As a small business owner, you have to be on top of several business functions at once, including IT, recruitment, marketing and sales. Many of these areas you may not be familiar with and more often than not the area that many small businesses quickly find themselves out of their depth with is the finance and accounting side of their business. It’s why, as a small business owner, you’re far more likely to outsource your accounting work to professionals, leaving you to get on with the more important task of running your business, without having to worry about what taxes you need to pay or the constant rule changes being implemented by HMRC.
Having said all this, it is essential that any small business owner be on top of their finances and an element of day to day bookkeeping is simply unavoidable. This is when cloud-based accounting apps such as Xero and Freshbooks can really make your life a lot easier.
Created with the small business owner in mind, these apps have a range of tools allowing you to do things like view your ledger, bank statement and create budgets using a simple interface. They can help you to calculate your VAT; send and receive invoices; track your expenses; or produce reports to help you, your partners or shareholders understand your financial position in minutes.
What’s more, many of these cloud-based accounting solutions come in modular form, meaning you pay only for the functionality that you require rather than incurring substantial license fees for an all-encompassing package.
Here we take a look at five ways cloud accounting software can empower small business owners and startups.
Easy management from anywhere
Cloud accounting software is hosted remotely, giving you access to your accounting and bookkeeping data wherever you are in the world at whatever time you need it – all you need is a smartphone, tablet or laptop, an internet connection and your login details. What’s more, because cloud software functions online and not on desktop software, other company employees can access it easily from any location on any device.
Real time financial information
You’ll always have an up-to-date view as to what’s going on with your company’s finances with cloud accounting software. Contrast this real-time financial information with the traditional approaches in which you’d have had to sieve through page after page of management reports just to get some idea as to where you were financially. Today it can be done in seconds.
All this results in a far more efficient way of keeping up to date with your financial position. Perhaps you need to know how much of a certain product you have in stock, or when a customer is due to make their next payment. All this is available to you and any colleagues you authorise at the touch of a button.
Less paper, more accurate
Expenses, receipts, invoices and bills can create more paper than you can keep track of, making bookkeeping a tedious job. With cloud accounting software all this paperwork can be scanned and imported straight to the software’s database, reducing the chances of human error, especially if you have more than one person entering the data. All this allows for the creation of a detailed paper trail that results in more accurate auditing and greater accountability.
As a small business, you’ll be looking to keep costs to a minimum and this is where cloud accounting software can help. Using the cloud means you won’t need to invest in physical servers, saving you money on hardware and IT support.
Because most cloud accounting solutions are modular in nature, you only need to purchase the number of users and functions that fits your company’s needs and size. You can add tools to your plan should you need to in the future. In addition, you’ll be spending a lot less time with your accountant, as you’ll both have access to the same online ledger.
Finally, because cloud accounting apps are classed as Software as a Service (SaaS) you don’t have to pay a large one off fee for a single licence and are always guaranteed to have the most up to date version of the software.
Simplifies tax compliance
By 2019 the UK government expects all VAT registered businesses (those turning over £80,000 or more) to comply with their Making Tax Digital (MTD) rules. This requires these businesses to record all their tax returns using HMRC-compatible software and submit quarterly, rather than annual, returns. All annual statements must be created on the digital platforms HMRC provides as well.
The good news is that cloud accounting apps like Xero are designed to comply with these new changes. The software will create HMRC compliant tax returns and annual statements, greatly reducing the chance of error and the need for you to spend hours liaising with your accountant to get your tax information HMRC compliant.
With MTD changes fast approaching, this alone is a compelling reason to invest in cloud accounting solutions to ensure your business remains on the right side of these and any future new rules the taxman may throw at your business.
About the Author: Andy Hyland is a certified Xero Accountant and the owner and director of AK Tax, an accountancy and tax advisory firm based in Medway, Kent. You can connect with him on Twitter, Facebook and LinkedIn.