As predicated in my last article, there was a last minute change requested by HMRC on how accounting software authenticates with its own systems. This was presented to us developers in a somewhat disingenuous manner by HMRC; we were ‘advised’ to make the change, as if the change was an optional choice for us. This, of course, is a nonsense. If we did not make the advised change, the software would not have worked and it would not have been compliant come April 2019. We have since made the necessary changes.
Given this experience, it does go to show up the pretence of a lot of the communication from HMRC and other accounting software manufacturers in recent months. How can so many other software accounting packages be declared ‘MTD ready’ when the parameters of what is required by the software from HMRC is still in flux?
In addition, HMRC have publicly promoted two lists of accounting packages, one of accounting software that is deemed to ready for MTD (beta-testing) and another of software that is developing MTD capabilities. Prelude, my own software, is cited on the latter list but, not wanting to sound too petty about it, shouldn’t all the software feature on the second list given my argument above?
Regardless, Prelude is always fully compliant on any given date when legislation and new processes require us to be, and we are going to be MTD compliant as of April 2019 (if not before) [Update: We’re now MTD Compliant]. In other words, we are ready when we need to be and not unnecessarily sooner.
The flipside of all this is whether accountants are really ready for MTD themselves. Despite all the publicity surrounding the introduction of Making Tax Digital in both the mainstream and accounting press, our own market research has shown that a worryingly large number of accountants (including ICPA members) are either unaware of MTD and its implications, or are clinging on to the belief that MTD will be scrapped at the last minute, whether that be due to wider political pressures (surrounding issues such as Brexit) or a lack of faith in HMRC’s own IT capabilities.
At the time of writing (February 2019), there is no sign of Making Tax Digital being scrapped before its first wave (MTD for VAT) in April 2019 – just two months out. MTD is going to happen, and I suspect that those accountants who are unaware of it will fold overnight, while those who thought it wasn’t going to happen will be scrabbling to get up to speed as quickly as possible (and will probably lose unimpressed clients in the process).
For those who are aware of the implications of Making Tax Digital on their business, I wonder how many have yet fully stress-tested their processes and software to make sure they can implement MTD for VAT when the time comes. If you yourself have yet to do this, I urge you to do so, if it is not already too late.
Any responsible software developer will make sure that there are clear guidance notes on how their software is to be used to fulfil the MTD for VAT process. Make sure you read the advice thoroughly and do a trial run at the appropriate juncture. Prelude will be producing clear to follow instructions for our users, and we also have a customer support team on hand who can help those still stuck with the new processes.
The next article you will read from me in Accounting Practice will be after the introduction of MTD for VAT, and we will all be lot more aware of how it is working in practice. All I can do now is to wish you luck and urge you to fully embrace the accounting software you have chosen. Prelude is always on hand as a cost-effective alternative to your existing software, and with our aforementioned guidance notes and customer support services, we plan to make the transition as painless as possible. Get in touch with me if you want to know more.
For more information about Prelude, e-mail firstname.lastname@example.org or call 0845 223 2170. Prelude is now MTD compliant.
Retail sales where the total transactions for the day are recorded – No change
Export Sales – Depends on the outcome of Brexit; Advice will be in available in due course
Expense Claims – No change
Purchase Invoices –New system needed
With purchase invoices, one illustrative scenario is when a small business receives over 40 invoices for small amounts from one supplier. Can such a small business post just the totals for the month from a statement? According to the HMRC website, before Making Tax Digital the answer was probably yes:
“You can keep VAT records on paper, electronically or as part of a software program (e.g. bookkeeping software). Records must be accurate, complete and readable. If you’ve lost a VAT invoice or it is damaged and no longer readable, ask the supplier for a duplicate (marked ‘duplicate’). HMRC can visit your business to inspect your record keeping and charge you a penalty if your records aren’t in order. You can hire a professional (e.g. an accountant) if you need help with your VAT.”
It would appear that, as long as all the invoices are included in the statements and the total net plus total VAT from the invoices agree with the statement total, and all are filed together, this is allowable.
However, with Making Tax Digital, things will probably be different.
“For each supply you receive you must record: the time of supply (tax point), value of the supply, amount of input tax that you will claim.“
and the same same paragraph goes on to state:
“Where an invoice includes supplies with different times of supply that are within the same VAT period, you may record all supplies on the invoice as being at the same date.”
