Cloud security: How to protect your business data online

Published Tuesday 4 November 2025

Table of contents

• What is cloud security?
• How does cloud security work?
• Why cloud security matters for small businesses
• What is the cloud?
• Understanding shared responsibility in cloud security
• How is your data stored in the cloud?
• Common cloud security challenges to be aware of
• 5 ways to make your cloud data more secure
• Train your staff about online safety and security practices
• Protecting your business with cloud security
• FAQs on cloud security

Key takeaways

• Implement multi-factor authentication and use strong, unique passwords for each cloud service to create multiple layers of defence against unauthorised access.

• Understand the shared responsibility model where your cloud provider secures the infrastructure while you remain responsible for managing data access, user permissions, and secure application configuration.

• Train your staff to recognise phishing emails and social engineering attacks, as most cloud security breaches result from poor user practices rather than cloud provider failures.

• Utilise login monitoring tools and anti-malware software on all devices to detect suspicious activity and protect against malware that could compromise your cloud data access.

What is cloud security?

Cloud security is a set of strategies and practices for protecting your online data, applications, and infrastructure. It works like locks and alarms for your business information online. It involves using policies, advanced technologies, and controls to shield your cloud environment from unauthorised access, theft, and data loss.

How does cloud security work?

Cloud security works by creating multiple layers of defence around your information. It uses several methods together to protect your data. Key elements include:

• Identity and access management: This ensures only authorised people can access your cloud data by verifying their identity, often with more than just a password.
• Data encryption: Your data is scrambled into an unreadable code as it travels to and from the cloud, and while it's stored there. Only those with the right key can unscramble it.
• Threat detection and prevention: Smart systems constantly monitor for suspicious activity and can block potential threats before they cause damage.

Why cloud security matters for small businesses

For a small business, strong cloud security helps you protect your success and keep your business running smoothly. It helps you:

• Build customer trust: Protecting your customers' personal information shows that you're a trustworthy and professional business.
• Prevent costly downtime: A security incident can shut down your operations, leading to lost revenue and productivity. Good security keeps your business running smoothly.
• Ensure compliance: Many industries have strict rules about data protection. Proper cloud security helps you meet legal requirements, such as those for tax information which can be mandated by Statutory Instrument, and avoid hefty fines.
• Safeguard your financial data: Your business's financial health depends on keeping sensitive information like bank details, invoices, and payroll records secure.

What is the cloud?

The cloud refers to data and applications stored online rather than on your computer's hard drive.

Here's how it works:

• Traditional computing: Software and data stored locally on your device
• : Software runs from remote servers, data stored online
• Key benefit: Access your information from anywhere with internet connection

This shift happened because internet speeds improved and data storage costs dropped significantly.

Many businesses are moving to the cloud for good reasons. This guide will help you understand cloud security and give you tips to keep your data and your customers' data safe.

This guide provides general advice on cloud security and isn't intended to cover everything. After reading it, you should be more familiar with ways to secure your data in the cloud. It's always a good idea to get professional advice if you have concerns about your data security.

Understanding shared responsibility in cloud security

When you use a cloud service, you and your provider share responsibility for security. This is called the shared responsibility model. It's important to understand what your cloud provider handles and what you're responsible for.

Your cloud provider secures the infrastructure, while you manage and protect your own data and access.

In the cloud:

• The provider is responsible for the 'security of the cloud': They secure the physical data centres, servers, and network infrastructure that their services run on.
• You are responsible for 'security in the cloud': You manage and protect your own data, control who has access, and configure your applications securely.

How is your data stored in the cloud?

Your data is stored in secure data centres with professional monitoring and backup systems.

Storage security includes:

• Physical security: Data centres with 24/7 monitoring and access controls
• Encryption: Your data is scrambled during transfer and storage
• Secure connections: Information travels through encrypted channels
• Professional management: Dedicated security teams protect the infrastructure

Data breaches can still happen, but they're often caused by user behaviour rather than cloud provider failures, a weakness highlighted by a report noting that in many small firms, data security is not considered a specific risk. The next section explains how to prevent these risks.

Common cloud security challenges to be aware of

To stay secure in the cloud, you need to know about common challenges. For small businesses, these include:

• Set up your cloud services correctly to avoid exposing sensitive data
• Control who can access your data and only give access to those who need it
• Monitor your cloud environment to spot suspicious activity
• Train your team to recognise and avoid phishing attacks

5 ways to make your cloud data more secure

Most cloud security incidents happen because of poor user practices, not because of cloud provider failures. Using professional cloud services is often more secure than storing data yourself.

