Cloud accounting software – should I bother
In the last 10 years or so, cloud accounting software has come a really, really long way. It’s my opinion that there is now almost no reason why every business owner should not be using cloud accounting software.
Cloud accounting software is where your accounts are held digitally on the web – all your income and expenditure, bank transactions, stock fixed assets, payroll etc – so a bit like the old desktop accounting software of old, but much better and far easier to use.
You see, what some software providers did since the cloud revolution was simply to port their existing desktop produces onto the web. These were accounting systems designed by accountants for accountants. Needless to say they were awful to use before for anyone who was not an accountant, and they remain about as awful once online, only prettier.
The clever, or sometimes simply just new companies in this space cottoned on quite quickly to the idea that with the cloud revolution, the accountants stopped being the priests of finance – their products were built to be used by “normal” people – not accountants. Probably the best example of this was FreeAgent which ranks amongst the most user friendly accounting software ever, without compromising on quality.
So cloud accounting is for everyone, not just accountants but let me run through just a few common but major benefits of almost all cloud accounting systems:
Its on the cloud…
Errr – yes – obvious one there. But take a moment to understand what that means. Offsite data backup, collaboration, software updates, access anywhere – all the normal reasons cloud systems tend to be favoured.
Your accountant can join in – hurrah!
Yes – when you get stuck – you can simply call your accountant and say “hey, what’s going on here”, and your accountant can log in and sort the problem out.
Also you don’t need to send the accountant anything at the end of the year, and (if your accountant is any good at all) you accountant will update your accounts at the year end for any adjustments so that what is in your cloud accounting software matches what has been published at companies house, or in the tax return, so you never need to wonder how your accountant ended up with a particular figure.
Bank feeds
Bank feeds are just simply brilliant! With bank feeds your accounting software connects to your bank and pulls in all your bank transactions – so no more data entry or data uploads required. Often, for many smaller businesses, you can simply explain or code up the bank transactions and that is much of you bookkeeping done.
Bank feeds make what once could turn into a complex procedure – a bank reconciliation (where you compare what the accounting system says it thinks the bank balance is compared to what the actual bank balance is) – into something that is now usually quite simple as the bank transactions in the accounting software are basically a carbon copy of the bank statement.
It gets better though – with many accounting systems you can set up bank rules (Xero’s are particularly good), so that every time it encounters a transaction that it recognises, it deals with it. Most software can do this and it can be set to either suggest, or fully automate, depending on the level of control you need.
Coming down the line is AI which should make the categorisation more accurate and more slicker.
If you are concerned that this sounds like a risky security threat – a bit of software “reaching” into your bank account, rest assured that the UK has now agreed on and launched a common standard called “Open Banking” to allow for the safe and secure transferring of banking data between systems.
Send invoices, get paid
For those of you who raise invoices, the accounting systems can all create invoices and send them via email to the recipient. Almost all software will allow you to attach a “payment processor” which means that you customer or clients will open the invoice and be able to pay there and then by card over the internet. Some of the key players in this are the likes of Stripe and Square.
It makes you look professional, means your invoices are more likely to get paid easier and is normally very cheap (the payment processors take a very small cut). What’s not to love…
Integration Integration Integration…
Xero are the reigning world champion at accounting integrations with the biggest ecosystem of apps to add on and extend its functionality.
Integrations are basically when you connect other apps and software to your accounting package so that the systems talk to each other. Whether its your website, or you Amazon store or you CRM, having your systems talk to each other is incredibly helpful and ultimately saves you admin.
Take a look at their apps page to see the sort of things you could expect: https://apps.xero.com/uk
VAT and Making Tax Digital –
MTD has changed things dramatically by forcing many businesses into using a digital accounting system. To my mind it was a good move by the government. The thing about MTD was it was initially only for VAT registered businesses over the £85k turnover threshold. Now its being extended to all VAT registered businesses (or at least the submission method is) and so all VAT registered businesses should now be migrating onto cloud software.
MTD compliant software means that the numbers that get submitted on your VAT return can be traced directly back to the accounting entries – again, no more guess work required as to what was or was not included in the previous VAT return.
I could go on and on, but I won’t. The benefits of cloud accounting software is huge, which leaves a couple of other questions then to answer:
What’s it going to cost me?
Is this not quite a lot of hassle to migrate?
Won’t there be a steep learning curve
Feel free to click through these links for the answers….
