Why should I switch to cloud accounting and how do I get started?!
PUBLISHED: 15:59 07 November 2018
There's a reason everyone's going on about cloud accounting - it's genuinely really good. Kristel Naughton at Paish Tooth explains why...
Everyone’s banging on about cloud accounting these days. You can’t escape it – there are even adverts for it on TV. Maybe you’ve been meaning to give cloud accounting a go, but it seems such a hassle to make the change that you haven’t quite got round to it. Or maybe you really can’t see the point. But there’s a reason everyone’s going on about cloud accounting – it’s genuinely really good. And here’s why...
Making Tax Digital – we’re all going digital whether we like it or not
First announced in 2015, Making Tax Digital (MTD) is a long term plan from HMRC, designed for ‘individuals and businesses to get their tax right and keep on top of their affairs’. The key point of this new scheme is that taxpayers will be required to keep digital records and to interact digitally with HMRC. Ultimately, HMRC will expect the majority of taxpayers to comply with these rules. There will be very few exceptions!
Making Tax Digital for VAT
Because it’s such a massive change, MTD is being introduced in stages. The first stage of the plan is to introduce a new system for filing VAT returns. So, from 1 April 2019, complying with MTD is going to become compulsory for all VAT registered businesses with a turnover over £85,000 a year.
So how is cloud accounting going to help me with MTD?
If your business is going to be caught by the new rules you’ll find cloud accounting is by far the easiest and best solution to tackle MTD. Perhaps you don’t yet meet the criteria for MTD for VAT, and so you don’t have to change just yet. But why not make the change now and be ready? Migrating to any new method of bookkeeping is always going to be a daunting task, and it’s even scarier if you currently use spreadsheets or manual cash books. But trust me, the change will definitely be worth it. Cloud accounting is about so much more than merely complying with MTD – it brings a whole host of other benefits besides.
Why else should I migrate to cloud accounting?
Cloud accounting puts you in a far better position to manage your business – it streamlines the whole bookkeeping process, and provides you with the latest relevant information on how your business is performing. Increasingly, businesses are using a variety of online digital services for banking, paying bills, sending and receiving invoices etc. The pace of change is rapid to say the least, and if your business isn’t going to get left behind then you’ll need access to appropriate software which is up to date and available when you want it.
Okay, so how do I go about making the switch to cloud accounting?
As with any large project, the best approach is to break it down into stages and then work through it methodically so that you can monitor progress. These are the key stages to attacking the cloud accounting project:
1. Select a software
2. Create a chart of accounts
3. Enter opening balances
4. Set up bank feeds
5. Get processing data!
1. Select the right software for your needs
The PT team are experts at using cloud accounting software and we’ve identified three major suppliers whom we feel can deliver the goods:
• Quickbooks Online
• Sage Business Online Accounting
Xero is perhaps the leader in this field, and it’s better suited to businesses with larger volumes of transactions. Xero offers greater functionality to amend transactions and it provides a VAT report which allows you to see all transactions for the period.
In my experience Quickbooks is currently better for those businesses that are relatively small and have fewer transactions. It’s more time consuming in Quickbooks to correct transactions after they’ve been posted, but if you have straightforward accounts it will present no problems.
The benefit of using any ‘mainstream’ software such as Xero and Quickbooks is that they provide lots of videos and training which can help you gain a better understanding of the product.
Also, being widely used means that they constantly receive feedback and online requests for improvements, which can rapidly filter through to updates in the software.
2. Create a Chart of accounts
These are the accounts you’re going to need to enable you to categorise your income and expenses. Often there are template chart of accounts that the software will allow you to use. A good starting point is either the categories in your current bookkeeping system or those set out in your financial accounts. This is so that the standard chart is personalised to your business. 3. 3. Enter opening balances
When you’ve decided to make the change, it’s important to ensure that your new accounting system gets off to a good start. Start by simply entering your opening bank account balance – the remainder of the balances can be confirmed by us at a later date, once the previous financial year has been completed.
4. Set up your bank feeds
Cloud accounting packages have the facility either for direct bank feeds, or for the information to be provided by a third party, such as Yodlee. This means that all bank transactions are automatically recorded in your accounts. The possibility of error is eliminated and it’s easier for you to reconcile your bank account.
Some bank direct feeds have additional charges, but they do run seamlessly without interruptions. Yodlee is free but tends to require the feed be updated every so often.
5. Get processing!
Now you’re ready to get started!
Any of your customer and supplier information which you currently keep in spreadsheet form can be copied into a template and then uploaded into the bookkeeping system. This then forms a contact database for you to use when you’re out and about, as cloud accounting software also has apps that can be installed on your mobile phone.
As long as you’ve got an internet connection or a mobile phone signal then you can work anywhere – solving issues for many busy business owners.
The best way to ensure your software is set up properly is to contact us early on, and let us help you with your migration or review what you have done so far. We also offer training on the software which will help you get to know the best and most efficient ways of processing transactions for your business.
So what’s holding you back? Jump on board and let’s get going!
For more information, visit the Paish Tooth website.