Key Takeaways
- Data security in digital accounting is a legal obligation, not just a recommendation: Israel's Privacy Protection Law and the 2017 Data Security Regulations require a business that holds personal data about customers to secure it. Since Amendment 13, information about a person's financial activity counts as information of special sensitivity.
- Since Amendment 13 to the Privacy Protection Law took effect in August 2025, the Privacy Protection Authority can impose financial sanctions of thousands to hundreds of thousands of shekels per breach, as of October 2026. A micro or small business can ask for the sanction to be capped at a lower amount.
- Customers whose privacy is breached can sue the business. In some cases a court may award compensation without proof of damage: up to 10,000 shekels for each breach of a type the law lists, such as refusing a person's request to see the data held about them, and up to tens of thousands of shekels where an invasion of privacy is proven.
- An Israeli business with no branch or office in the EU is subject to the GDPR only if it offers goods or services to people in the EU or monitors their behaviour there. The GDPR's maximum fine is EUR 20 million or 4% of worldwide annual turnover, whichever is higher.
- When choosing a digital accounting system, check for data encryption, two-factor authentication, automatic backups and regular security updates. Even with a secure system, your business stays responsible for protecting its customers' information.
Why Data Security Is Essential in Digital Accounting
Digital accounting centralizes your most sensitive financial data -- income, expenses, invoices, and customer details -- in one system. This is convenient, but it also makes it an attractive target for hackers and cybercriminals.
Without strong security, this data is vulnerable to leaks, theft, or misuse. Beyond direct financial damage, a data breach can lead to fines from Israel's Privacy Protection Authority, loss of customers, and severe reputational harm.
In an era of increasing cyber threats, data security is not just a recommendation -- it is a legal obligation: Israel's Privacy Protection Law and its data security regulations require a business that holds personal data about customers to secure it. Good security protects your data, covers an important part of what the law requires, and lets you focus on growing your business with peace of mind.
A simple first step is to map where your customer data lives: in your accounting software, in Excel files, on WhatsApp, in email and in folders on your computer. Every extra copy is another place it can leak from, so it is worth deleting duplicate copies you do not need. Your bookkeeping records themselves must be kept for at least 7 years from the end of the tax year.
Protecting Sensitive Financial Data
Financial data such as bank account numbers, credit card details, invoices, and customer payment information are prime targets for attackers. A breach of such data can cause significant financial losses, reputational damage, and customer attrition.
An online store whose customer details leak can lose some of its regular customers because of broken trust, and a customer who leaves is hard to win back. For small businesses where every customer counts, the damage can be devastating.
Secure digital accounting systems use advanced technologies like AES-256 encryption, two-factor authentication, and secure cloud storage. These protections reduce the risk of a leak, help your business keep running when something goes wrong, and give your customers a sense of safety.
Store only what you actually need. A name, contact details and the transaction details are usually enough; there is no reason to store a customer's full card number, a copy of their ID card or their passwords. A detail you never stored is a detail that cannot leak.
Meeting Data Protection Regulations in Israel
Israel's Privacy Protection Law and the Privacy Protection (Data Security) Regulations of 2017 require businesses to secure the personal data they hold about customers. Since Amendment 13 to the law took effect in August 2025, information about a person's salary and financial activity counts as information of special sensitivity. Businesses that offer goods or services to people in the EU, or monitor their behaviour there, may also need to comply with the GDPR, the EU regulation that imposes strict data protection requirements.
Non-compliance can result in heavy fines. Under the GDPR, a fine can reach EUR 20 million or 4% of worldwide annual turnover, whichever is higher. In Israel, since Amendment 13 to the Privacy Protection Law took effect in August 2025, the Privacy Protection Authority can impose financial sanctions of thousands to hundreds of thousands of shekels per breach, and more for very large databases, depending on the type of breach and the database's security level (as of October 2026). A micro or small business can ask for the sanction to be capped at a lower amount, and any business can ask for the total sanction to be limited to 5% of its turnover. Beyond fines, regulatory violations expose your business to lawsuits from affected customers.
Secure digital accounting systems integrate features like encryption, secure storage, and frequent automatic backups, which helps with some of the law's technical requirements. Even when a provider stores the data, though, your business remains responsible for securing its customers' information: who may access the data, how the people who work with it are trained, and what to do when a security incident happens.
How much the regulations require depends on the database's security level -- basic, medium or high -- and a database managed by a single individual has lighter requirements. They usually include a document defining what data is stored and why, a written security procedure, access management and handling of security incidents.
Preventing Fines and Legal Risks
A financial data breach does not just damage your reputation -- it exposes you to heavy fines and lawsuits. Violating Israel's Privacy Protection Law can lead to financial sanctions from the Privacy Protection Authority, and customers whose privacy is breached can sue the business. In some cases a court may award compensation without proof of damage: up to 10,000 shekels for each breach of a type the law lists, such as refusing a person's request to see the data held about them or collecting data without the notice the law requires, and up to tens of thousands of shekels where an invasion of privacy is proven. In other cases the damage has to be proven.
Suppose Michal, 31, a cosmetician with a small home clinic in Yavne, keeps her clients' credit card details in a file on her computer with no password. If that file leaked, she could face an inquiry from the Privacy Protection Authority and clients demanding compensation. When payments go through a secure payment system and card details are not stored on her side, the risk is much smaller.
Secure systems use encryption, firewalls, and two-factor authentication to prevent breaches. This capability saves resources you can invest in growth and minimizes the need to deal with legal crises that distract from running your business.
