Cloud accounting has been around for more than 20 years. However, only since 2019 have most VAT-registered businesses with a taxable turnover above £85,000 had to keep digital VAT records and use compatible Making Tax Digital (MTD) software to file their returns. Its purpose: to transform the tax system into being more effective, efficient, and making it easier to submit returns correctly.
As the roll-out of MTD gains traction, from April 2022, VAT-registered businesses with a taxable turnover below £85,000 will be required to follow MTD rules, and accounting periods that start on or after 6th April 2023, for those self-employed businesses and landlords with annual business or property income above £10,000, MTD rules will apply for Income Tax.
By using government approved software, such as Xero to file returns directly with HMRC, eliminates duplication, unnecessary data transfer, timely data entry, and the need for remembering multiple passwords.
As identified in our blog “Driving Efficiencies Into The New Dawn”, OCR technology, in the form of Hubdoc, provides seamless integration with Xero for the digital capture of receipts and expenses as supporting evidence for MTD-compliant returns. This makes it easier to manage VAT, improves accuracy and reduces overheads. No more boxes of paper receipts required!
This is not to say that existing processes and methodologies are defunct, but providers, such as Xero offer a bridging solution for those using spreadsheets and existing non-MTD compliant software, enabling business owners to make the transition at their own pace. This can be facilitated by a certified advisor, such as an accountant or by undertaking training available from the software providers themselves.
Not only does cloud accounting put you in control of your information for better business decision making, it also empowers collaboration between team members. Client portals offer secure destinations for document sharing, approvals, and workflow management.
With open banking, automatic bank feeds make your cloud accounting software the main hub of information where all invoicing, expenses and bank transactions are kept for expedited bookkeeping and reconciliation in one place.
It creates familiarisation with, and increases the use of, digital invoice processing and accounts receivable information. Sharing real-time information with your accountant saves on unnecessary expense and allows more time for both parties to concentrate on value-added propositions for your business and presents opportunities for deep dive reporting to gain key business insights, enabling conversations that are future-focused.
This proactive element is why most chartered accountants got into the role in the first place and is what makes them tick. As we have seen in 2020, being an agile business is one that thrives in times of adversity. The cloud accounting solutions on offer allow accountants to be the trusted advisor of choice and provide superior value-added service delivery at a time when their experience is crucial in forging deep bonds with business owners and guiding them through the existing hard times. Partnering with companies to ensure they come out the other side stronger, more resilient, ready for new challenges and aware of the inherent risks their existing business model holds, knowing they have plans in place to pivot quickly should the need arise.
Before the pandemic took hold, but more importantly now, through continuous improvement, technology is transforming the traditional accounting industry into one where face-to-face meetings are held at a distance using Zoom, meaning travel time is eliminated and your local accountant no longer has to be on your doorstep. Offering a greater choice, increased competition and necessitating efficiencies that benefit your business.
Much like that gym membership that is paid for but never fully utilised, instead of buying pre-packaged accounting services, why not personalise your digital cloud accounting solution? This way, you only invest in the services you pick and choose that suit your existing business needs, where services can be added at any time, that scale with your business as you thrive and evolve.
Future-proof your business by scheduling a conversation with Zen Finance Solutions today.