CFOs constantly face the challenge of juggling many regulatory changes, as part of the bigger financial puzzle. This is one of the many reasons Cloud adoption has increased among medium to large-sized businesses.
One such regulation is Making Tax Digital, which requires businesses to use digital tax submission software. And there’s also the UK SOX legislation, which will impact the controls companies have in place around auditing and reporting. With so many legislative changes occurring all the time, it’s no wonder finance teams are struggling to remain compliant (especially if they are using outdated legacy systems).
Many software providers understand this struggle and have upgraded their Cloud accounting capabilities to provide greater compliance and security. Going forward, as new laws continue to emerge, these providers will be crucial in the pursuit of robust financial compliance.
The importance of financial governance and compliance cannot be overlooked, so let’s explore how Cloud technology addresses regulatory concerns while offering long-term benefits across the board.
The importance of robust financial compliance
A significant KPI in the finance function should be related to compliance management. CFOs must ensure they have proper compliance checks in place for the following reasons:
- To ensure the standards set by regulators in the UK are adhered to and requirements are up to date.
- To avoid heavy fines imposed by regulators for non-compliance, which may, in some cases, lead to business closure.
- To preserve the reputation of the business and prevent costs associated with losing trust from valued customers.
Common challenges for compliance within Cloud technology
Today, Cloud technology has become an integral part of business operations across all industries. But it’s not without its challenges. Take, for example, apps that run in the Cloud. Applications are being launched daily with new codes. Without proper monitoring, they may negatively impact compliance posture.
Compliance programs set a baseline for control, but these are based on common threat vectors. Compliance standards may recommend strong passwords to protect system access, but they may not consider attackers using phishing to grab credential information or bypass password controls entirely.
The theft of Cloud-based data has influenced the development of better Cloud security practices and the rise of automatable controls.
This is, however, a reactive approach, which does not offer solutions for unknown or future threats. Cloud microservices present a greater challenge because they not only need to meet compliance standards, but they must also be closely monitored for security and compliance posture management.
Some of the top challenges relating to compliance in the Cloud include:
- Data security – Simply using Cloud technology doesn’t guarantee your data will be secure. This is why you should choose Cloud-based software that prioritises your data security. After all, financial data is some of the most sensitive information your business possesses.
- Lack of expertise – You will also need to ensure adequate protocols and best practices are in place. All employees should be given training that allows them to uphold these. Otherwise, individuals could end up compromising your compliance.
- Malicious actors – There’s the possibility there could be employees internally who carry out fraudulent, malicious, or incompetent actions within the Cloud system. Therefore, it’s crucial that levels of accessibility are enforced appropriately when any system is used.
- Integration with other systems – Although a Cloud-based accounting system may be achieving the desired outcomes, it could be other integrated systems that are scuppering compliance (when data is being sent back and forth). It may be beneficial to use one provider/solution for all activities, or at least ensure all software being used is up to scratch.
- Lack of transparency – Sometimes there can be minimal visibility around where certain data sits, which regulations are on the horizon, and who is responsible for upholding particular responsibilities. Any ambiguity with these aspects can easily lead to non-compliance.
- Stagnation/complacence – Finance teams may become complacent. This can happen if best practices aren’t regularly revisited, training isn’t an ongoing process, or new legislation isn’t continuously monitored. Some Cloud systems can of course keep you on top of compliance to a large degree. But having an over-reliant mindset can lead to stagnant internal protocols.
How can Cloud technology overcome compliance issues?
To address these potential risks, we must first understand how compliance monitoring and auditing programs can be set up and monitored securely.
In terms of compliance, Cloud technology provides the best solution to businesses by ensuring key elements such as logging, data control, and classification, as well as redundancy and maintenance, are met.
Cloud computing offers an easy way to implement this key security principle of compliance. Since Cloud software providers often maintain multiple data centres around the world, they can replicate workloads to aid in data recovery (should an entire data centre become damaged or destroyed by a natural disaster).
Data log retention
Data compliance can be achieved with a scaled approach and attention to detail. It's not just about tracking data, it's about keeping track of the right data. Reliable Cloud software providers help ensure that every detail is recorded. Log retention requirements contain the length of time data must be stored for according to the regulations. Cloud services facilitate this by providing easy access to storage, native support for aging data, and low-cost, long-term storage options.
To prevent customer-facing online banking systems from accessing information on their back-end systems, banks must classify data before controlling access. Today, Cloud software providers offer services that automate tagging and data classification, making it easier to identify data and understand its location and access details. In addition, finding misclassified or unlabelled sensitive information has become easier with new tools and capabilities that are built into the Cloud platform to ensure user convenience.
Maintaining network and application visibility is crucial for automating redeployments and avoiding security breaches. These processes can be automated in the Cloud, making updating and implementing applications and deployments easier (which reduces the risk of an out-of-date network).
Benefits of adopting Cloud technology for wider compliance
Businesses must follow regulations to manage day-to-day operations, which is why a growing number of medium to large-sized businesses have migrated their financial functions to the Cloud. By using robust Cloud accounting software, compliance with regulatory requirements is no longer a manual chore for finance teams.
Complying with government regulations is also enhanced by the Cloud's high availability and scalability of resources, which also leads to improved financial cybersecurity.
Many finance functions have already embraced the Cloud for its ability to make operations faster, more scalable, and more flexible (as well as its robust security). This level of agility also facilitates the rapid deployment of new applications, which is key to driving innovation.
Enhanced security through automated systems
Financial data kept by businesses is the most valuable and sought-after by cyber criminals. Therefore, faster deployment release cycles and automated deployments are some of the key factors attracting finance functions to Cloud adoption. As soon as a breach occurs, a patch can be quickly implemented across the automated fleet.
The Cloud provides multi-layered security to guard against network attacks such as distributed denial of service (DDoS). It also facilitates network segmentation, enabling businesses to achieve more prescriptive network design, limiting exposure, and reducing the risk of a breach.
Agile software updates
Implementing automated deployments means the finance function can release updates and new software faster compared to outdated accounting software. This seamless software update process enables businesses to quickly respond to customers' needs alongside resolving issues with systems.
Ability to scale
Using the Cloud, finance functions can easily scale their network infrastructure up and down accordingly to meet business demand. This is thanks to the physical infrastructure being operated and maintained by Cloud software providers.
How Advanced Financials can help you improve compliance
Cloud accounting software provides finance teams with a real opportunity to simplify controls, streamline reporting, and scale securely. This is all while staying on top of new compliance standards and regulations.
There may be a variety of reasons why some businesses might hesitate to make the move to the Cloud. But the advantages of improved accountability, enhanced security, and operational standardisation play a significant role in improving wider governance and compliance.
Managing this is a key part of your operation, but it isn't something you should fear. Our Cloud-based accounting software, Advanced Financials, adheres to UK compliance and legislation guidelines. It is regularly updated with the latest financial legislation, incorporating aspects of Making Tax Digital, UK SOX, and much more, which ultimately makes life easier for your finance team.