Security aspects of outsourced bookkeeping

How can you trust a remote bookkeeper?

You know outsourced bookkeeping saves you money. However, what about security and privacy? There are many risks associated with online bookkeeping. How can you mitigate these risks? How can you trust someone who is remote, whom you have not seen and barely know? Of course, it’s a valid concern! Key is to pick a reputed bookkeeping company. How do you do that?

Pick a reputed bookkeeping company

Choose a company that has been around for many years and has an A+ rating from a trustworthy source like the BBB bureau. It’s important that the company you are doing business with is incorporated in the USA so that you are dealing with US laws and regulations.  And, a company that is security and privacy verified by an independent agency and one has a stringent security and privacy policy.

Strict security protocols

When outsourcing bookkeeping, a reputable company will typically have robust security protocols in place to protect the confidentiality of your business data. These protocols may include measures such as:

• Using encrypted communication channels: This helps to protect data in transit, ensuring that sensitive information cannot be intercepted or accessed by unauthorized parties.
• Implementing strong password policies: Passwords are often the first line of defense against unauthorized access, and a good outsourcing company will require employees to use strong, unique passwords and change them regularly.
• Conducting regular security audits: Regular security audits can help to identify and address potential vulnerabilities in the outsourcing company’s systems and processes.

Once you’ve chosen the right company then the concern shifts to the use of remote or even offshore resources. Paradoxically, the use of an offshore resource for bookkeeping from a trustworthy company can be more secure than the use of on-site bookkeepers. There are primarily two factors in play here – physical separation that’s often 1000’s of miles and separation of duties.

Limited access to bank web sites

Offshore resources based in India cannot easily do funny stuff. If you have only given access to your bank and credit card web sites in read only mode, there’s not really much they can do. Almost all banks require you to be in person to execute international wires. Compare that with an on-site bookkeeper who has the keys to the kingdom. They have access to your physical office and your checkbooks. The first thing a bank does when they suspect unusual activity is to send you a notice to the address on record. An on-site bookkeeper can very easily intercept that notice and ensure you do not see the notice. An off-site bookkeeper has no access to such notices at all. Even better, an offshore bookkeeper is far removed from these notices.

Separation of Duties

One significant advantage of outsourcing bookkeeping is that it can help to eliminate the risk of internal fraud. When bookkeeping is done in-house, there is always the possibility of collusion between staff members, leading to financial losses for the business. In contrast, outsourced bookkeeping companies typically have a separation of duties, which means that different tasks are assigned to different individuals to minimize the risk of fraud.

For example, one employee may be responsible for entering financial transactions into the accounting system, while another employee may be responsible for reconciling accounts and preparing financial reports. This separation of duties ensures that no single employee has complete control over the bookkeeping process, reducing the risk of fraud.

Cash Reconciliations

Most fraud happens because team members collude. With an offshore bookkeeper, given the distance and cultural limitations, the chances of collusion are next to nil. This is one reason why established offshore bookkeeping companies are sought after to reconcile cash and merchant services balances on a nightly basis for retail, fast food and other establishments. The offshore bookkeeper can also check to see if the cash from the register made it to the bank that day. When cash is handled in-house, there is always the possibility of collusion between staff members responsible for handling the cash and those responsible for recording the transactions in the books. This can lead to discrepancies between the cash on hand and the cash recorded in the books, making it difficult to identify and prevent fraudulent activities.

In contrast, when outsourcing bookkeeping, the outsourced staff responsible for recording transactions and reconciling accounts can do so independently of the onsite staff responsible for handling the cash. This ensures that the books accurately reflect the actual cash transactions and balances, without the risk of collusion or manipulation.

By doing daily cash reconciliations, any discrepancies or anomalies can be identified and addressed promptly, reducing the risk of financial loss for the business. This can also provide valuable insights into the business’s cash flow and financial performance, allowing for more informed decision-making.

In summary, contrary to what most people think, offsite and offshore bookkeeping from a well-established and trustworthy company is very secure. In fact, we have been in business for 17+ years and never had a breach.