Over the weekend I found I was surrounded by the world of accountancy even though it was a bank holiday and I wasn’t at work. Thanks to the introduction of Making Tax Digital (MTD), adverts for cloud accounting software are currently everywhere you turn – on the radio, TV, sides of buses and taxis and splashed all over social media. The adverts are 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. The adverts portray how easy it is to transfer your accounts to a cloud software system and this frees up your time for running your business.
It is that last point I find myself getting a little annoyed at. It is true that a well-maintained accounts software program will make your life easier and give you access to data that I feel every business should have their finger on, including who owes money and who is owed money. However, the worst record keeping I have ever encountered over my 28 year career was maintained on a computerised software package and I fear that making it sound so simple is likely to escalate this issue. Computerised accounts software is not a new concept and in fact many businesses have operated desktop versions of software for years. The difficulty is that whilst the mechanics may be easy, business owners still need to have a level of understanding of how to correctly record transactions, especially those relating to VAT. Not only do businesses need to be aware of invoices that can be claimed for VAT purposes (not all those with VAT are allowed to be claimed back from HMRC) but they need to be wary of expenses that can be claimed incorrectly too.
My fear is that the adverts are setting unrealistic expectations – 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 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.
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.
Just remember – it took most accountants at least 5 years to qualify and hours of continued professional development to keep up with regulatory changes from HMRC, therefore it can’t be that easy, can it? We have the skills and expertise based on years of dealing with client’s accounting records to ensure that they are being maintained correctly.
Cloud accountancy 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.
If you would like a discussion on your own accounting software, please feel free to contact us at Lambert Chapman LLP. We can also offer extremely competitive Bookkeeping rates for clients that just want someone else to deal with it for them.