I was just reading on a website about a new software which has been designed to help businesses who use an excel spreadsheet for their bookkeeping submit their VAT returns from when Making Tax Digital is implemented next April. It says ‘Why get involved with complicated expensive software when Excel has always done the job?’ and encourages businesses to continue to use a spreadsheet for their bookkeeping and to use the bridging software for VAT submissions.
What are your thoughts on that? I of course fully understand and appreciate that there will be many business owners out there who are reluctant to move away from an excel spreadsheet and the way they have always done their bookkeeping. They know it, they trust it and they feel they are in control of things.
However, if these business owners are not shown the broader alternatives and opportunities of using a cloud based accounting software that will be Making Tax Digital compliant, then are we missing an opportunity to really help our clients and other business owners that we know?
Let’s put Making Tax Digital aside just for one moment. What are the day to day benefits of using a cloud based bookkeeping software like Xero, Quickbooks online, Kashflow or Freeagent rather than a spreadsheet. Well, here are just some of those;
Limitations of a spreadsheet for bookkeeping
- When using a spreadsheet, you may make a typing error or formula error that you do not notice and this could impact on the final figures you are providing. If you are using a cloud based software then these errors can be more easily identified and corrected.
- Spreadsheets can be damaged or corrupted, meaning you lose meaningful data. If using a cloud based software, this is less likely and you have the back up of the software company to go to for help and support
- If you are using a spreadsheet, then you are possibly raising sales invoices either in a separate system or using a Word or Excel template. By using a bookkeeping software, you can create these simply and easily in the software and email them out to your clients. You can copy previous invoices and set up recurring invoices – all of these things are a massive time saver and you can do this from your phone, tablet or laptop from anywhere.
- Using a spreadsheet, there are no standard reports you can run which provide you with the information you need. You would have to create linked spreadsheets to pull information through into the format you need.
Easier to monitor and manage your finances
- Using a bookkeeping software, when you have input the transactions and reconciled everything, you can generate user friendly reports which tell you how your business is performing and whether you are making a profit or not. You can analyse your financial information and use it to make informed decisions in your business. It is so much easier to do this on a bookkeeping software than a spreadsheet.
- You can put budgets into your software and then compare your actuals with your original budget.
- If you have key performance indicators for your business, you can use the software to help you measure whether you are achieving them.
- You can use the software to chase your customers for payment – generating email statements and reminders.
- You can also use your software to inform you which of your suppliers you still need to pay.
Saving time with streamlined ways of working
- Scanning your documents into the bookkeeping software or via another software such as Receiptbank, means you can go paperless as all your documents will be stored in your software. This is a great way to work and saves you hunting through files for particular documents.
- Automatic bank feeds which pull through the transactions itemised on your bank statement, making your bank reconciliation so much quicker.
Enabling others to support you
- Cloud based softwares enable you and others (that you give permission to) to access your account from any location. You can therefore let your bookkeeper and accountant access your accounts via your bookkeeping software so they can help you run your business.
- You can outsource with complete confidence as you can let someone else do the work (freeing up your time) but still be able to see the data and keep complete control of your finances.
You can do so much more than basic record keeping
Here are just some examples of the functions you can use (in addition to your bookkeeping);
- Calculation and submission of VAT returns
- Credit control
- Maintenance of your customer and supplier data all in one place
- Running your payroll
- Storage of your financial documents in the cloud
- Project management
So where does this leave you reading this blog? I’m really hoping that lots of businesses who are needing to find a solution will take the opportunity to move off the spreadsheet and on to a cloud based software rather than staying with the spreadsheet and the ways the have always worked and using a bridging software for Making Tax Digital. They will be missing out on a great opportunity to really change how they work and manage their finances.
If you are an accountant reading this blog who is thinking about what solution to apply to their clients or a business owner not sure which way to go, please contact us. We have a free Making Tax Digital guide or call us for a free telephone consultation. We are Xero certified gold partners and can show you how to become Making Tax Digital compliant but also get the great benefits of working with Xero software. www.thebookkeepingdepartment.co.uk Tel: 01462 455455.