If a security incident does happen, document what happened, change passwords and block unauthorized access. For a database at the medium or high security level, a severe security incident must be reported to the Privacy Protection Authority. The law allows a financial sanction to be reduced, among other things, for the business's conduct and for compensation already paid to those affected.
Maintaining Customer Trust
Customer trust is a valuable asset, and a data breach can destroy it instantly. Customers who provide payment details or personal information expect your business to keep them safe and secure.
Dana Levi, 32, runs an online gift and lifestyle shop from home in Rishon LeZion. Since she moved to a secure payment page, fewer customers message her to ask whether it is safe to pay on her site. Maintaining trust increases the likelihood that customers will recommend you to others -- essential in a competitive market.
Turning data security into a competitive advantage improves your reputation and strengthens your market position. Customers who feel protected tend to make repeat purchases and refer others, driving organic growth for your business.
A simple way to build trust is to tell customers up front why you collect their details and what you will do with them. The law requires it too: when you collect personal data, you must tell the person why it is collected and whether they are obliged to provide it. A short, clear privacy policy on your site and order form is a common way to do this.
Dealing with Evolving Cyber Threats
Cyber threats such as ransomware, phishing attacks, and data theft are evolving rapidly, and small businesses in Israel are not immune. Ransomware that takes over an accounting system can demand thousands of shekels for data release or cause complete loss of critical information.
Secure digital accounting systems integrate advanced protections -- firewalls, anomaly detection, frequent backups, and regular security updates -- to counter these threats. These protections reduce the risk and help the business get back to work faster if an incident does happen.
For small businesses with limited IT resources, having built-in cyber protection within the accounting system reduces the need to invest in separate, expensive security systems.
Many ransomware and phishing attacks start with an email or message containing a link. Three habits reduce the risk: switching on two-factor authentication on every account that offers it, never entering a password after clicking a link in a message, and keeping a backup of important files somewhere separate from your computer.
Choosing a Secure Digital Accounting System
Selecting a secure digital accounting system is a critical step in protecting your business. Here are four key criteria to help you choose wisely:
- Data encryption -- Ensure the system uses advanced encryption such as AES-256 to protect all data during storage and transfer.
- Two-factor authentication -- Choose a system that requires dual verification on every login, preventing unauthorized access even if a password is compromised.
- Secure cloud storage -- Look for systems with secured servers that meet international security standards, with automatic daily backups.
- Frequent security updates -- Make sure the system is regularly updated with security patches against new threats.
The right choice saves time, reduces risks, and lets you focus on growth instead of security concerns. A system that combines all these features greatly reduces the risk to your accounting data.
Beyond security, it is worth checking that the software is registered with the Israel Tax Authority, that you can export your data if you move to another provider, and what the service agreement says about data security. Under the data security regulations, a business that passes personal data to an outside provider must set out in a contract how the provider will secure it, and monitor that it does.
Summary
Data security in digital accounting acts as the guardian that protects your financial data, helps you meet legal requirements, and preserves customer trust. From safeguarding sensitive data and meeting regulations, to preventing fines, maintaining trust, dealing with cyber threats, and choosing a secure system -- security is an integral part of modern accounting management.
Whether you are a designer, e-commerce merchant, or shop owner, data security helps keep your business safe and competitive. On every Keep plan, documents are issued as digitally signed PDFs and all your business data is in one place, so it is easier to focus on what matters most -- growing your business.
It is worth reviewing your security arrangements at least once a year, and whenever someone joins the business, you change a provider or you open a new sales channel. For what the law requires of your business specifically, such as which security level your database falls under, the Privacy Protection Authority's guidance or a lawyer who specialises in privacy can help.
Frequently Asked Questions About Data Security in Digital Accounting
Does a small business have to comply with Israel's Privacy Protection Law?
Yes. A business that keeps personal data about customers in digital form, for example in accounting software or a customer file, must secure it under the Privacy Protection Law and the data security regulations, however small it is. How much is required depends on the database's security level, and a database managed by a single individual has lighter requirements.
How much is the fine for breaching Israel's Privacy Protection Law?
As of October 2026, since Amendment 13 the Privacy Protection Authority can impose financial sanctions of thousands to hundreds of thousands of shekels per breach, depending on the type of breach and the database's security level. A micro business, with annual turnover of up to 4 million shekels, can ask for a cap of 20,000 to 70,000 shekels depending on the type of breach, and a small business, with annual turnover of up to 10 million shekels, can ask for a cap of 40,000 to 140,000 shekels. Under the law, the amounts are updated in line with the consumer price index.
Can a customer sue a business over a data leak?
Yes. A customer whose privacy is breached can sue the business. When the claim rests on a breach of the data security regulations, damage usually has to be proven. Only in some cases may a court award compensation without proof of damage, for example up to 10,000 shekels per breach when the business refused to let the customer see the data it holds about them.
Does the GDPR apply to an Israeli business?
Only in some cases. The GDPR applies to an Israeli business with no branch or office in the EU if it offers goods or services to people in the EU or monitors their behaviour there, for example with advertising cookies on a site aimed at EU visitors. A single customer from abroad is not enough on its own.
Is a secure accounting system enough to comply with the law?
No. A secure system handles the technical side, such as encryption and backups, but your business remains responsible for securing the data even when a provider stores it. Access permissions, staff training, handling security incidents and the agreement with the provider stay with the business owner.
The information in this article is general and is not legal advice. For your own business's case, it is worth consulting the Privacy Protection Authority or a lawyer who specialises in privacy.
