The Importance of Data Security for Small Businesses

The Importance of Data Security for Small Businesses

The Importance of Data Security for Small Businesses


Small businesses are growing more vulnerable to cyber threats and data breaches. They have become a prime target for hackers. Cyber criminals focus on these types of businesses because they often lack resources that their larger counterparts have. The consequences of a data breach can be devastating. Often leading to financial losses, damaged reputations, and even business closures. Small businesses must prioritize data security to safeguard their assets. Understanding what data security is, and following simple steps can help protect your small business from a data breach.

What is data security?

Data security refers to the protection of digital data from unauthorized access, corruption, or theft. It consists of three core elements: confidentiality, integrity, and availability. Data security involves implementing an array of techniques, technologies, policies, and procedures. This process is designed to safeguard data from potential threats and vulnerabilities. Data security seeks to mitigate risks associated with unauthorized access, data breaches, cyber-attacks, and other potential threats to sensitive information. It is essential for protecting the three core elements, ultimately, safeguarding businesses and their clientele.

Protecting your data

Small businesses have many options to be proactive and safeguard their data. This helps to significantly enhance their data security. By implementing a combination of these steps, businesses can protect their data against cyber threats and data breaches.

  • Implement Strong Access Controls: Establishing strong authentication methods, with role-based access controls helps to reinforce data security. This allows businesses to regulate access to sensitive data. Ultimately, ensuring that only authorized personnel can view or manipulate it.
  • Educate Employees: Investing in ongoing employee training programs on cybersecurity is essential in safeguarding your data. Employees play a crucial role in maintaining data security. Therefore, it is imperative that they understand the importance of strong passwords, recognizing phishing attempts, and following security policies and procedures. Prioritizing employee training can help reduce the likelihood of security breaches and enhance overall data security.
  • Encrypt Data: Businesses should utilize encryption techniques to protect data both at rest and in transit. By encrypting data, if an unauthorized user gains access to it, they will not be able to decipher it without the decryption key. Developing proper procedures for sensitive data through encryption helps to prevent unauthorized access to confidential information.
  • Backup Data Regularly: Regular data backups are essential for mitigating the impact of data loss due to a cyberattack. Businesses should have automated backup processes in place to create copies of critical data. Backups should be stored securely in cloud storage or somewhere offsite.

Data security is paramount for small businesses due to the number of risks and threats they face every day. Implementing data security measures helps to reduce the risk of a successful cyberattack. As a small business, we truly understand the importance of data security and the pain points you may be facing.


Contributed by Elizabeth Partlow

How Improved Long-Term Planning Can Unlock Huge Opportunities for Small GovCons

How Improved Long-Term Planning Can Unlock Huge Opportunities for Small GovCons

How Improved Long-Term Planning Can Unlock Huge Opportunities for Small GovCons

Improving long-term planning is crucial for Small GovCons to capitalize on the opportunities offered by government contracts. By implementing effective long-term planning strategies, these firms can enhance their competitiveness and position themselves to succeed in the GovCon market. 

Steps That Can Help Overcome SMB Planning Challenges

1. Understand the GovCon Landscape: Gain a comprehensive understanding of the government contracting market, including the agencies, procurement processes, and upcoming opportunities. This will help identify potential projects and partnerships that align with the company’s capabilities and long-term goals.

2. Set Clear Long-Term Objectives: Define specific, measurable, achievable, relevant, and time-bound (SMART) long-term objectives. These objectives should align with the company’s mission and vision and provide a clear direction for growth and development.

3. Perform Market Research: Conduct thorough market research to identify trends, potential competitors, and upcoming government initiatives. Understanding the market dynamics will help identify gaps and opportunities for the small GovCon to leverage.

4. Develop a Long-Term Business Plan: Create a comprehensive long-term business plan that outlines the company’s strategy, market positioning, growth projections, and resource allocation. The plan should include risk assessments and mitigation strategies.

5. Diversify Revenue Streams: Overreliance on a single contract or customer can be risky. Small GovCons should strive to diversify their revenue streams by pursuing contracts with multiple government agencies or expanding into other markets.

6. Invest in Talent Development: Ensure that the company’s workforce possesses the skills and expertise required to meet the demands of long-term projects. Training and professional development initiatives can help attract and retain top talent.

