Making Tax Digital: Every cloud has a silver lining

With the initial deadline for Making Tax Digital (MTD) upon us, it’s important to make sure that all our clients are compliant or will be by April 2020 if they are to avoid penalties. Ultimately, it’s our job as accountants to communicate the benefits of switching to digital accounting methods. Rather than fearing these changes, businesses should be ready to embrace a paperless future. MTD will essentially streamline accounting methods for ourselves and the clients we work with.

Despite the noise around MTD, cloud accounting is nothing new. Digital accounting platforms have existed for a number of years and many of us have experienced it at some point or another during our accounting careers, so MTD shouldn’t come as a shock to us. The issue is convincing our clients to also adopt this outlook.

According to the Making Tax Digital Monitoring Businesses’ Awareness of MTD report, 20% of VAT-registered businesses still have no idea when they plan to sign up, and 11% still do not know what MTD is. With 25% of businesses saying they are relying on their accountant to advise them on when to sign up, every accountancy firm needs to ensure that all of their clients are aware of these changes.

Harris Lacey and Swain adopted digital accounting over three years ago, long before MTD was made compulsory, and we have been advising our clients to make the move to the cloud ever since. Last November, we were the first firm in the UK to submit a VAT return on HMRC public beta for MTD using QuickBooks, and we found the entire process incredibly quick, easy and virtually seamless. The software is easy to navigate and it was reassuring to know that any compliance issues would be resolved by the software.

Suffice to say, some of our clients were sceptical to sign up at first. We’ve had to work through a number of misconceptions around online security, since realising the benefits of digital accounting methods, they’ve never looked back. We have clients ranging from one-man bands to multi-million-pound turnovers that have taken on the software themselves, and have found the digital transition smooth and the software straightforward. In fact, many of them are wondering how they ever managed without it, with common feedback highlighting the amount of time it saves them – mainly due to how streamlined these processes are.

So, if the process is this easy, why are people still afraid of cloud accounting? The MTD report claims that 33 percent of business owners view MTD as an expensive endeavour and not worth the hassle. As their accountant and financial advisor, it is your job to reassure them by guiding them through the entire process, explaining the benefits and relieving them of their concerns.

With so many different systems on the market to choose from, the right system can be found at the right price and, with your assistance, they can find an MTD-certified software that complements their current systems in place, adding value to their business by improving efficiency and productivity.

For instance, a retail business would benefit more from QuickBooks that can seamlessly sync with their current e-POS, whereas a service provider or agency may prefer the simplicity and straightforwardness of Xero. Most platforms offer free trials, so you can find out if a software works for your client’s business before committing to signing up.

Dependant on who your clients bank with, some systems are actually free to sign up to. Customers of NatWest and the Royal Bank of Scotland, for instance, can sign up free to MTD-certified FreeAgent.

As ambassadors of QuickBooks, we stand firm that cloud accounting works for the better, so much so that we cover the cost of their subscription. Why do we do it? Because it makes our job easier, too.

Cloud accounting is effectively no different to our day-to-day bookkeeping routines, the only difference is that rather than inputting our data in an Excel spreadsheet, we just simply input it into a cloud software. Then when it comes to filing VAT returns, the data is already there for us, saving us from having to input it all over again, reducing human error, missed information and rapidly speeding up the mundane process.

There are obviously monthly fees to use a system, which is to be expected, but this should not be seen as a cost as much as it is an investment. The fees paid monthly will be gained back in time as cloud accounting can save up to 1/3 of accounting time per month. In this sense, the benefits outweigh the cost.

Many think that MTD is a burden but, for the accounting industry as a whole, it is a huge benefit, hence why we support all the well-known systems. Upfront costs (such as training and set-up) can be off-putting to your clients, but in the long-run the software is designed to streamline financial management, reducing the risk of common mistakes and ensuring compliance, saving your clients money – and saving your priceless time.

This guest article was written by a representative from Harris Lacey and Swain chartered accountants.