I had finally warmed up to the idea of sensitive financial data being housed “out there” on the internet when I heard that an online accounting service lost some of its customers’ data. Apparently Freshbooks, a software as a service (SaaS) invoicing application, lost about 12 hours’ worth of transactions for a small segment of their customer base. Poof! Gone.

Very much to their credit, they did the right thing: they told their customers what was going on, fixed the problem, compensated all customers, and they apologized. They explained the specifics of their data loss - a real-time redundant mirrored drive system didn’t work like it was supposed to - and strangely enough, that actually gave me more confidence in internet-based data processing storage.

Why? Because no matter how you slice it, data security boils down to getting a bunch of one’s and zero’s safely tucked away into little boxes of plastic and metal located somewhere around the world. And I figure that reputable vendors are likely to be better at that than your typical small business. So when migrating your data online — whether it’s a Web 2.0 on-demand SaaS accounting app like Freshbooks, QuickBooks Online, NetSuite, or Blinksale, or a remote backup system like BackupSolutions - sign up with an established company that has proven itself. Years of solid service count. Millions of successful transactions count.

And even then, don’t assume anything. Keep asking questions until you understand how the backup systems work. Learn how to test-restore a backed up file. Monitor, check, double-check, and triple-check. Ultimately the responsibility lies with us to make sure our mission critical data are secure.

And if I had any doubts about the utility of online data storage, yesterday I received an e-mail from a business associate:

Our office was burglarized the night after Christmas and my computer was stolen. I cannot tell you how fortunate I am that ALL my confidential data was on remote secure servers and not on my hard drive. They even took my on-site backup.

Poof! Gone.