7. Build Strong Relationships: Cultivate strong relationships with existing and potential government clients, industry partners, and other stakeholders. Networking and collaborative efforts can lead to new opportunities and contracts.

8. Stay Compliant: Adhere to all government regulations and compliance requirements. Failure to comply with these standards can lead to penalties and may jeopardize future contracts.

9. Continuous Performance Evaluation: Regularly assess the company’s performance against the long-term objectives outlined in the business plan. Analyze successes and failures, and use the insights to refine the strategies and make necessary adjustments.

10. Adapt to Changing Circumstances: The government contracting landscape is dynamic, and opportunities and challenges may arise unexpectedly. Small GovCons should be agile and adaptive in response to changing circumstances.

11. Seek Mentorship and Assistance: Engage with industry associations, seek mentorship from experienced GovCon professionals, and leverage government assistance programs designed to support small businesses in government contracting.

12. Focus on Innovation: Encourage innovation within the organization to stay ahead of the competition. Investing in research and development can lead to the creation of unique solutions that set the company apart.

By following these steps, small GovCons can enhance their long-term planning capabilities and position themselves to take full advantage of the opportunities provided by government contracts. Proactive and strategic planning can help these firms achieve sustainable growth and success in the GovCon market.

Are you a Government Contractor? Virtual CFO provides GovCon-centric strategic accounting for small businesses providing services in technology, architecture, engineering, aerospace, and project management industries. 

We know your pain points – let us help you relieve them – schedule a consult.

Year End Financial Check 2021

Year End Financial Check 2021

It’s that time of year again, and no, I’m not talking about holidays. It’s that time of year when you need to start thinking about closing the books, preparing annual financial statements, and filing tax returns. Year end is when you have to think about all those financial reporting obligations. Everyone wants to know how the business performed, including investors, banks, and the IRS.

So, as usual, I’ve put together some key items to review as you prepare for year end.

Review the Trial Balance report

This report is well-known amongst accountants. It provides an overview of the balances in every account that has a balance.  Depending on the report filters, it may even show accounts that have no balance currently, but had activity during the year.

You will want to scan the Trial Balance report for any balances that appear odd.  Are there balances that should be debits but are showing as credits, and visa versa?  Are there balances for accounts you don’t recall using?  You’ll want the also skim through the amounts to see if they look realistic on the surface.

Lastly, you’ll want to make sure you have reconciled to each balance. You should have prepared bank reconciliations or credit card reconciliations.  These should all still tie to the year end balances on this report.  You may have statements from third-party providers.  These should tie to the year end balances on the Trial Balance.  If balances do not tie, you should at least investigate the difference.

Take a deeper dive into the general ledger

The general ledger, like the Trial Balance report, shows the balances in every account.  However, the general ledger provides the details of how those balances came to exist.  It includes the line-item transactions that add and subtract from the balance at the beginning of the period, to calculate the balance at the end of the period.  Depending on your accounting system, there could be a running balance after each transaction.

With the general ledger, you should make sure you have classified transactions properly.  Is there a credit card charge for supplies purchased at Office Depot in the Travel account?  Are there customer payments in your labor expense accounts?

The general ledger is also useful in determining the reason behind those financial differences when the balances do not tie to statements and reconciliations.

Payroll expense, reconcile to the payroll tax returns

I find a key area that explodes with errors is the payroll expense.  For all of our financial statement clients, we make sure that the payroll expense accounts reconcile to the 941, 940, and SUTA tax returns.

Ideally, you want to reconcile payroll expense on a quarterly basis.  If you are using a third-party payroll processor, you can do it when you receive the quarterly tax package.  If you are preparing payroll in-house, you actually want to reconcile, prior to submitting the payroll tax returns.

Reconciling payroll expense is not only important for the financial statements.  It is important for the income tax returns as well.  Under an IRS payroll tax audit, the payroll expense will be reconciled to the amounts you submitted on the W2’s and well as the payroll tax returns.  Also, reconciling is important to ensure you have remitted the correct amount of payroll taxes.  The penalties for incorrect payroll tax filings are assessed on the business, regardless of whether you process payroll in-house or have a third-party.

Recheck business meals including deliveries

Lately, tax laws have been changing as frequently as you change the oil in your car.  After the Tax Cuts and Jobs Act (TCJA) in 2017, entertainment expense went from a 50% to a 0% deduction.  Business meals remained at a 50% deduction.