Here are five ways to strengthen your cloud security:

1. Make sure your passwords are secure

Secure passwords are long, random, and unique for each application. For example, Get Safe Online recommends using a combination of letters, numbers, and symbols, as weak passwords are the easiest way for hackers to access your cloud data.

Password best practices:

• Length: Use at least 12 characters or a 20-30 character passphrase
• Uniqueness: Different password for every cloud service
• Randomness: Avoid personal information like names, dates, or addresses
• Management: Use password manager software to generate and store strong passwords

Password managers let you remember just one master password while keeping all your other logins secure and accessible.

2. Use multi-factor authentication

In addition to requiring a username and password to log in, some software solutions offer multi-factor authentication. This is also called two-factor authentication, two-step authentication or two-step verification. Multi-factor authentication places an additional layer of security on your login.

This means that in addition to your standard login, you're required to provide another factor to authenticate your identity. This could be a unique code generated by a separate application, service or device, or something unique to you – like your fingerprint or voice. This reduces the risk of your account being accessed if your password is compromised.

3. Take advantage of login and online activity monitoring

Some cloud applications provide additional information about how their system is being used. Review the additional security services they provide and take advantage of them – every precaution you take makes a difference.

Check when you last logged in. If you see a login you do not recognise, report it straight away. Use these tools to help keep your account secure.

4. Use anti-malware (also known as anti-virus software)

Malware (short for malicious software) can get onto your computer, laptop, tablet or smartphone and do something malicious like stealing your data. It usually means that the user of the device has clicked on a link or attachment in an email, or visited a website that's not secure. Only click on links or attachments you trust.

Once malware is on your machine, it might log your user ID, password or credit card information and send it to a hacker. Or it might quietly take over your computer and use it to attack other machines.

Malware is designed to be hidden, so you're not likely to notice it by chance. Make sure you use anti-malware on your phone, laptop, desktop and tablet. Additionally, the UK's Information Commissioner states that portable devices should be encrypted to protect customer data. And always ensure that all your software is kept up to date.

Make sure you get your anti-malware from a reputable source. This is because often what can look like genuine software, is actually malware in disguise. If in doubt, run virustotal.com as a preliminary check. Protecting your devices from malware helps keep your data safe.

5. Be aware of phishing or other hacking methods

Hacking can happen through people, not just computers. For example, imagine a phone call: "Hello, it's Mary from IT support. We're upgrading your software but it looks like your password has changed since last time and we can't get in to do the upgrade. What's your new password?" This type of hacking attempt is called social engineering.

Another method of hacking is called 'phishing' and this happens by email. Often the email will contain links that the hacker wants you to click on. Without training, your staff might give away vital security information via phone or email.

These attacks can happen whether your data is in the cloud or stored locally. Using the cloud can reduce risks like theft or loss of devices, as your data is protected by professional security measures.

Train your staff about online safety and security practices

Staff training is essential for cloud security because employees are often the weakest link in your security chain. Most data breaches can be prevented with good staff training and secure practices.

Essential training topics:

• Password security: How to create and manage strong passwords
• Phishing recognition: Identifying suspicious emails and links
• Device security: Protecting laptops, phones, and tablets
• Data handling: Safe practices for accessing and sharing cloud data

Every business needs a written data security policy. Online resources and security companies can help you create one that fits your specific needs.

Protecting your business with cloud security

Cloud security can protect your data better than storing it on your own premises. Professional cloud providers offer security that most small businesses cannot match.

Your security checklist:

• Use strong, unique passwords for each application
• Enable multi-factor authentication where available
• Keep devices protected with updated anti-malware software
• Train staff to recognize security threats
• Maintain current data security policies

Ready to experience secure cloud accounting?Cloud-based solutions like Xero combine professional-grade security with the convenience and flexibility your business needs. Try Xero for free and see how secure, accessible financial management can transform your business operations.

FAQs on cloud security

Find answers to common questions about cloud security for small businesses below.

What are the main types of cloud security?

Cloud security covers four main areas: protecting your data, controlling access, monitoring your cloud environment, and meeting compliance standards.

Is the cloud more secure than keeping data on-site?

For most small businesses, the cloud is more secure than keeping data on-site. Cloud providers invest in security and monitoring that you may not be able to match on your own.

How can I improve my business's cloud security?

Start with the basics. Use strong, unique passwords for every service, enable multi-factor authentication wherever possible, and train your staff to spot phishing emails. Regularly reviewing who has access to your data is also a simple but powerful step.