

• Maintain data minimisation and accuracy: Only collect what’s needed and ensure client information remains correct.

• Ensure secure processing: Apply strong access controls, passwords, 2FA, and internal policies to avoid unauthorised access.

Even with cloud automation, ultimate responsibility for data security remains with the accountant.

2. ICO Expectations for Cloud Use 

The Information Commissioner’s Office (ICO) provides guidance on how businesses should use cloud services securely and legally. Accountants must:

• Assess the cloud provider: Check their security measures, certifications (e.g., ISO 27001), and history.

• Review provider contracts (DPAs): Ensure they clearly cover data processing, breach notifications, retention, and deletion policies.

• Understand international data transfers: If data is stored or accessed outside the UK, ensure it complies with UK transfer rules such as adequacy decisions or SCCs (Standard Contractual Clauses).

• Document decision-making: Keep records of why the provider was chosen and how it meets compliance requirements.

• Monitor ongoing compliance: Cloud providers must be reviewed periodically, not just once.

The ICO emphasises that organisations cannot outsource accountability only operations.

3. NCSC Cloud Security Principles 

The National Cyber Security Centre outlines 14 Cloud Security Principles that organisations should follow when adopting cloud solutions. For accountants, this means ensuring:

• Strong identity and access management: Use unique accounts, MFA, role-based access, and tight user permissions.

• Secure configuration: Disable unnecessary features, ensure default passwords are changed, and enforce strong security settings.

• Protecting data in storage and transit: Verify the cloud provider uses robust encryption and key management.

• Supply-chain security: Understand the provider’s subcontractors, infrastructure dependencies, and risk-management processes.

• Robust monitoring and logging: Maintain activity logs, track access, and enable alerts for suspicious actions.

• Incident response readiness: The provider should offer tools and procedures for responding to breaches quickly.

Accountants must configure these controls correctly and ensure staff follow secure usage practices.

Residual Risks of Cloud Accounting: What UK Accountants Must Watch Out

Even with the advanced security measures of leading cloud accounting platforms, risks still exist. Most incidents occur due to human error, misconfiguration, or external threats. Understanding these risks helps accountants mitigate them effectively.

1. Weak Passwords & Misconfigured Accounts

Despite strong encryption and secure servers, human error remains the leading cause of breaches. Common issues include:

• Shared logins: Multiple staff using the same account makes it impossible to track activity and increases risk.

• Poor password hygiene: Simple or reused passwords can be guessed or cracked.

• Disabled MFA: Multi-factor authentication adds a critical layer of protection; without it, accounts are vulnerable even if passwords are strong.

Mitigation: Implement strict password policies, enforce MFA, and provide regular staff training on account security.

2. International Data Transfers

Some cloud providers store data in servers outside the UK or EU, which can create compliance challenges under UK GDPR:

• Accountants must confirm the provider uses adequate safeguards such as Standard Contractual Clauses (SCCs) or other legal mechanisms for cross-border transfers.

• Awareness of where the data physically resides is crucial to avoid violations or penalties.

Mitigation: Always check the provider’s data residency, transfer mechanisms, and GDPR compliance statements before onboarding.

3. Insider Threats

Risks are not always external. Unauthorised access from staff either within the accounting firm or at the cloud provider can compromise sensitive data:

• Malicious intent or negligence can expose client information.

• Excessive permissions and lack of audit trails increase vulnerability.

Mitigation: Apply role-based access controls, regular audits, and monitor user activity to reduce insider threats.

4. Phishing & Credential Theft

Cybercriminals often bypass technical controls by targeting users directly:

• Phishing emails, fake login pages, and social engineering attacks can trick employees into giving away credentials.

• Once stolen, attackers can access cloud accounts even if the infrastructure itself is secure.

Mitigation: Train staff on identifying phishing attempts, enable MFA, and regularly test security awareness.

5. Supply-Chain Risks

Many firms integrate cloud accounting software with third-party tools such as payment processors, payroll apps, or CRM systems. Each connection adds potential risk:

• Vulnerabilities in third-party software can compromise accounting data.

• Poorly configured APIs or insecure integrations can be exploited by attackers.

Mitigation: Only use trusted integrations, monitor activity, and ensure third-party vendors comply with security standards.

How UK Accountants Can Use Cloud Accounting Securely

Cloud accounting offers efficiency, accessibility, and improved security for UK accounting firms. However, to fully benefit from these advantages, accountants must actively manage security and compliance responsibilities. Here’s a detailed guide on how to use cloud accounting safely.

