Small Creative Agency Owners and Freelancers: 6 Reasons You Should Have Swapped Spreadsheets for a Cloud Accounting Software like Yesterday!!
HMRC is digitising the UK Tax System. The transformation started in April 2019 with Making Tax Digital (MTD) for VAT for businesses with taxable turnover above the VAT threshold (£85,000), VAT-registered businesses with a taxable turnover below £85,000 will be required to follow MTD rules for their first return starting on or after April 2022.
Self-employed businesses and landlords with annual business or property income above £10,000 will need to follow the rules for MTD for Income Tax from their next accounting period starting on or after 6 April 2023.
So, If you’re still using spreadsheets for your small business accounting then it’s most definitely time for an upgrade. In fact, using spreadsheets is almost as outdated as working with pen and paper! Hence, let’s take a look at WHY you should swap your spreadsheets for a cloud accounting software, and HOW to make the transition smoothly.
1. Data Entry
Not only is manual data entry mind-numbing, it also makes it very easy to make mistakes. Just one typo could lead to major errors, including mistakes on your tax return which may result in missed deductions or penalties.
Cloud accounting software, however, allows you to upload your receipts and invoices directly and keep accurate records, removing the need for double data entry and reducing the likelihood of mistakes.
2. Lost Data
The larger a spreadsheet becomes, the more likely it is to either crash or corrupt, resulting in lost data. However, your records don’t cease to matter once your tax return is filed. It’s important to keep your records for audits and to track the company’s progress over time. Leaving your data in a spreadsheet leaves it vulnerable, whereas cloud-based accounting software provides multiple layers of protection to keep your information safe.
Spreadsheets don’t tend to integrate well which can lead to a lot of stress and wasted man-hours. Saving a spreadsheet in a new location can corrupt files and break links, causing countless problems. However, cloud accounting software automatically syncs your data across a range of devices and is designed to integrate well with other software, permitting seamless sharing and collaboration.
4. Audit Trail
Spreadsheets don’t create a clear audit trail in the same way that accounting software does. For example, you may see that something was changed but be unable to identify the exact details. It’s important to keep a step-by-step record to keep your company safe and your records accurate. Accounting software allows you to easily keep a log of all changes made to your files, dating right back to the moment they were initially created.
Spreadsheets tend to be much more time-consuming than cloud accounting software, especially if you’re working with a high volume of data. Using spreadsheets requires you to spend a lot of time on data entry, preparing reports, and verifying information. This could cost you days’ worth of man-hours! With cloud accounting software, on the other hand, these processes take mere minutes to complete.
The sharing functionality of traditional spreadsheets tends to be slow and can become confusing when multiple people try to work on a document at once. Cloud accounting software is designed to be collaborative and, as mentioned previously, automatically syncs across all devices, permitting seamless sharing and creating an accurate audit trail.
How to Choose the Right Cloud Accounting Software
The right cloud accounting software for your small business will depend on your particular requirements, and it’s worth asking your Accountant for recommendations.
We recommend considering the following:
Which systems do you want to integrate the software with?
How many people will use the software?
Which functions are most important to your business?
What is the upfront cost or subscription fee?
How much training is required?
What support is provided?
Is the software scalable as your business evolves?
From My Business to Your Business
Cloud accounting software can save you a huge amount of time and money, as well as protecting your data (GDPR), and maintaining more accurate records. But, the reality is, with HMRC’s vision of digitising the UK Tax System, there is no way out for you and your small business to keep your Old School accounting system up to date.
You're very welcome to get in touch with Grace Certified Accountants if you have any questions.
I hope this information helps your business run more smoothly through these difficult times.
Director & Managing Partner
Grace Certified Accountants