The cloud accounting imperative for small businesses
With 2.3m Quickbooks users in the US and more than 1m Xero subscribers in the UK, cloud accounting is now firmly in the mainstream.
Gone are the days of having a dedicated computer in the corner of the accounts office so that businesses could manage their books. Or of completing a spreadsheet and spending a whole day putting your receipts in date order before you delivered them to your accountant. Now, even small businesses can access the kind of accounting intelligence which used to need a whole department to create it.
Why I am a fan of the cloud
Quite apart from telling you about your business in real time, cloud-based accounting systems give business owners a more user-friendly experience than looking through an old-school balance sheet or profit and loss. Visuals and dashboards make the data instantly accessible and create handy snap shots and triggers to take action.
Of course, being a management accountant I’m a big believer in using numbers to drive a business’s performance, but you can only do that if you have access to them and know how to interpret them.
Digital accounting packages give business owners more information than ever about the financial health of their business, and the support of an expert can turn that information into intelligence on which you can base decisions.
Smart online accounting packages show information in real time, with automatic bank feeds now available for many of the major banks. They also provide a way for the business owner and their advisor to view the same information simultaneously while in separate locations.
The imperative for adopting digital accounting
If you haven’t heard of Making Tax Digital (MTD), where have you been?! The Government’s flagship change to the way HMRC collects tax has been planned for many years, and, as with many large government IT projects, deferred a few times too.
It’s the accounting equivalent of GDPR, affecting a vast number of businesses and forcing behaviour change in plenty of them.
We now know that VAT-registered businesses turning over above £85,000 – the VAT threshold – will have to submit quarterly financial information to HMRC digitally from April 2019.
If your business is VAT-registered voluntarily, you will have to submit quarterly information from 2020, so you don’t get not a lot more time.
The benefits of MTD
If you’re already using an online accountancy package you’re probably already submitting business information to HMRC online. So using cloud accounting is helping you get ready for MTD.
I don’t believe it’s a bad thing to have to update all of your financial information – expenditure and income – every three months instead of the every 12 months that some businesses might be used to. You will have a much more accurate understanding of the financial health of your business by completing this record-keeping on a quarterly basis, which will allow you more opportunities to make changes if they’re needed.
Unfortunately, there are many accountancy practices not yet operating digitally. In sticking with paper-based systems they aren’t helping their clients get ready for the inevitable and predictable impact of MTD. And that’s quite apart from the loss of vital insight into how their clients’ businesses are operating and whether there are any risks showing up in the numbers.
Augmenting with apps
Another major benefit of cloud accounting systems is their adaptability. Hundreds of apps are available which work with the system to help give you more intelligence about your business. If the cloud accounting system is the hub, apps are the spokes which support the turning of the wheels of your business.
By using other apps you can have the functionality of the type of multi-million-pound accounting system which only Blue Chip businesses used to be able to afford.
The functionality provided by these apps can add significant value to your business by streamlining processes, putting you more in control of your business, saving you time and meaning you are better informed.
It’s definitely worth the time investigating which apps and bolt-ons are right for your business, but if you want expert advice based on decades of experience, I’m always happy to help - if you want to know what my top 3 apps are then drop us a line at firstname.lastname@example.org