Therefore, in the scenario above, it may be possible to ask the supplier to provide one invoice per month at the end of the month or, if he must produce individual invoices, to then also produce a ‘Total Invoice’ for the month’s transactions and an associated ‘Total Credit Note’. The business can then match the Total Credit Note to the individual invoices and file them together, then post just the ‘Total Invoice’ in their accounting software. Of course, this is asking the supplier to do more work in order to make the business’s life easier, which might not get a positive response from the supplier.
“It is not acceptable to make one digital entry for purchases and sales based on a statement amount or payment total.
Many users of the cash accounting scheme post a single cashbook entry when a supplier is paid, which might encompass 10 or 20 different purchase invoices, and the input tax claimed might be totalled on a calculator. From 1 April 2019, each invoice within the payment must be separately entered digitally, showing the net and total input tax figures (VAT Notice 700/22, para 3.3.3). HMRC claims this has always been necessary, although it has not happened in practice. The same outcome applies with sales, i.e. a digital entry must be made for each sales invoice.”
In conclusion, the changes can be summarised as:
Sales and purchase invoices with more than one VAT rate do not have to be split
Imports will be affected by the outcome of Brexit, which we do not know at the time of writing.
There is an extra digital process for group registrations, namely that there must be a digital link between the VAT totals for each company to the consolidated VAT return that is prepared and submitted digitally by the representative member to HMRC. This might be done by linking the VAT totals to a consolidated spreadsheet.
“During the soft-landing period between 1 April 2019 and 31 March 2020, HMRC will not require a digital link to exist between each group member’s software and the spreadsheet. However, the links between the pieces of software must be digital from 1 April 2020 for the set of software to be considered functional compatible software for Making Tax Digital purposes.”
We would like to hear from any accountants with knowledge of the above and other MTD-related issues; how do you think MTD will impact record keeping? Either comment in the section below or e-mail us with your insights
*Thanks to Neil Warren. Neil is an independent VAT consultant and author who worked for Customs and Excise for 14 years until 1997.
What is the purpose of MTD?
HMRC is facing a number of challenges:
Digitally, it is not at the forefront of technology compared to the majority of its contemporaries, competitors or ‘customers’.
There is a huge amount of ‘available’ revenue that is currently not collectable – eventually businesses will be paying their tax bills much earlier.
HMRC is hoping that MTD will reduce the number of submission errors and increase revenue.
It also hopes to reduce its workload – like everyone else, HMRC has to do more work with fewer resources.
Is it really going to happen?
There have been rumours that MTD will be shelved or postponed. The House of Lords recently proposed that it should be postponed – but HMRC and a number of software companies have invested too much time and resource to abandon it now as the deadline is so close, and HMRC and the software companies are on track to deliver in good time.
Will it be affected by the outcome of Brexit?
If the outcome is a ‘No deal’ Brexit, plans are in place to deal with it and it will have an initial impact – but even that will not be onerous. We will keep you informed of its impact if it happens.
What do I need to do – as an Accountant?
There is much to do. So the sooner you start, the better:
Review your client list and identify those that are VAT registered and over the threshold – £85,000. These clients will have to submit their VAT returns digitally from the first VAT period starting after 1st April 2019. There has been some misunderstanding as to when it takes effect:
Monthly returns – the return for the period April 2019 must be be submitted by 7th June 2019.
Quarterly returns – the return for the period April to June 2019 must be submitted by 7th August 2019.
To your list of clients, add the date when the first VAT return is due and the date you need the digital records to start from. It is recommended by HMRC that you get your clients’ records started as soon as possible in order to make the transition easier.
As an agent you will need MTD-compliant software that allows you to submit VAT returns to HMRC. Prelude will be compliant and recognised by HMRC very soon. You can still submit by spreadsheet but you will have to purchase an API (Application Programming Interface) and configure that into your spreadsheets – In our opinion, it will be easier and better to switch to competent accounting software.
If you have signed up for the Trust Registration Service (TRS) you will already have an ASA and will use this for MTD as well.
Be aware that you can only set up an ASA if you have an Anti-Money Laundering Supervisor in your practice. If you haven’t already registered as an Anti-Money Laundering Supervisor, you must do so as soon as possible. You will need your or your practice’s Unique Taxpayer Reference (UTR) and the postcode associated with that reference. Here is the link: https://www.gov.uk/guidance/money-laundering-regulations-register-with-hmrc
You will receive a new agent Government Gateway ID to access the new MTD services, and an account number, in this format XXX-NNNN-NN, which will be shown or your ASA homepage.
