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Is your CPA firm seeking to offer a remote work environment, eliminate the need for on-site data centers, or scale up? Cloud-based solutions can make these positive changes happen. Indeed, cloud computing has changed how accounting businesses operate, approach staffing strategies, and serve clients.
In this fast-paced and competitive sector, it is essential for owners and partners to explore the potential benefits of incorporating cloud-based technology into their overall operational infrastructure. Neglecting to do so could result in losing a competitive advantage.
That's because, according to a recent industry survey, 65% of survey respondents said they are utilizing an external cloud provider. Further underscoring their findings, the CPA Firm Management Association determined that the shift to the cloud continues to grow. Another research study revealed that upwards of 80% of all enterprises are developing or already implementing a multi-cloud strategy.
With the advantages of increased productivity, remote work capabilities, and cost savings in mind, it is unsurprising that the adoption of cloud technology is becoming more prevalent. Despite these benefits, accounting firm executives may consider certain factors and questions when transitioning to the cloud.
To help firms navigate the transition, this blog will explore the great opportunities the cloud presents and the factors firm partners should consider.
Accounting firm partners hold the keys to valuable client data, prioritizing data security. Firms have a fiduciary duty to protect client information. Consequently, any breach could damage their reputation, receive financial penalties, or even suffer legal consequences for non-compliance. Partners and owners must recognize the importance of safeguarding data and take precautions to avoid potential risks.
According to Randy Johnston of K2 Enterprises, the recent FTC Safeguards Rule imposes stiff penalties for firms not meeting defined data security standards. "First, it's up to $100,000 or imprisonment for each violation. And beyond that, the officers, partners, or directors are each personally liable for $10,000 for each violation." This rule applies even to small firms because "if you do any tax work, you're classified as a financial institution under Gramm-Leach-Bliley, which is why you have to comply."
Johnston further observed that CPA firms, as data-rich targets, are experiencing an uptick in cyberattacks. He noted, "We are noticing far more aggressive security attacks. We think AI enables these, and the bad actors can create far greater effectiveness in phishing and other attacks like that." Johnston admits that in 2024, he's "actually had to deal with more firms that have had security breaches than in any other past year."
Given this threat landscape, combined with the repercussions of breaches and non-compliance, it makes sense that many accounting firms in the aforementioned surveys cited cybersecurity risks as their preeminent challenge.
Moving data to and from one location to another can pose security risks. For example, it might come as a surprise that some of the biggest application solution providers in the industry, like CCH—Wolters Kluwer and Thomson Reuters, don’t have a solution for the separation of data required to comply with FTC Safeguards regarding offshore employees accessing client data overseas. Therefore, when it comes to cloud migrations, it is imperative that cloud-hosted data and apps adhere to proper security protocols.
Such security measures involve strictly enforcing password policies, using multi-factor authentication (MFA) tools on all devices connected to a firm's local network (even cell phones), and setting access controls to grant only the minimum level required for employees to perform their jobs. Failing to implement security protocols like these can quickly spell trouble.
CPA agencies need to ensure that they are working in a safe cloud setting and utilizing solutions that comply with cloud security protocols. Have policies and plans to address potential shortcomings from providers when that isn't possible.
Partners can better protect firm and client data by implementing a security policy. Because some of the aforementioned providers might not always be able to address gaps in compliance for international employees, it's crucial that CPA agencies themselves write specific policies to ensure that these aren't overlooked. A good security policy would create firm-wide standards that include overseas workers, holding everyone to set standards for encrypting data at rest and in transit, using the least privilege, and more.
Educating employees about the constantly evolving threats that CPA firms face is a cornerstone of any robust security policy. Everyone, from partners to employees, must understand the importance of following security procedures and be aware of how to avoid falling prey to AI-enabled phishing and other novel schemes used by cybercriminals. Furthermore, ensure that all security policies and best practices are regularly updated and scaled as necessary.
The best way to move and store data securely is to turn to a reputable cloud-based Managed Service Provider (MSP) that specializes in data security and accounting-specific application hosting. A trusted MSP can oversee and perform the required steps for a cloud migration.
Reputable providers will already employ industry best practices for cybersecurity when migrating and storing data in the cloud, including robust policies that lock down data for offshore employees to prevent its unauthorized exfiltration. They should also be employing Endpoint Detection and Response (EDR) solutions paired with Managed Detection and Response (MDR) capabilities to maximize data protection by minimizing the response time to a potential threat. MSPS can also help audit a firm's technological infrastructure to implement security parameters designed to protect sensitive data and make secure cloud solutions available across the business to keep it that way.
Firm partners will also likely seek to leverage third-party APIs to integrate accounting processes seamlessly. Whether through an MSP or independently, it is critical to ensure that third-party solutions come from a trusted source. This is done most safely through service providers, who can protect your firm’s data from intrusions with endpoint and managed security, virus protection, and encryption.
