Is my financial data safe in the cloud? What small businesses should check
⏱ In about 7 minutes
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In this article
The short answer
Short answer
For most small businesses, a reputable cloud accounting provider is likely to be safer than a spreadsheet on one laptop. The ACSC says "for many small businesses, reputable cloud services provide stronger security than self-hosted systems." (ACSC)
The bigger risk is usually your login: a reused password or a phishing email. So pick a provider that publishes its security practices, then turn on MFA, use a password manager, and control who has access.
No provider is risk-free, and no software makes you "100% secure."
Why it matters
- Accounting software holds the keys to your business: bank details, client lists, payroll and tax records.
- Phishing is a common way in. The ACSC says phishing was recorded in 60% of the incidents reported to it in 2024–25. (ACSC Annual Cyber Threat Report 2024–25)
- It has happened to accounting users before. In 2015, Xero told customers that "a small number of customers have had their Xero accounts compromised" through phishing and malware, while stating that "our own Xero system has not been compromised in any way." (ARN, 26 Oct 2015) That's the pattern to protect against: stolen logins, not a hacked provider.
Fix it: step by step
Step 1: Check what the provider publishes about security (15 minutes)
Look for a public security page that covers:
- Independent certifications or audits, for example ISO 27001 or SOC 2 reports.
- Encryption of data in transit and at rest.
- MFA available for every user.
- A way to report phishing that uses their brand.
- Where your data is stored. Canada's Cyber Centre advises: "Know where a service provider's data centres are located. Different countries have different privacy laws and data protection requirements." (Canadian Centre for Cyber Security)
Example: Xero's security page says it is "certified as compliant with ISO/IEC ISO27001:2022", produces "SOC 2 reports based on independent audits", provides "encryption when it's transferred and stored", offers multi-factor authentication, and asks users to report suspected phishing by forwarding it to phishing@xero.com. (Xero security)
Step 3: Use a unique password from a password manager (15 minutes)
If your accounting password is used anywhere else, change it today. See why reused passwords are a problem.
Step 4: Give everyone their own login (10 minutes)
No shared logins, including for your accountant. See how to share access safely.
Step 5: Remove unused apps and integrations (10 minutes)
Check the connected-apps list in your accounting software and remove anything you no longer use.
Step 6: Keep your own export (10 minutes a quarter)
Export key reports and data periodically and store them securely. The ACSC notes that "regular backups allow businesses to recover personal data if it is lost, damaged or encrypted by ransomware." (ACSC)
Step 7: Treat "your accounting account" emails with suspicion (ongoing)
Log in by typing the address yourself, not via the email link. See what to do if you clicked a phishing link.
Quick pick
Quick pick (product details from official vendor pages, checked 18 Oct 2026. Not hands-on tested. No ratings. We have not audited any provider's security.)
- Accounting software with a detailed public security page: Xero. ISO 27001 certification, SOC 2 reports, encryption in transit and at rest, MFA, and a phishing-report address. → See our accounting guide
- To protect the login itself: a business password manager. 1Password and Proton Pass both offer business plans with free trials. See our password manager comparison for verified plan details.
What we'd avoid: honest limits
Free: the Small Business Password & Access Checklist
A 1–2 page checklist that turns this article into a to-do list: which accounts to protect first, how to set up shared access, and what to do when someone joins or leaves.
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Frequently asked questions
Is cloud accounting safer than desktop software?
Often, for small businesses: the ACSC says reputable cloud services "provide stronger security than self-hosted systems" for many small businesses. It depends on the provider and on how you protect your logins.
What happens if my provider is hacked?
Check its terms. Xero's data processing terms, for example, say it will inform customers "without undue delay" of a security incident affecting personal data. (Xero data processing terms)
Should I still keep my own backups?
Yes. A periodic export means you're never fully dependent on one login or one provider.
I got an email saying my accounting account is locked. Is it real?
Possibly not. Don't click the link; log in directly, and report it to the provider. Xero, for example, asks for phishing emails to be forwarded to phishing@xero.com.
Related guides
- Accounting: our hub
- My accountant wants access to my accounting software
- I want to turn on two-factor authentication
- Best password manager for small business
Sources
Government bodies first. All links checked and loading on 18 Oct 2026.
- Australian Cyber Security Centre: Protecting devices, systems and networks · Protecting business and customer data · Annual Cyber Threat Report 2024–25
- Canadian Centre for Cyber Security: Top measures to enhance cyber security for small and medium organizations
- Vendor pages (checked 18 Oct 2026): Xero security · Xero data processing terms
- News: ARN, "Xero suffers security breach" (26 Oct 2015)
About our review process
We pick products from official information and say clearly when we haven't tested something hands-on. Commissions may influence which products we choose to cover, but not our assessment of them. See how we work.