In December 2020, the Taxpayer Certainty and Disaster Tax Relief Act was enacted.  The Act provides a temporary 100% deduction for business meals provided by a restaurant.  Specifically, expenses paid or incurred between January 1, 2021 and December 31, 2022, for food and beverages provided by a restaurant are 100% tax-deductible.  A restaurant is defined as a business that prepares and sells food or beverages to retail customers for immediate consumption, regardless of where the food is consumed. This does not apply to grocery stores, convenience stores, pre-packages food, etc.

For this calendar year and next, you will want to review all the meals purchased.  Make sure they are supported by receipts unless you are using GSA per diems.  Be sure to separate out any entertainment, which is still not deductible.  The meal expenses can include tax and delivery charges as well.

Negative accounts payable?

If you are using your accounting software correctly, certain reports are never out of whack.  One such report is the Accounts Payable (AP) Aging report.  This report shows all unpaid bills and ages them based on how long they have been outstanding.

If you notice, “negative” balances for vendors or bills, you could be missing deductible expense.  Negative balances happen when a bill payment is earlier than the date of the bill. For example, a January 1 rent bill is paid on December 26.  This will create a negative AP amount for the December AP Aging report.  However, it will not exist in January when both net to $0.

Another reason for negative financial AP, is that you are actually missing a bill that matches the full amount of the bill payment.  This occurs when you have paid a bill, but later deleted it.  Also, a negative AP exists if you enter a bill payment for more than the amount of the bill that you are attaching it to.  You will want to double check to make sure you have recorded the bill (and the expense) for the correct amount.

Work from home state tax implications

If you are new to having remote workers, COVID may have brought on some challenges for you.  From an accounting perspective, state tax nexus is the biggest risk.  When you people were in the office, you knew exactly which state’s tax laws had to be followed.  Based on your office location or your contracts, there was little fluctuation in where withholding, unemployment, or even income tax was filed.  Most states, waived nexus rules temporarily during the pandemic.  Now, permanent work-at-home (WAH) policies, have opened the business up to having tax liability to states that they did not before.  The tax liability extends beyond payroll tax, to income tax.

You will want to review your employee work locations.  You should document the location of where they are performing work, down to the city/county.  You also want to document any employee working in another location for more than 30 days.  Depending on each state’s rules, you may have additional tax filings. For example, if your employee is working remotely from Montana, you have to withholding and pay Montana payroll taxes, regardless of the business’ location.

Take inventory of your property and equipment

Remember, year end is clean up time.  You will want to take an inventory of all the property and equipment that you have on your fixed asset lists and property tax returns.  Why pay property tax on items that are broken, unusable, lost, or trashed?

You should take a full inventory that includes items that remote workers may also have in their possession.  Again, some states do require property tax filings on laptops, computers and other equipment that telecommuting employees are using at home.

Record entries to dispose of items that no longer exist.  Don’t forget to record depreciation on the new assets that you purchased for the fiscal year.

Review your trends

If you are using accounting software, and I hope you are, you should run comparative financial statements.  Comparative financial statements show more that one period, side by side, so that you can…. compare.

You should run a monthly profit and loss to check for routine income and expense that is missing from one or more months.  Run a two- or three-year profit and loss to detect those once-a-year expenses or income that are missing from this year.  This comparison is useful for detecting possible misclassifications (i.e., expense recorded but in a different account than last year).

Run a two- or three-year Balance Sheet to see if balances increased or decreased as expected.  Check for balances that normally remain unchanged, that have now changed.  This is a good report to assess if everything you own or plan to use in the future is recorded as an asset.  Also assess if everything you owe is recorded as a liability.

Every year accounting standards and tax laws change. Year end checklists always need to be updated or refreshed based on current events.  The pandemic threw another curve into what used to be predictable planning for year end.  While this list is not comprehensive of all the things you can do to plan for year end, it highlights what I think is often missed.  If you have any questions, or when in doubt, a CPA can provide important guidance to your small business.  At Cheryl Jefferson & Associates, we take a proactive approach to making sure our clients are ready for year end, all year long.

Contributed by Cheryl Jefferson Cooke, CPA|CFF, CFE