Utilizing the cloud can improve operational efficiency, opening up new strategic growth possibilities. This is useful for businesses aiming to stay competitive and enhance profitability.
For example, by implementing cloud-based tools for auditing, companies can utilize cutting-edge technologies such as analytics and artificial intelligence (AI) solutions to offer clients more thorough analysis and improved audit quality while reducing risk.
Thus, the cloud quickly proves a 'must-have' for external auditors. Advanced tools like these mean the cloud has the potential to dramatically transform external auditing processes. The transformation is well underway as the use of cloud-based solutions increasingly reshapes the audit landscape.
Simultaneously, an increasing number of accounting agencies are reemphasizing more proactive, strategic consulting services due to rising client needs and the standardization of compliance-based services. The cloud can facilitate the provision of such services.
Leveraging the cloud and automation tools is becoming the norm, enabling firms to avoid mundane, time-consuming tasks like data entry. This means that the accounting team can devote more time to concentrate on services with higher value and higher profit margins, such as client-facing consulting and good, old-fashioned relationship building.
A significant hurdle that decision-makers like partners might encounter when transitioning to the cloud is an absence of integration and standardization when it's crucial to fully leverage the advantages of cloud technology to propel potential growth prospects for their company.
Tech solutions lacking strong integration features can lead to considerable inefficiencies in the company and heighten the possibility of mistakes. Cloud-based solutions, along with any hosted third-party applications, need to possess the capacity to interact with each other to guarantee a smooth data transfer and drive automation.
Cultural inertia can pose a hurdle for companies. Certain accountants, particularly those with more experience, might hesitate to alter their work methods and client service approach. For example, saying goodbye to spreadsheets or even paper-driven processes might not be a welcome shift for some team members.
The issue is that the absence of uniform processes within the company results in considerable inefficiencies and obstructs the company's capacity to reap the advantages of the cloud.
When searching for cloud-based options that will suit the firm's desire for growth, start by contemplating any inefficiencies that hinder that growth or current productivity. What are the issues within your firm that you're hoping to be resolved? Unfortunately, choosing the wrong cloud-based tools is unlikely to make those problems magically disappear.
Make sure that the systems you choose will possess integration capabilities out of the box, enable automation, prevent data silos, and reduce the chance of human error. Asking for a live demonstration of the product can be an excellent method to comprehend how the solution functions and gain a deeper understanding of its integration potential.
A firm should also decide whether to seek cloud services under a controlled growth model or a predictable cost model.
A controlled growth model typically offers flexibility in scaling resources according to demand, ideal for firms experiencing variable workloads or seasonal peaks. Pay-as-you-go pricing under this model ensures cost efficiency, as you only pay for resources when they're actively used, potentially saving money during quieter periods.
Conversely, a predictable cost model provides stability in budgeting with fixed pricing plans, allowing firms to forecast expenses reliably regardless of usage fluctuations. This model suits firms seeking financial predictability and consistency but may entail higher costs if resource limits are exceeded during busy periods. To decide between the two, assess your firm's historical usage patterns, budgeting preferences, and the importance of scalability versus cost stability in effectively meeting your operational and financial objectives.
In the context of change management—overseeing this shift in operational structure as it impacts the individuals involved—open dialogue is crucial. Ensure that employees fully comprehend why the company is moving to the cloud and how this transition will enhance their job performance. When employees feel included in the discussion and grasp the rationale behind the change, their apprehension toward change diminishes. This approach fosters employee involvement and alleviates any potential worries they might harbor.
Today’s clients want and expect more. As a partner, it is important to ensure staff have the proper tools and resources to meet these rising expectations.
Migrating to cloud-based technology can help accounting and audit firms build stronger client relationships. For instance:
By improving operational efficiencies and delivering higher-value services, accounting and audit firms can strengthen client relationships and sharpen their competitive edge in an increasingly competitive business environment.
Standardizing your firm's tech stack is critical. It is important to stress the importance of standardization before moving to the cloud and expanding.
The cloud revolution isn’t coming. It's already here. However, successfully migrating to the cloud involves understanding the immense opportunities while knowing how to address any challenges.
Firm partners should consider some factors before making the move. Do we have proper security practices in place? Does the cloud solution have integration capabilities? Is there standardization? Do employees understand why our firm is moving to the cloud?
If you answered "no" to any of these questions, remember that seeking out a reputable Managed Service Provider (MSP) can help turn it into a "yes" for your firm. Cetrom is a trusted, industry-leading cloud service provider and MSP specializing in cloud accounting solutions. Cetrom Connect is how we ensure your firm will remain compliant while eliminating onsite servers as you lead your firm toward a cloud revolution. Contact us today to see how we can make your cloud migration seamless, secure, and optimized.
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