You will use your new account only to send Income Tax updates and submit VAT Returns on behalf of your clients. Continue to use your other software and existing Government Gateway IDs for other HMRC online services:
manage your client lists (not available from your ASA account)
access other HMRC online services (which you cannot use with your agent services account)
use the agent services dashboard (previously known as Agent Online Self Service) for your own business.
You must link your clients to your ASA. This includes your Income Tax clients, for whom you currently hold a 64-8, as well as your VAT clients:
link each of your agent Government Gateway user IDs to the account – this will link all your existing clients connected with each ID
invite additional clients one by one – this will link new clients, and existing clients who’ve not yet signed up to use an HMRC online service
You must then link your MTD-compliant software to your ASA before you can make any submissions. This involves adding an extra layer of security – only one person in your organisation can do this. Identity confirmation will also be needed.
All businesses with annual turnover above the VAT-registration threshold (currently £85,000) will be required to submit their VAT returns with Making Tax Digital / MTD-compliant software for VAT periods starting on or after 1st April 2019:
Monthly returns for the period April 2019 must be submitted by 7th June 2019;
Quarterly returns for the period April-June 2019 must be submitted by 7th August 2019;
For annual returns, check your Government Gateway online account for due dates.
If such businesses try to use the Government Gateway VAT portal, they will receive a warning and the submission will not be accepted. At the time of writing, HMRC has yet to advise the specific nature of the warning and non-acceptance, or of the consequences.
The VAT portal will remain open for businesses with annual turnover below the VAT-registration threshold to submit their VAT returns, until such time as they will also be required to use MTD-compliant software – at the time of writing this is expected to be some time after April 2020.
While submission of VAT returns may not actually be due until 7th August 2019, businesses are mandatorily bound by legislation to maintain digital records from 1st April 2019. If you have not yet started to prepare for this, YOU MUST START NOW. It will probably take longer than you think and there will probably be unforeseen issues to address.
This process is what HMRC are referring to as ‘Signing up to MTD’. Businesses will need a BTA – Business Tax account – most will have one already – if unsure, log in to your government gateway account to check. If you don’t have a government gateway account you will need to register and then check for or enquire about a BTA – also see note below about BTAs through Accountants.
Businesses that already use competent accounting software to manage their record keeping should find the transition relatively easy. They should check with their software provider to ensure that the software they use is or will be MTD-compliant in good time and confirm what measures must be taken, e.g. software updates, training, costs etc. VAT returns will be submitted directly from the accounting software rather than by logging in to the Government Gateway VAT portal. The VAT return figures will be calculated from the detailed transactions in the accounting software, which should provide the opportunity to check and adjust the figures prior to submission. When the submitted VAT return details are accepted by HMRC, a notification message will be returned to the software – in the same way as RTI does for payroll.
It should be possible to use spreadsheets with an integrated API to submit your VAT return. However, we recommend use of competent accounting software, e.g. Prelude.
In order to communicate with HMRC, the accounting software or spreadsheet will require the following information:
Business name and address – as per the Government Gateway account
VAT registration number
Government Gateway username and password – as in RTI
If you are going to engage a new Accountant to prepare your VAT returns, you may need to create a Business Tax account (BTA) with HMRC on their website. Ask your new Accountant to assist you, if necessary. Each business will have a BTA that will send them notifications and where you can view your VAT returns. If you pay your VAT liability by direct debit, you will need to supply a contact email address – log in to your Government Gateway account at least three weeks before your first submission to ensure it’s all set up in good time.
Finally, a number of special VAT schemes have largely fallen outside regular use in accounting software. Such schemes include: Flat Rate Scheme, Annual Scheme, Margin Scheme and Margin Scheme for second-hand vehicles. For MTD, these must be accommodated in the submitted VAT returns. If your business uses a VAT scheme other than the standard invoice or cash accounting schemes, please contact us and we can advise you separately.
I think, however, what is up for debate is the eventual form that Making Tax Digital will take, the speed of its implementation and what facets of it will go live (and when). This is why I believe that Making Tax Digital is a journey, not a destination – accountants, taxpayers, and HMRC are all working towards a 21st Century approach to accounts submission and tax gathering, but the speed of technological implementation is such, don’t be surprised if MTD evolves mid-implementation.
