Virtual Data Rooms: Everything your accounting firm needs to know
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Whilst standard file-sharing services like Dropbox may be low-cost and ideal for personal use, they have limitations that make them inappropriate for a business setting. Instead, virtual data rooms are a popular choice for businesses in all industries, including accountants that prioritise security and control.
What is a virtual data room?
Accounting firms use virtual data rooms (often shortened to VDR) to share and store sensitive documents with clients, employees and business partners, from within a private and controlled cloud environment.
Accountants and financial controllers should look to understand the key elements of a virtual data room to decide if it could be the better option over standard file sharing and storage tools.
Virtual data rooms are designed for business use (from start-ups to enterprises) and so the features available to accounting firms are a reflection of that.
Included in data rooms are features such as live file previews, restricted file sharing and file versioning. However, they also offer additional security features that standard file sharing solutions don’t provide.
More features you’ll find in a virtual data room include:
- Identity management controlled content access – to control user access for files and folders. Decide who can view, download, edit and delete information.
- Activity streams – to get updates of clients and employee activity in real time, with content following and email notifications.
- Document management – file versioning, locking, approvals, commenting, live previews and file/folder access control.
- Audit trails – to have a backlog of users who have logged in and out of your virtual data room, and who has uploaded, downloaded and deleted files.
Virtual data rooms offer bank-grade security as a minimum to ensure your data is safe.
However, the aim of a data room is to provide your business with a heightened level of security that goes beyond your standard file sharing solutions. This is achieved with a combination of additional security measures and increased control for your accounting firm:
- TSL - transport security layer, works with SSL to encrypt your data in transit.
- IP restrictions, API access and custom terms of service.
- Complex passwords – to require users to include digits, special characters, or a combination of both in the password of their virtual data room account.
- Two-factor authentication – using something the user knows (e.g. a password) and something the user has (e.g. a smartphone).
- Private cloud solutions.
Accountants typically use virtual data rooms for sharing a variety of sensitive financial and client information, including payroll, tax, profit and loss accounts, invoices, contracts and agreements, statements and reports.
Sensitive documents shouldn’t be shared through email attachments, Google Drive, Dropbox or any other tool that isn’t specially designed to protect your information from hackers and malware.
Virtual data rooms allow its members to be informed, through email and the data room dashboard, of any changes made to files that they are following. This helps accountants with tracking how and when their files are being accessed and used.
As an accountant, you’re in control
Despite data rooms being run by a third-party cloud vendor, accounting firms can still stay firmly in control of their data.
For instance, access can be limited for individual users on a file-by-file basis; valuable information can be collected on user activity and file updates; customisation can be added to meet branding requirements, and more.
So, it’s clear that virtual data rooms are for businesses (like accounting firms) that regularly share sensitive files with clients, employees and business partners.
Clinked offers a free 10-day trial and demos for accounting firms needing a more secure and efficient way of working with clients and business partners. You can find out more here.