May 11, 2018 en_US Many firms find a huge payoff by moving from a paper-based system to cloud computing. Learn how the cloud can increase data security, and help you gain tremendous efficiencies. Data Security: Why Your Business is Safer With Cloud Software Than Your Paper Process

Data Security: Why Your Business is Safer With Cloud Software Than Your Paper Process

By Ken Boyd May 11, 2018

Managing your day-to-day company operations can be hectic, and changing how you do business sounds overwhelming.

Many small businesses find it pays off to move from a paper-based system to cloud computing. Using the cloud provides a much higher level of data security, and tremendous gains in efficiencies.

As your small business grows you need to process more transactions, secure your business data, access databases, and increase storage. Using the cloud means you can eliminate nearly all paper files.

Why Payroll Systems Are Complicated

Payroll data may be your most sensitive information.

Payroll systems are complicated, because each worker’s information is different, and your employee’s salary, hours, and personal deductions may change during the year.

If your payroll records are lost or stolen, you may face regulatory issues, along with angry employees. Securing this data is critical for any company.

Assume, for example, Jenn owns Riverside Furniture Outlets, a retailer with five stores and a warehouse across three different states. Jenn has dozens of employees who place orders, move products in and out of the warehouse, and sell furniture in her retail locations.

These employees are paid differently, and may be subject to different payroll deductions depending on which state they live in.

These are the steps Jenny must perform to process payroll using a paper-based system:

  • Data collection and storage: When an employee is hired, Riverside’s accountant must collect sensitive personal data from each worker, such as their Social Security number. The accountant must document each employee’s pay rate and collect information on federal and state tax withholdings. Because Riverside’s business is growing, new payroll data is generated every month, and employees make changes to their payroll information periodically.
  • Calculation of net pay: Each payroll period, the accountant uses a worker’s gross wages and subtracts their tax liability, benefits withholdings, and other deductions to calculate the net pay for each employee. The majority of Riverside’s workers are paid an hourly rate so the accountant must collect timecards from each worker.
  • Check and direct deposit payments: Once net pay is calculated, Riverside must generate physical checks or transmit payroll dollars by direct deposit.
  • Tax reporting: Every month and year, businesses must report gross wages and tax withholdings to federal, state, and possibly local government entities. At year-end, companies are responsible for generating W-2 forms for employees and 1099 documents for contract workers.

Each of these steps must be performed for each worker, and the information must be used correctly and stored securely.

This paper-based record keeping system is not only inefficient for Jenn’s fast growing company, it adds unnecessary cost in staff, storage, and security.

Avoiding Serious Payroll Problems

Paper-based payroll requires more time and increases the risk of error or theft.

Consider these potential problems:

  • Loss of sensitive data: Your business must use Social Security numbers, salary levels, and hourly pay rates to process payroll. If you keep physical files in your office, they can be stolen. Keeping data on a company server is better, but using offsite data centers in the cloud exponentially increases security.
  • Gathering records to run payroll: If you use a paper spreadsheet to calculate payroll, you may have to manually compare all of the spreadsheet data to your files before processing. This slows down your operation and increases the risk of error. Instead, consider using a payroll service and accounting software that can verify all of the data automatically.
  • Computing net pay: Using a spreadsheet to calculate net pay creates the risk of miscalculating a formula. In addition, you may misplace the correct spreadsheet file or lose the spreadsheet due to a computer crash. Keeping hard copy files also risks theft. A full service payroll company will make the calculations for you.
  • Generating checks and direct deposits: Using a manual process increases the risk that you write a physical check for the wrong amount or worse, submit a direct deposit to an incorrect bank account The more checks you write, the more checks you must deal throughout your bank reconciliation process. Encourage your workforce to use direct deposit, and use a payroll service to generate checks and direct deposits for you.
  • Tax reporting: Many businesses that use a paper-based payroll system struggle to file tax reports on time. If you’re using a spreadsheet to calculate and report federal tax withholdings, you’ll spend more time and increase the risk of error. There are fines and penalties for filing late, so take action to automate the process.

For greater data security, use a service like QuickBooks payroll software to automate your payroll process, guarantee accuracy, and follow the most up-to-date information security protocols.

Why Competitors Want Your Customer Data

If your biggest competitor stole all of your customer contacts and details on purchases made within the last year, what do you think would happen?

This is another reason why securing your sensitive data is so important.

Say, for example, that Riverside Furniture’s crosstown rival Don’s Home Furnishing finds out how much Riverside was paying for a popular kitchen table.

Don’s might approach the table vendor and offer to buy all of their production at a higher price. This would cause Riverside an inventory shortage, leaving them unable to satisfy their customers.

Don’s Home Furnishings then sits on the product, creating greater demand, while selling their similar table at a discounted rate.

Do More Work in Less Time

In addition to increased data security, the cloud empowers you to do more work in less time.

Here are some examples of how the cloud accelerates your productivity:

  • E-signature: Assume that Riverside has contracts with 20 businesses to supply office furniture, and Jenny wants to add 50 more business contracts. By using e-signature technology through the cloud, Riverside can save time by gathering signatures electronically and maintain data security.
  • Invoicing: By automating the invoicing system, you reduce the chance of manual errors by collecting customer information and product prices over the web. You can increase sales and maintain accuracy with your invoices.
  • Disaster recovery: If you experience flooding, a fire, or a tornado, your on-site servers and paper files may be damaged or destroyed. Even if you maintain backup servers in the same city, a natural disaster may also damage your backups. Cloud computing eliminates the impact of a natural disaster and gets your business back up and running faster.

Any routine operation you perform can be completed faster and more securely using cloud computing.

Make The Smart Investment In Your Future

Change is difficult.

However, the payoff for moving to the cloud is increased data security, greater efficiency and more reliability for you, your customers, and your employees.

Operate your business with confidence knowing you’ve made a smart investment in your long term success.

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Ken Boyd is a co-founder of and owns St. Louis Test Preparation ( He provides blogs, videos, and speaking services on accounting and finance. Ken is the author of four Dummies books, including "Cost Accounting for Dummies." Read more