If you think I am exaggerating, consider the recent partnership between Amazon and HMRC to use the former’s Echo devices and Alexa smart assistants to remind people about tax credits. Of course, this is at this stage more PR than process, but it has already led to headlines in the tabloid press such as “Alexa… Pay My Tax!”, which gives the impression to the general public that in the near future they will not even have to touch a keyboard (or even a touchscreen) to file their accounts with HMRC.
This is why, as a software developer, I am only looking to implement functionality to my accounting software packages as and when specified or needed by either HMRC or Accountants themselves. To do otherwise, would be costly, presumptive and potentially a waste of time, and that misspent development cost would have to be passed onto the end user… i.e. you, the accountant!
This is not meant to be a dig at other software developers or a sales pitch, but a statement of fact. It hopefully articulates an ethos that I think all concerned with Making Tax Digital would be wise to adopt, as it will result in a practical and effective adoption, and not failure or panic.
I suspect that despite my arguments above, many of you remain sceptical as to whether MTD will eventually see light of day, so let me give you another perspective. In a past life I worked in the City of London, trading energy derivative investments – buying low and selling high. Rather than attempt the impossible task of quantifying the impact of all the world’s events on the energy markets, we would identify a small number of major influencers – the fundamentals – and base our trading decisions on the impact of only these fundamentals. Yes, this approach did risk ignoring the impact of events that we didn’t consider to be major, but it made our decision process more clear – and we were right far more often than we were wrong. With this mindset, I think there are only three fundamentals that make MTD an inevitability:
the UK Government needs to lower its overheads and become more efficient generally;
the UK Government needs to increase its tax revenues;
the UK Government doesn’t want to wait nearly two years (in some cases) to be paid the tax it is owed.
Given these three factors, Making Tax Digital is the Occam’s razor to take to all these problems as far as the Government is concerned. Electronic submission of taxes will mean (in theory) the automation of tax returns, which will lower the overheads and staff requirements of HMRC (saving the Government substantial amounts of money) and demanding quarterly payments of tax owed will address the Government’s own cash-flow and revenue forecasting problems. If you think there is another way for the Government to meet the objectives I think underpin the Making Tax Digital project, I would be interested to hear them.
As I have written before, I think Making Tax Digital provides a huge opportunity for accountancy as a sector and it shouldn’t be seen as a threat. However, remaining in denial about the inevitability of MTD will lead to the failure of your practice, because the accountancy world outside is changing as I write this, and you are not. The way you currently work will soon cease to be viable, so I genuinely urge all accountants who have yet to embrace the digital revolution to do so for their own sakes, and not just for the benefit of software developers like myself.
Making Tax Digital is not immediately going to be a panacea to all of HRMC’s problems nor does it necessarily mean extinction for an older generation of accountants (if they’re proactive), but it is a journey we’re all currently on with a final destination being a hazy landmark on the distant horizon. It is a journey we’ve all undertaken (either by choice or circumstance), and it is one I am glad to be on, and one that I want to enable others to make.
Prelude is a secure Cloud-based accounting software package that allows simultaneous access to accounts by accountants and their clients. It can be accessed from any device that has an internet connection and web-browser.
With so many accounting software packages out there, what was it about Prelude that made Lee sign up? “There are many things about Prelude which appealed to me, but its main appeal is the ease of use and its simplicity”, said Lee in July 2018. “It is written for ‘the man in the street’, which is very important if accountants want to encourage their clients to engage with the software too”.
Lee has adopted a range of technological processes that interact with Prelude that makes his own work easier and more time-efficient, which in turn means he has lower overheads, passing on cost-savings to his clients. This makes Lee a more attractive proposition to potential clients than his competitors, and he can do this without compromising the quality or accuracy of his work.
Lee achieves this by striking the perfect balance of what he wants his clients to undertake in terms of managing their books and what services he provides. Prelude allows for the generation of branded invoices that can be easily created by the client within the software, while Lee focus on the ‘back end’ processes of reviewing the books and consolidating the accounts.
By creating this division of labour, Lee is empowering the client to keep on top of their invoicing while simultaneously updating their accounts package in the process. Lee undertakes his own work in the background, and the two mesh seamlessly together. “By working in this way, I am minimising the chance of error in the accounts, and the client and I can review the accounts at any time” said Lee. “Not only am I saving myself the stress of ‘end of year’ tax return, it means that the client themselves will have a clear idea of their tax obligation at any given moment. It can also help clients more effectively manage their cashflow and business development”.
