It seems that every aspect of business these days incorporates tech so it’s no surprise that digital transformation is about to change the way businesses manage their books.
Already many businesses – particularly small and medium sized enterprises – use cloud accounting software such as QuickBooks or Xero to keep on top of their finances. These software providers have broken the monopoly of Sage, which lots of people will be familiar with.
My job title pretty much sums up the direction of travel for where accountancy and bookkeeping is heading – the cloud.
Cloud software is a fully integrated solution that brings together everything from bills and receipts to bank statements and invoices into one place, in real time.
Much like you allow apps such as Facebook or Twitter to have ‘permission’ to access certain details about you, this cloud-based software allows your bank to feed transactional information into your accounts to make the book-keeping more efficient. Most clever is that the software uses artificial intelligence so that they are continually learning and remembering previously entered information to speed up the process.
A simple example is the ability to take a photo of a receipt through an app on your phone, which can then be uploaded into the accounting software. The OCR technology will read the details from the receipt and store a digital record of the receipt image.
One of the other reasons to move onto cloud software is the new rules on Making Tax Digital (MTD), which you may have heard about recently. HMRC are in the process of digitising the tax system, beginning firstly with VAT from 1st April 2019.
MTD requires most UK businesses above the £85,000 VAT turnover threshold to keep records digitally and submit VAT returns to HMRC using MTD-compatible software.
HMRC are now due to begin contacting affected businesses, as many are still unaware of the changes and implications on VAT filing. April may seem a long way away, but it’s important for businesses to plan for conversion to a compliant software now, or to discuss other options such as bridging software, which ‘bridges the gap’ between spreadsheets and HMRC. Making Tax Digital puts the onus on businesses and accountants to move forward into the digital world, which HMRC believe will reduce the number of ‘careless errors’ made when preparing VAT returns.
From an accountancy profession standpoint, we can use this new technology to save time inputting and processing, which allows us to add more value to our client work. As less time is spent doing the book-keeping, we can help with important things like cashflow forecasting, management accounts and projections. As the software is accessible and updated in real time, business owners no longer have to look back at historical information to make decisions.
The digital transformation allows accountants to dedicate more resources to analysis and providing advice to clients, which can help grow their business and manage risks on a timely basis.