How to Handle Cybersecurity if You're a Small Accounting Firm
- Mike Andrewes
- Apr 28
- 5 min read
Updated: Apr 29
In this blog post, I want to talk directly to one of our main client types: small accounting firms. Companies that have between 1 and 40 employees. It's easy to think that cybersecurity is something for larger companies to focus on since small companies have less resources and other priorities to think about. Really though, it's more productive to focus on the data types in play when deciding how high of a priority cybersecurity and compliance need to be. In this post, we'll talk about some of the cybersecurity issues we've seen at small accounting firms and some of the strategies we've used to help these companies minimize cyber risk and maximize compliance.
Understanding the Challenges
Small accounting firms typically rely on various software systems to manage tasks such as payroll, tax preparation, and client accounts. We've seen some clients that use 20 to 30 separate types of software. While these tools might enhance efficiency, they can also introduce vulnerabilities if not properly monitored, because they increase your system surface area. Having a larger surface area increases the potential for risk.
Cybercriminals see small firms as easier targets, because they're less likely to pay attention to cybersecurity. According to a 2023 report by Verizon, 43% of cyberattacks were aimed at small companies. Understanding the data you handle and the tools you use to manage that data is crucial in tightening your security.
Navigating Compliance Requirements
The Gramm-Leach-Bliley Act (GLBA) mandates that financial institutions protect client information. As an accounting firm, this law pertains to you.
To comply with the GLBA, you must implement specific protective measures. This includes documenting how you store, share, and protect sensitive data. Failure to comply can lead to heavy fines and a severe loss of client trust. It’s essential to familiarize yourself with these regulations. This knowledge can guide your policies and ensure that your practices align with legal expectations.
IRS 4557 introduces guidelines for tax preparation firms because the IRS realizes how important it is to safeguard client data. This is smart of the IRS to do and their recommendations are actually good advice. We've helped clients implement these guidelines and it's helped them keep data secure and systems online.
Evaluating Cybersecurity in Software Products
Before selecting and introducing new software tools into your operations, it’s essential to assess their cybersecurity capabilities. Consider asking these questions:
Does it offer the cybersecurity features we need?
Are security updates issued regularly?
Have they been through SOC 2 or ISO 27001?
By exploring these questions, and seeking their input if clarification is needed, you arm yourself with the insight needed to safeguard your clients' sensitive information. After going through this process hundreds of times, you'd be shocked at some of our findings.
Assessing Your Partners’ Cybersecurity
Your cybersecurity is only as strong as your partnerships, if you're sharing data. Third-party vendors, like legal firms or bookkeeping partners can easily pose risks if their cybersecurity practices are lacking. What makes things even more challenging is that you might be working with incomplete or inaccurate information since you may not have access to the inner-workings of their systems and associated processes.
Before partnering, conduct a thorough review of their cybersecurity measures. Look into their data protection policies and how they respond to incidents. According to a recent survey, ~60% of data breaches in small businesses stem from third-party vendors, making it essential to evaluate their practices as part of your due diligence.
Conducting Annual Cyber Risk Assessments
Annual cyber risk assessments are a powerful way to identify potential weak points in your systems. These assessments help shed light on areas needing attention and improvement.
Utilize both internal experts and external consultants for a well-rounded view of your cybersecurity measures. Utilizing this dual approach can uncover vulnerabilities you might not notice on your own and can help you prioritize the enhancements needed based on the identified risks.
Enhancing Cybersecurity Controls and Documentation
Once vulnerabilities are identified, it's time to take action. Consider these essential enhancements:
Strengthening access controls: Limit who can access sensitive data and enforce strong authentication measures.
Updating security policies regularly: Ensure your documented policies stay current with best practices and compliance needs.
Focusing on resiliency: Keeping system configuration and data backups that are available when primary systems are impacted is the main way to bounce back from issues that are impacting your systems.
Ongoing security checks: Once you have the proper controls in place, it's important to make sure they're working as intended. This includes recurring log reviews so you know if and how you're being targeted, since new threats evolve daily.
Training your staff is vital: Regular sessions promote awareness and correct data handling procedures. This process sets a tone of accountability and commitment to maintaining a secure environment.
Unlocking the Full Potential of Existing Systems
Many accounting firms now use platforms like Microsoft 365 or Google Workspace. These systems have numerous cybersecurity features, but they have to be configured properly so you can get the most out of them.
You can maximize the potential by using multi-factor authentication, restricting sharing options for sensitive documents, and implementing data loss prevention measures. Perform regular reviews of your settings to ensure alignment with your firm’s security standards. Research shows that firms implementing multi-factor authentication reduce the risk of breaches by up to 90%. This is especially effective in lowering the odds of a phishing attack, which is the top way small accounting firms get targeted.
Should You Manage Cybersecurity Internally or Outsource?
A common dilemma arises for many firms: is it better to handle cybersecurity in-house or to outsource it?
Managing it internally provides more control but is dependent on your team's expertise and availability. Conversely, outsourcing can bring specialized knowledge to your firm and lighten your workload. The right choice depends on your firm's specific needs and capacity. Here's our prior blog post on this topic, if you'd like to compare options:
Moving Forward with Cybersecurity
Navigating cybersecurity can feel overwhelming for small accounting firms. The blend of regulatory compliance, software vulnerabilities, and third-party partnerships poses significant challenges. By conducting annual cyber risk assessments, enhancing your security controls and processes, and conducting regular security checks, you'll have a much better chance of staying secure and compliant.
Whether this information is new to you or you're well aware, we're here to help if you need to strengthen your cybersecurity and compliance. We have years of experience navigating these issues, are super easy to work with, and offer flexible terms because we truly want to see our clients thrive. For questions or to set up an intro call, feel free to contact us today using our website contact form or one of the other methods listed throughout this website.
