I find that I am now constantly surrounded by the world of accountancy thanks mainly to the introduction of Making Tax Digital (MTD). Adverts for cloud accounting software are everywhere you turn, on the radio, TV, sides of buses and taxis and splashed all over social media. The adverts are predominantly aimed at smaller businesses and focuses on them giving up the bag of receipts (often lost) for a simple accounting process using camera phone technology. They portray how easy it is to transfer your accounts to a cloud software system and this frees up your time for running your business.
I feel that the adverts are setting unrealistic expectations eg you enter the receipt by scanning it on your phone and POW the software does it for you. Here comes my first health warning – there are common expenses such as petrol or diesel for cars and home phone bills that are not that simple when it comes to VAT. Whilst a receipt may show VAT – this doesn’t necessarily mean that it can be claimed back. Those businesses that operate as limited companies need to be even more cautious – not only could there be VAT consequences for getting it wrong, there could also be P11d issues and other taxes. I am not suggesting for one minute that business owners should resort back to pen and paper for their records, far from it, accounts software has the ability (if maintained correctly) to ensure business owners are on top of their financial affairs and this is a very positive step. I don't believe a business can operate effectively, at any size, unless it has very good accounting controls in place and this is my point.
My concern is that the software providers are not highlighting the downfalls and where the health risks are. As a qualified accountant that has to continually keep up with changing tax legislation, I can assure you it is not always simple and certainly rarely logical. For the simplest of businesses, the chances are it will be OK but what is a simple business?
My top tips when considering accounting software are as follows:
- Research what the best software program is for your business – software packages are not all the same! Make sure the functionality matches the requirements of your business. Talk to your accountant for advice on what software best suits your business and if they only suggest one package, ask why – it should be the best package for your business and not the best package for your accountant.
- Ensure that the software is set up in a way that provides you with the information that you want to see. Again, talk to your accountant about the best way to achieve this. They have years of experience to help you – the standard set up promoted by the software company may not be the best to suit your business needs.
- Ask for some training, especially surrounding the key areas that are likely to be incorrect. This can avoid unnecessary accountancy bills later on or even tax errors.
- Ask for the records to be reviewed and don’t be afraid to ask questions – after a period of 3 to 4 months, get your accountant to review the records to ensure you are on the right track.
Cloud accounting software is the right way forward and can be beneficial for both the business and your accountant, but only if it is set up and maintained correctly.
It takes accountants at least 5 years to qualify and at least 20 hours of continued training every year to ensure that the qualification is maintained and to keep up with constantly changing legislation. This can not be replaced in its entirety by an APP.