If you’re an accountant, there’s no doubt you deal with sensitive personal and financial information daily. That brings up another issue: GDPR. As introduced in 2018, this is legislation that puts quite a string of guidelines on how personal information is dealt with. In the line of an accountant, knowing and following the rules of GDPR means everything: from not having to pay enormous fines to simply earning the trust of your clients.
In this guide, we will be taking a deeper look at what GDPR means for accountants, what is meant by personal data, what penalties face on its basis, and what steps you can take to ensure that you’re fully compliant. We will also take a glance at what rights individuals have under GDPR and how these rules apply to employers.
By the end of this blog, you will have a crystal-clear idea of what GDPR is, how to keep your client’s data safe, and how to keep your accounting firm on the right side of the law.
You can also refer to the UK GDPR Guide published by the UK’s Information Commissioner. It offers useful online tools that can help accountants evaluate how GDPR affects their practice.
How Does GDPR Affect Accountants?
How does GDPR affect the accountant? In one word: monumentally. An accountant’s world is filled with personal data, from tax records to payroll details. Under the GDPR, every time you process, store, or share this information, it has to be done securely with complete transparency.
GDPR affects how you collect information, how you store it, and who has access to that personal information. Generally speaking, as an accountant, you are supposed to be bound by the following fundamental principles of GDPR, among others:
- Lawfulness, fairness, and transparency: You must process personal data lawfully and fairly, and you must inform your clients about how their data is being used.
- Purpose limitation: The purposes for which the information is being used are specified, and the usage does not extend beyond those purposes without the proper consent of the entities to whom it pertains.
- Data minimization: You can only collect those data that are absolutely necessary for the task at hand.
- Accuracy: The data recorded shall be accurate and up to date. For example, if any of the client’s information, say address, changes, then changes on your part must also be made with due alacrity.
- Storage limitation: Not to retain the data longer than necessary. If a client leaves you, you should not retain their data indefinitely unless it is by the requirements of the law.
- Confidentiality and integrity: The data should be secure and not subjected to unauthorized access or breach.
So, if you operate with any sort of client data, GDPR compliance needs to be part of your everyday routine.
How is Personal Data Defined?
Under the GDPR, personal data is defined as information that can in any way identify a particular individual. As an accountant, this would include such things as the client’s name, email address, or bank account numbers; it can also mean anything as obscure as an IP address or even a client’s tax information.
To comply with GDPR, it’s important to understand that personal data contains a wide array of information. Any information through which one can directly or indirectly identify someone is protected by GDPR. Thus, when dealing with customer accounts, payroll data, or even business transactions that involve sole traders, GDPR comes into play.
What are The Penalties for Non-Compliance?
Let’s get real-nobody wants to be on the wrong side of a GDPR fine. The penalties for non-compliance are serious and can be financially crippling. The maximum fine can reach up to €20 million or 4% of your annual international turnover, whichever is greater.
There are two levels of fines:
- Tier 1: Up to €10 million or 2% of annual global turnover for less serious breaches, such as failing to notify the supervisory authority of a data breach.
- Tier 2: Up to €20 million or 4% of turnover for more serious breaches, such as neglecting the basic elements of data processing.
But the damage is bigger than just money: lost clients’ trust or damage to your reputation as an accountant-a result of the GDPR breach-may have long-term consequences for your accounting firm. Being compliant, therefore, serves a dual purpose: avoiding fines and taking care of your business and client relationships.
What Practical Steps Should an Accountant Take to Ensure GDPR Compliance?
Compliance with GDPR may be a cumbersome task for any business concern, but actually, there are some practical steps to make your business secure, keeping your client’s data safe and secured from penalties. Here is what you are required to do:
1. Conduct a data audit:
Take an inventory of the personal data you hold. Identify what personal data you collect, what you collect them for, how it is stored, and who holds access to it.
2. Update your privacy policies:
Allow your clients to know how their information is being gathered and utilized. Be transparent, and let this information be comprehensible.
3. Use encryption:
Encrypt any sensitive customer information, both while in transit and storage.
4. Implement data access controls:
Restrict access within your organization to personal information on a “need-to-know” basis.
5. Get consent:
Before any collection of personal data, obtain unequivocal consent from your clients. They have a right to know how and for what purpose their data will be used.
6. Provide regular GDPR training:
Train your team regularly on the necessary GDPR practices. This way, everyone in the company will understand the situation with personal data protection.
7. Appoint a Data Protection Officer (DPO):
Consider naming a DPO if your firm processes loads of sensitive information; this helps spearhead GDPR compliance.
8. Have a breach response plan:
Make sure that you have a plan in place. It should focus on dealing with data breaches. GDPR requires that certain breaches must be reported to authorities within 72 hours.
What Rights Does an Individual Have Under GDPR?
The GDPR provides several rights for individuals regarding their personal data. As an accountant, you should be well aware of these rights so that you can respond to any of the requests by clients:
Right to access: This involves a request by a client for a copy of the personal data that you hold about him/her.
Right to rectification: Regarding data you hold that is inaccurate or out of date, clients have a right to ask for such data to be corrected.
Right to erasure (also known as the “Right to be forgotten”): Under circumstances where clients do not want you to hold their data anymore, they can ask for it to be erased.
Right to restrict processing: In certain circumstances, clients might ask that the processing of their data be halted.
Right to data portability: The client has the right to ask the controller to transfer his personal information to another service provider.
Right to object: Clients can object to their information being used for a particular purpose, for example, direct marketing.
GDPR for employers
GDPR, if you are an employer, is not only about the data of your clients; rather, it also pertains to the personal information of your employees. Records of employees, payroll data, and even monitoring tools like email and CCTV footage form part of the purview of GDPR.
You should make sure that your workers know everything about their data usage. Whether it is payroll or the performance track, transparency is paramount. Moreover, you will have to have strict policies for the security of your staff’s data from misuse or hacking.
Conclusion
As an accountant, GDPR is not an option but a must. It means much more than avoiding fines because personal and financial data are entrusted in your hands by your clients. In another aspect, on the other hand, with the application of GDPR principles and practical steps towards compliance, you will ensure that your firm is compliant and secure.
However, managing GDPR compliance alone can be heavyweight. That’s where MeticMinds comes in: your trusted accounting outsourcing partner that understands all the inner details of data protection. Expertise reassures that your client’s data is being handled securely and in full compliance with the GDPR.
Along with unburdening you from extra loads, by partnering with MeticMinds, you are opening yourself up to professionals who could guarantee smooth data protection and compliance with the GDPR. This enables you to focus on what you do best.
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