Lee believes that accountants spend to much time undertaking ‘repairs’ of accounts, and the process he has developed by using Prelude intelligently means that his own business is far more effective, giving him the capacity to take on more clients without increasing his own overheads.
Lee likens his use of Prelude with his clients to the a ‘dual control’ car used by driving instructors; you’re enabling the client to get the full business benefit of modern accounting software without them running the risk of doing anything too dangerous or catastrophic to their accounts. “The beauty of Prelude is that I can give the client only the functionality that they need” says Lee. “Too many other accounting packages are overloaded by features that most small businesses never use and which could potentially cause problems or confusion – Prelude is straightforward and easy to understand”.
By focusing on only what is essential, Prelude is a substantially more cost-effective software package for the accountant and their clients. “I don’t want to be paying £30 per month per client to a software package I will only ever use 10% of; Prelude is a fraction of the price yet does everything I need it to do so I can manage the accounts of my clients”
Lee also presents Prelude as his own inhouse software; all accountants who use Prelude can brand the main dashboards with their own logo and marketing material. “For all intents and purposes, the software and the service I provide is seen as one” said Lee. “Every time my clients login into the software, which they do through my website, they see my logo on the dashboard.” On a repeated basis, over time, this can only subconsciously strengthen the bond between accountant and client.
“If a client of mine uses Sage or Xero, they are repeatedly exposed to those software packages names and not mine” says Lee. “In effect, I would be selling the software rather than my skills or services, and that client could easily go off with another accountant who uses those accounting packages. By using accounting software that is branded as my own business I am reinforcing that I the accountant, and not the accounting software, is the service for which the client is buying.”
Another facet that Lee likes about Prelude is that it is built by Diamond Discovery, a software developer based in South Wales. “With Prelude, I have always received great customer service and I am always treated in a personable manner – Diamond Discovery know me and my business’ needs, and they are always on hand to help” said Lee. “I don’t think that would be my experience if I contacted a multinational manufacture of accounting software.”
Due to the personable and adaptable nature of both Prelude the software and Prelude the support team, Lee has developed processes that saves him time, stress and money. By using CSV importing features and scanned documents, Lee can process as many as 140 invoices in just half an hour.
Such an approach means that Lee is not running the risk of using tools like Automated Bank Feeds, which theoretically invalidate the client’s rights in the event of fraud: “I don’t want to be logging into clients’ bank accounts; CSV offer the same efficiencies without the risks.”
Lee also has customised his Prelude with the free Customer Relationship Management module, which allows him to keep detailed notes, reminders and other necessary information about his clients. This CRM component fully integrates with Prelude, avoiding any duplication of entry or process, and is fully GDPR compliant.
Prelude is so integral to Lee’s business model he doesn’t use or support any other accounting software package, and he charges clients substantially more if they want him to use another. “By using just the one, simple accounting software package, all my own processes – and those of my clients – are uniform and I am not incurring the additional cost and time of supporting multiple accounting packages.”
Lee thinks other accountants should use Prelude in the same way he does, as he feels HMRC’s digital agenda could result in taxpayers bypassing accountants altogether. With Prelude being so easily adapted to the Lee Coombes Accountancy brand, Lee is ensuring that his clients view his services more than just software even though it is software that enables him to offer the services that he does.
“Prelude does exactly what it sets out to do and is continually updated to meet the requirements set by HMRC and other bodies. It is cost-effective, simple to use, and provides efficiencies within my own business; what else would an accountant want from accounting software?”
As of 25th May 2018, your business will have to be fully compliant with new regulation relating to how you manage and store data. This new tranche of regulation is known as GDPR (General Data Protection Regulation) and is an expansion of existing data protection laws, known in the UK as the Data Protection Act 1998.
Why is this new regulation coming into force? The initiative came from the European Union (EU), which was concerned about the use by (and security of data in) businesses, exactly what data businesses and organisations held on individuals, and whether they had the consent of those individuals to hold data about them. These concerns were brought into the public eye by the rapid transformation of society by citizens’ use of new technology and digital platforms, such as the adoption of social media and e-mail.
The first thing to note is that Britain leaving the EU as a result of the ‘Brexit’ vote will have no impact on the adoption of the new regulation; as mentioned, the regulation comes into effect in May of 2018, and businesses must be fully aware of their obligations under this new legislation.