1. Conduct Due Diligence on Providers

Before selecting a cloud accounting provider, it is essential to carefully assess their security standards. Accountants should check whether the provider holds recognized security certifications, such as ISO 27001 or SOC 2, which demonstrate adherence to best practices for data protection. Understanding where customer data is stored is also critical data kept within the UK or EU is generally easier to manage under GDPR. Reviewing audit reports, security whitepapers, and detailed documentation about the provider’s security practices helps accountants choose a platform that prioritizes data safety.

2. Review the Data Processing Agreement (DPA)

A robust Data Processing Agreement (DPA) is a legal requirement under GDPR. Accountants must ensure the DPA clearly defines data roles, outlines breach notification timelines, specifies international transfer safeguards, and details backup and exit procedures. This agreement confirms how the cloud provider will handle client data, respond to incidents, and allow secure extraction if the firm decides to switch platforms in the future. Reviewing the DPA thoroughly helps firms stay compliant and mitigate legal risks.

3. Enable Multi-Factor Authentication (MFA)

Multi-factor authentication is one of the most effective protections against compromised accounts. MFA requires users to provide additional verification, such as a one-time code from a mobile device, in addition to a password. Even if a password is stolen, attackers cannot gain access without the second factor. Enforcing MFA for all staff members significantly reduces the risk of unauthorised access to sensitive client data.

4. Apply Least-Privilege Access

Not all staff need full access to all accounting data. Implementing a least-privilege access policy ensures employees only see and interact with the data necessary for their roles. Limiting access reduces the risk of accidental or intentional data breaches and makes monitoring easier. Role-based permissions also help track activity and hold individuals accountable for actions taken within the system.

5. Audit Activity Logs Regularly

Monitoring activity within the cloud accounting platform is crucial for identifying suspicious behavior. Accountants should regularly review login patterns, data access logs, and changes to financial records. Early detection of unusual activity can prevent breaches or limit their impact, providing an additional layer of protection beyond the system’s built-in security measures.

6. Secure User Devices

Even the most secure cloud systems cannot protect data if end-user devices are vulnerable. All laptops, desktops, and mobile devices accessing cloud platforms should have up-to-date antivirus software, firewalls enabled, and the latest operating system and application updates installed. Device security complements platform security and ensures that sensitive financial information remains safe even if a device is lost or stolen.

7. Maintain Independent Backups

While cloud providers routinely back up data, keeping independent backups provides an extra safety net. Firms can export client data or maintain offline copies to ensure they can recover information in case of accidental deletion, provider failure, or ransomware attacks. Independent backups give accountants greater control and peace of mind regarding data availability.

8. Update Your Privacy Policy for Clients

Transparency with clients is both a legal requirement and a best practice. Accounting firms should update their privacy policies to clearly explain how client data is stored, processed, and protected within cloud systems. This not only ensures GDPR compliance but also strengthens client trust by demonstrating a commitment to data security.

Questions to Ask When Choosing Cloud Accounting Software

Before selecting a provider, accountants should ask:

• What security certifications do you hold?

• Where is customer data physically stored?

• Do you support MFA and role-based access?

• What is your breach notification policy?

• Can data be exported easily if we switch platforms?

• How do you handle backups and disaster recovery?

These questions help firms evaluate providers’ security posture and determine if they meet regulatory and operational requirements.

Conclusion

Yes. Cloud accounting software is often more secure than traditional in-house systems, provided firms take an active role in implementation and governance. Security depends on:

• Choosing reputable providers with strong certifications

• Enforcing robust access controls, including MFA

• Following GDPR, ICO, and NCSC guidelines

• Configuring and monitoring user access carefully

• Training staff on cyber hygiene and security best practices

When these measures are in place, cloud accounting not only enhances security but also boosts efficiency, reliability, and resilience, making it a superior option for modern UK accounting firms.

FAQs

1. Is cloud accounting safe from hackers?

Yes, leading cloud platforms use strong encryption, firewalls, and monitoring. Most breaches happen due to weak user passwords, not provider failures.

2. Can UK accountants store client data abroad?

Yes, as long as GDPR-compliant safeguards are in place and clients are informed.

3. Is cloud software safer than desktop accounting software?

In many cases, yes. Cloud systems are automatically updated, backed up, and monitored by security professionals.

4. What is the biggest security step accountants can take?

Enable multi-factor authentication (MFA) for every login. It blocks most unauthorised access attempts.

5. What if the cloud provider suffers an outage?

Leading providers have multiple data centres, meaning outages are rare and usually resolved quickly. Independent data exports add extra protection.