With Making Tax Digital being introduced in April 18, all small businesses will have to keep their records digitally – “in the cloud.”  But what is that exactly and should you be getting ahead of the game and moving over now?

Cloud accounting is the same concept as accessing your bank account online.  A few years ago, you wrote cheques and sent them in post; you would never have thought of accessing your bank account and doing your banking online.  With an online accounts package, you can access your data from anywhere and upload expenses and receipts to it as you get them in the shop.  You don’t need to install software on your desktop, keep it up to date, or back up your data.

If your computer dies, all is not lost as your data is still there in the cloud.

The real benefit of cloud accounting is that it is done in real time, so your accounts are always up to date and you can make business decisions based on actual information.

Giving your accounts to your accountant 8 months after your year end and getting them back a couple of weeks later may tell you what tax you have to pay, but it’s a bit late for your accountant to then point out that your advertising spend was out of control, or you have several invoices that haven’t yet been paid.

Cloud accounting gives you, and your accountant relevant information on which you can make informed decisions.

So how does it work? 

In most packages you raise your invoices in the software – and email it straight out.  It can automatically send out reminders to your customers that the invoice is due for payment, or overdue.  You can get your bank statement “fed” directly into your package, and simply set up rules, so that every time the software sees a payment to say “Shell” – it puts it in the “Motor expenses” category.  No need to produce a spreadsheet for your accountant to go through.

The popular “add-on” is an app called Receiptbank – which you have on your phone and you simply take a photo of your receipt and press a button.  It makes a lovely “whooshing” sound and that’s all you need to do.  You can bin the receipt, knowing that it is safely recorded in your accounts.

No more throwing all your receipts in a pile to deal with later, or losing them and not being able to claim for items because you can’t find the damn paperwork.

Cloud accounting is generally subscription based – so you will pay anywhere between £5 and £30 per month depending on which package and product you go for.  Most VAT registered small businesses will pay between £10 and £20 per month.  Popular options are Kashflow (my favourite), Quickbooks,  Xero and Sage – and most will offer a 14 day trial so you can try before you buy.  Receiptbank is usually about £10 a month on top of this.
There is a more basic version of Receiptbank called 1Tap – ideal for non-vat registered sole traders – at only £6 per month.

So it may sound expensive – but £25-£30 a month could completely transform the pain that is doing your accounts.  How many hours does it take you a month?  How many hours on top of that putting it off?  What’s that worth to you if you got that time back and could use it to either do more billable work – or spend more time with the family?  With these package you will definitely save time – and stress!

So is it for you? 

For all but the very small businesses, I would say yes.  Making Tax Digital is going to force it on you anyway, and I’m advising all my clients to make the switch from April 17 so are fully up and running when MTD comes in. Just image a world without the dread of accounts………..!

For more information please contact Rosie Forsyth.