NEWS

Moving to Digital Record Keeping

From keeping business records to claiming expenses and filing tax returns, there is a lot of accounting involved when running a business.  As a business owner, bookkeeping may not be something that lights your candle but it is an essential part of ensuring your business is on track.

At the heart of any business are controls.  As running costs increase you may notice that drawing your usual amount is having more of an impact on your bank balance at each month end.  Without an effective accounting system in place to give you timely information about your current financial situation how can you know exactly what is happening within your business and why.

As everyday life becomes more digital and interactive, managing your business and tax liabilities in this way is no different.  Now is the time to consider how this method of working can transfer to your practice.  With online accounting you can manage your cash flow quickly and have a tool which not only provides you with confidence about the financial situation of your practice but also gives you peace of mind.

Consider the following benefits of online accounting if you are in any doubt:

•    Provides access to your accounts at any time from your computer or mobile with internet connection
•    Enables a robust and secure management accounting system for your bankers and the tax man
•    Gives you financial information in real time so you can avoid unnecessary overdraft fees, interest and penalties
•    Allows you to easily identify where cost savings can be made
•    Lets you manage your cashflow for the year ahead to ensure all cash commitments can be met
•    You have the ability to trouble spot any financial concerns or weaknesses within the business
•    You can see if there is any leeway to, for example, set up a safe balance to cover short term emergencies
•    Should save you accountancy fees when your records are presented in a more manageable manner

It is the ability of digital software to measure financial performance which offers perhaps the greatest benefit.  As a business proprietor you will want to know how well your business is performing.  With online accounting most of the information you need to make better business decisions will be at your fingertips.

The online accounting functionality is growing rapidly and the market offers a range of programs, add-ons and apps to help you run your business efficiently.  Overtaking the more traditional desktop versions and spreadsheets, these online ‘cloud-based’ packages are more secure and offer flexibility, timely information and greater control.

Digital Reporting will Become Compulsory

You will no doubt be aware of the significant changes HMRC are introducing to the UK tax system to bring it into the digital age.  The changes are under the banner ‘Making Tax Digital for Business’ (MTDfB) and will affect all self-employed individuals who pay income tax, VAT and companies paying corporation tax.

Originally planned to commence in April 2018, the government announced last July that the start date would be put back a year in order to give more time for businesses to prepare.  Under the new timetable:

•    Only VAT registered businesses with a turnover above the VAT threshold (currently £85,000) will have to keep digital records and only for VAT purposes
•    They will only need to do so from 2019 and will have to report quarterly to HMRC using a software package
•    Businesses will not be asked to keep digital records or to update HMRC quarterly, for other taxes until at least 2020.

Under the proposed scheme taxpayers will be required to submit quarterly returns within one month of the end of the quarter, with a final ‘end of year’ confirmation due ten months after the fourth quarter.  Given the difficulties some businesses may have adapting to the new reporting requirement, HMRC has confirmed that late filing penalties will not be applied for at least the first 12 months.

However despite this ‘generosity’ and the delay in implementation, make no assumption that MTDfB will not happen. The government has invested £1.3bn for HMRC to become the most digitally advanced tax administration in the world.

And as we mentioned above, now is the ideal time to think about how online accounting will benefit your business and ensure you have the right software in place when more frequently reporting to HMRC comes into effect.

From our extensive experience of working with many clients using online accounting software, two of the systems that we would strongly recommend are Xero and Quickbooks Online.  We can provide versions specifically tailored to meet the needs of your business and offer help with the initial set up and training.  Both packages will provide users with the required tools to manage their finances more efficiently and, used correctly, will give you an overall detailed up-to-date view of your business for better decision-making and enable compliance with the new reporting regulations.

Furthermore, online accounting software is available by monthly subscription saving you the initial outlay of the traditional desktop accounting software.  Both Xero and Quickbooks Online offers subscribers constantly updated systems which guarantee that you are always using the latest version.  Currently, Xero offers free conversion of two year’s worth of accounting data available to users of the desktop versions of Sage or Quickbooks. Similarly desktop users of Sage wishing to convert to Quickbooks Online currently are also able to convert two years of accounting data into Quickbooks Online for free.  Or, for users of desktop Quickbooks wishing to convert to the online version, all your existing accounting data can be transferred into Quickbooks Online.

You can also find more information at our online accounts page

30/01/2018