NATP Warns of Lack of Cyber Security Preparedness
The National Association of Tax Professionals polled the attendees at their annual conference in July. One set of questions revolved around how prepared tax professionals were for a cyber attacks and or network security breach. Their findings were alarming.
Only 38% of the 633 in attendance classified themselves as familiar with cyber threats, with 51% saying they are “somewhat familiar.” As for preparation for such an event, only 15% of those at the conference said they purchase cyber insurance and only 33% have written a disaster recovery plan.
For tax preparers, CPA’s and accounting firms, the safeguarding of sensitive client information is paramount. Accounting and tax professionals have access to hundreds – or thousands – of social security numbers, home addresses, income amounts, investment details or other information that a client would be upset if it was made public. A cyber attack that results in the loss of this type of client information is not covered by standard insurance. While 65% of the survey respondents felt they had adequate insurance for this type of loss – only 15% said they buy cyber insurance. There may be a number of firms who find themselves without adequate coverage in the event of an actual loss.
State and federal data loss laws are very specific and costly to comply with. Contact us to discuss whether network security insurance is right for your firm.
Payments Slow to Come In
Sageworks, a financial information company, reports that from 2011 to 2012 professional service firms have been receiving payments from clients more slowly. Consulting firms waited an average of ten days longer, while accounting firms and IT firms waited an additional five days on average. While private companies have always had strong cash flow incentives to delay payments, this trend is also being seen from public companies and large corporations.
The Wall Street Journal reported earlier this year that Proctor and Gamble would “add weeks to the amount of time it takes to pay suppliers.” Other large retail and commercial companies were reported as doing the same. delayed payments allows for an increase in float, which can fund expansions or stock buybacks. However, the impact of slower payments can trickle downstream to smaller suppliers and vendors who are then forced to pay their accountants later than usual.
The danger accounting firms may have when faced with a delay in payments is collections issues. Smaller accounting firms rely on quick payment to make their own payroll and bills. Larger firms have an accounting department who simply looks at the days in arrears and not at an individual client’s situation. Both instances can lead to suits for fees by an accounting firm who needs to be paid. This can lead to poor client relations, or a counter claim to the fee suit that will cost the firm more than the fees originally sought.
It is important to realize that not all professional liability insurance will cover a counterclaim to a fee suit. Many policies explicitly exclude coverage for any claims “based on or arising out of” fee suits. If fee suits are a practice that your firm utilizes, it is important to discuss how your insurance will respond. Contact us for a review of your current policy and to discuss options to have these types of lawsuits protected.