Imagine a future in which you dealt with your receipts by taking a photo on your phone, or one in which all your business records were available online 24/7.
There are lots of solutions available but how do you know the one you choose is the best, or even that it will be available tomorrow? This online accounting guide walks you through key issues to help you make an informed decision.
The world is changing and the business world is no exception. Once, accounting ledgers were written longhand in copperplate handwriting but now no one would think of recording transactions that way.
In the 21st century, with mobile phones and OCR in conjunction with sophisticated accounting software, so much can be automated. And that leaves you with more time to run your business as well as access all the data you need to make good business decisions.
Soon, Digital Tax Accounts will be the normal way HMRC works with taxpayers and accountants and using online accounting software will become essential (rather than using spreadsheets). So, rather than being reluctantly forced into a new way of working, why not be proactive and embrace all the advantages of doing so?
Why would you not want to record receipts with a photograph and have the transaction automatically entered into your accounts? Why would you manually reconcile bank statements when you can have an automatic bank feed to software that recognizes regular transactions and automates their entry?
So whether you are just starting out in business, or your business is growing, and you want to ensure you use a streamlined, efficient tool that saves you more of your hard earned cash, then we urge you to start online accounting straight away.
There are a number of cloud accounting software solutions which vary in the range of features, the ease of use and the quality of reporting. In additional some link with a number of external services (like taking card payments and credit control). Here are some of the most used systems…
How do you choose? Here are some things to think about while you are searching:
It’s always best to talk to users and accounting experts who specialise in setting up new businesses with online accounting software. They are likely to be using several of the different software systems already and know what will work for you.
There are several good systems out there but we have come to prefer QuickBooks online as it has all the features you want, backed by a great range of apps, and all at a reasonable price. What’s more, the company has the resources to continue to develop and improve the software over the long haul.
Setting up the system correctlyEvery accounting software system will have default settings but they may not suit your business. Making sure you set up bank accounts correctly and run a proper director’s loan account can be very confusing to the non-specialist. So take time and get advice to make sure everything is set up correctly from the start. In the end that will save both time and money, as well as enabling you to get the most from the software you have chosen.
You can report on just about everything from a good and well set up online accounting system. You should also be able to set up the software to show you a visual dashboard of your business progress.
You will also want to know who owes you money and for how long (You can also get apps to automate the debt chasing process – see below). You will certainly want to know which products and services are making you money and which are losing you income.
A good system gives you control over your business so you can make good decisions based on up to date knowledge of the facts.
Once you have chosen your software, you should (if it’s any good!) be able to add on apps that will help you automate credit control, produce fantastic projections, take credit card payments and much, much more. There are loads of apps for QuickBooks Online and Xero who probably have the widest offerings.
Handling receipts efficientlyOnce you had to take all your receipts back to the office and someone (usually you!) opened the accounting software and typed in the company name and address, amount, VAT amount and how it was paid.
Today you don’t need to do any of that! Take a photo with your smartphone using an app like ReceiptBank. Then click to upload, and their software will recognize all the information above and, when you are back in the office, ask you if you want to enter or amend the entry.
Or, even easier, get your accountant to handle the office function and train the software to recognize transactions and enter them into the right category for your accounts. It really doesn’t get any easier.
So is there a catch? Well, yes … and no! The software will do exactly what it says if it is set up correctly. The weakest link is usually the human software. The data cannot get automatically entered if you don’t take a picture of the receipt. Bank accounts cannot be automatically reconciled if the bank feed isn’t downloaded.
None of the above is remotely difficult if done regularly. If you don’t let the train pull out of the station before you have snapped the ticket receipt, or leave the coffee shop without pulling out your phone, then you’ll be fine! Everything will be there and up to date. However, if the bills pile up then your business reports will be out of date and you will be back to late night sessions with piles of paper!
It’s all a question of creating good habits and establishing a regular routine. Once you’ve done that, everything is easy and you will save lots of time to run your business better.
Keep the taxman at bay!You will still, of course, have to complete VAT returns, prepare accounts and send tax returns to HMRC. But keeping your records up to date should take the stress out of the statutory reporting. With some help from your accountant (who can work on the accounts while you are still using the software) then reporting to the taxman should be both easier and more prompt.
A great accountant will help you get started, be there to support you through the early days, and then teach you how to use reporting to grow your business. They will be an adviser, trainer and help you to make more profit in a tax-efficient way.
Building a long-term relationship with an experienced accountant will undoubtedly help you enormously. You will want to be sure you get good value, though the cheapest option may not provide that. They should know the software you use incredibly well and, ideally, like us be certified pro-advisers in online accounting.
Ideally, you will want to build this relationship from the very start of your business but, if your current arrangement is not working, then change as soon as you can.
Hi, I’m Ian Marlow and I lead the team at HFM Let's discuss how you can go digital
