Navigating GDPR and data privacy in accounting with Xero

Data privacy is a growing concern for accountants and bookkeepers

Financial data is a sensitive, high-risk asset. With the growth in digital data storage and online transactions, ensuring your practice has robust accounting digital security measures in place has never been more important.

The EU introduced the General Data Protection Regulation (GDPR) in 2018 to build trust between businesses (including accountancy practices) and their customers by stressing data privacy and security throughout business. GDPR was designed to hand control of individual data back to the people it belongs to. While it enables trust and accountability, it increases the burden of work for your practice.

Xero helps you comply with the GDPR, so you can implement data privacy and security best practices that your clients expect. It also means avoiding the penalties that come from failing to do so.

Understanding GDPR and data privacy requirements in the accounting industry

The GDPR created a range of rules around privacy designed to improve data security and accountability. The UK’s GDPR, introduced in 2021, functions in much the same way. Both include provisions affecting accounting and bookkeeping.

Here are some of the ways the GDPR affects your work.

Data controllers need the consent of the subject or client before using or storing their data

Article 7 lays out expectations that the data controller – or the person handling the data – must gain the consent of the subject or client before using or storing it. They must also provide the ability to decline or withdraw consent at any time.

Controllers must be clear about how and why data is collected and treated

Article 13 makes it clear the controller must make available a point of contact for the subject.

You can collect and store client data only in certain ways

Article 5 puts collection and storage limits on subject data. You must notify any collection of data, explain why you’re doing so, and keep the data only as long as it's needed.

You need clients’ consent to process their data

Article 6 makes it clear that the processing of data must comply with legislation and be carried out only with explicit consent.

You must tell the client what you’re doing with their data if they ask

Article 15 explains that the client has a right at any time to know why you’re collecting, storing, processing or erasing their personal data.

The client can complain to a recognised authority

Article 77 gives every data subject the right to lodge a complaint with a supervisory authority if they feel a controller isn’t properly following the GDPR.

Failing to comply with GDPR brings financial and reputational risks to your practice

Article 83 of the GDPR lays out consequences for businesses that don’t comply.

• If your practice doesn’t comply with its controller obligations, it risks a €10m fine or 2% of total global annual turnover, whichever is higher
• If your actions break GDPR’s basic principles of a right to privacy then you can be fined up to €20m or 4% of total global annual turnover, whichever is higher

Your practice’s reputation is at stake, too. The GDPR is designed to build trust between business and customers – if you break the GDPR, your clients might question whether they can trust you with their data.

Tax deadlines and accounting standards add to your compliance burden

Regular changes in tax codes, compliance updates, and evolving industry standards already place demands on your time and resources. Operational standards add to that. Whilst GDPR documentation, client permissions, cross-checking third-party data, audits, and data back-ups are time-consuming, they are essential and cannot be ignored.

These must be handled within strict deadlines or you and your client(s) can face severe financial penalties. Furthermore, becoming misaligned with mandates or facing penalties could have negative impacts on your reputation. GDPR is too important to get wrong, but this is where Xero is here to help.

Xero makes GDPR compliance and data privacy management simple

Xero has committed to responsible data use itself, and its tools will help you fulfil important compliance requirements.

Xero’s data protection measures make sure you’re compliant with GDPR Article 32:

• Multi-factor authentication, which combines login details with secondary confirmation via an app on your device, improving access security
• Data encryption, so your clients’ data are incomprehensible to anyone without proper access
• Access controls allow you to choose who on your team has access to specific data, minimising chances of malicious or accidental data misuse.

Xero also uses cloud-based storage, so your data is there when you need it, wherever you are. All data is replicated across multiple data centres so you and your clients’ data is always available. And Xero’s security noticeboard keeps you and your team up to date with the latest threats and security practices.

Stay ahead of tax deadlines and evolving accounting standards with Xero

We update our online accounting software as tax laws change, and tell you about the changes. This way you know what your compliance needs are and you can trust Xero to meet them. Our platform also makes broad use of automation for repetitive tasks and enables digital collaboration no matter where you are. This will reduce the time spent wrestling with your accounting software so that you can get on with the work itself.

Xero empowers accountants to focus on growing their practice, not compliance

We offer a holistic solution through multiple products on our platform. Xero Workpapers offers automated compliance workflows. Xero Practice Manager allows you to automate job tracking and invoicing, as well as manage staff schedules. Gather and track client queries securely with Xero HQ, and handle all your tax needs through Xero Tax.

Xero allows full integration, balancing GDPR with compliance with tax regulations and other regulatory demands. Xero’s multi-layered security, access controls, and automation simplify and clarify your accounting, and make meeting GDPR requirements easy – building your clients’ trust in your services.