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Why you should change to digital accounting software


For many charities the Covid-19 pandemic was the catalyst needed for them to adopt digital technology to create better and more efficient ways of working. Charities quickly realised that to meet the challenges of dealing with the operational issues brought about by the crisis, and the transition to home working, they needed to reassess their existing systems and processes.

A key concern for charities during this time was to ensure their financial systems could be accessed by staff working remotely. A reliance on older accounting systems unfit-for-purpose soon became evident. Not only was remote access an issue, older software did not always integrate well with other internal systems or enable online banking. Many of these systems also relied heavily on manual imputing, both time-consuming and error-prone.

A further worry is that old software could sometimes pose a financial risk, often developing glitches that made it a target for hackers and ransomeware attacks. And, if outdated, it could easily become unsupported and require specific knowledge to maintain.

Charities that are VAT-registered should be aware that in April this year HMRC will be extending its Making Tax Digital for VAT regime to those below the VAT annual threshold of £85,000. Charities will need to comply by keeping digital records and send their VAT returns to HMRC each quarter using digitally-compatible accounting software, if applicable.

Recognising the benefits

Changing to a digital accounting system can be viewed as an expensive measure for many smaller charities but it is important to review the benefits it can provide. Both secure and efficient, these new systems allow for real time reporting, forecasting and scenario planning. As such, they can prove invaluable for making key financial decisions. A far cry from the limitations of the Excel spreadsheets they usually replace.

Furthermore, for financial reporting charities need to comply with the Statement of Recommended Practice and provide detailed analysis of income and expenditure activities. As charities often carry out a range of different activities, a digital accounting system can enable them to track all of these quickly and easily. It will also enable charities to potentially link up a donor management system to help record the various types of donations and Gift Aid claims.

Being able to make the switch to digital can present a challenge for charities. However, the task can be less daunting if a gradual, carefully considered manner is taken and some expert advice is obtained. Also an assessment to gain a clear understanding of the inefficiencies can help, and consulting with the finance team for their views on improvements. Involving staff directly in this way can help smooth the way and identify their training needs.

We have assisted a number of clients both before the pandemic and during to migrate accounting systems from desktop versions to online packages. This has facilitated more flexible working patterns for finance staff, improved efficiencies as well as providing greater transparency with staff and trustees being able to more readily access financial information.

A timely approach

The start of the new financial year is usually the easiest time for the changeover as it avoids transferring data between two systems during the year. However the change can be made in year in cases where it is preferred to keep the old system running while the digital one beds in. It should be borne in mind that accounting records must be kept for at least six years.
Making the change to digital accounting can significantly improve a charity’s reporting function. With timely and more accurate management information, charities are in a better position to face the future, whatever that may hold.

If you would like advice on choosing the right digital accounting software for your charity’s needs or have any questions please contact Stuart Mackie of our Charities Team at or call 023 9248 4356.


Posted 16/2/22




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