The good news is that GDPR provides your business or organisation with opportunities to revisit business processes in a way that will yield efficiencies and engage with past contacts and clients. The bad news is that businesses and organisations are up against it if they have yet to consider the implications of GDPR for their work, and they must start to do so now if they are to be ready in time. GDPR is mandatory legislation, and does not provide businesses or organisations the opportunity to opt out. Failure to comply with GDPR, especially in conjunction with a data breach, could result in sizeable fines. In addition, it is businesses and organisations themselves that are held legally accountable (not their employees), so you need to ensure that everyone on the payroll understands the significance of GDPR and their professional obligations under it.
In a broad overview, GDPR can be summarised as having two core themes; the security of data held by an company and organisation, and the rights or permissions of that company and organisation to hold that data. Each is equally as important as the other as far as the legislation is concerned.
In terms of data security, GDPR is primarily concerned with how information on individuals is both stored and accessed, and whether a person who is viewing that information has the individual’s permission and good reason to do so. Given that most information is stored digitally, the prime concern for businesses and organisations will be how information is kept or accessed on digital devices such as laptops, computers and phones, but this also extends to data storage solutions such as USB sticks, CD-ROMs and internet servers. However, GDPR also covers traditional hardcopy records and how they should be kept under lock and key when not being accessed.
The main focus of these security concerns is minimising the risk of data breaches; data incorrectly or illegally accessed or obtained by others due to a business’s or organisation’s carelessness or non-compliant processes. Given that identify fraud can be easily committed with the bare bones of information about any one individual, the legislation is to ensure that the risk to citizens is minimised when they provide their personal details to others for legitimate purposes.
The second, most equally important aspect of GDPR is the justification for a business or organisation to retain information of individuals in the first place. In other words, does that business or organisation have the consent and knowledge of that individual to hold onto information about them, and is the information that they do hold relevant to the organisation and only used in an appropriate manner?
This in turn means that businesses and organisations must audit the information that they currently have on file to ensure that it meets the criteria, and must dispose of information that is no longer valid or justifiable. In addition, it must also look at how it gathers information, how that information is stored and how that information is accessed, specifically in terms of the individuals’ own awareness of how the business or organisation intends to hold, process and store their data.
To tie these two strands together, businesses and organisations must nominate internal stakeholders with regard to data protection, and let the Information Commissioner’s Office know of this point of contact.
As you can gather, GDPR is a huge subject with significant ramifications, but it does provide a spur for businesses to get their houses in order, with eventual profitable outcomes in addition to the required compliance.
We are delighted to announce that Prelude (AKA Prelude Accounts) will be exhibiting at the upcoming ICPA Practice Evolution Conference taking place on 7th June in London and 27th September in Manchester.
In addition, as a reader of this website, you are also eligible to receive a 10% discount, just quote “PA10” when booking.
This year’s conference will focus on the issues faced by the accountant in practice and will look at technical topics including 4MLD, VAT pitfalls, MTD, Taxation of Rental Income, etc. as well as ways to help you future-proof your business and help it flourish in the coming years.
The specially-chosen speakers are all experts in their field with great presentational skills and they all have the remarkable ability of imparting help and information.
Confirmed speakers include:
Steve Pipe: How to become the most respected and successful accountants in town by “doing good”
Melanie Lord: 10 VAT pitfalls to avoid so HMRC don’t win on penalties
Steve Checkley: The latest on MTD and admin issues
Richard Simms: From risk assessments to due diligence: how to be 4MLD compliant
Colin Walker: Taxation of Rental Income: From repairs to Interest deductions
Elaine Clark: At first I was afraid I was petrified but I will survive
Nick Lewis: Twitter from Zero to Hero for Accountants in Practice
You can catch up with us throughout the day at our stand in the exhibitor area.
Remember to quote “PA10” to get your 10% discount – click here to book or call 0800 074 2896.
We look forward to seeing you there.
If you’re an accountant and you read Accounting Web recently, you would have thought that the apocalypse had arrived. “I love this product, and now I have to work out what to replace it with” said one, “I do the vast majority of my clients’ bookkeeping so will now need to either switch and pay for other solutions!” complained another.
Apparently many, many accountants were reliant on Transaction+, which allowed them to use Excel spreadsheets, desktop accounting software and Dropbox in collaboration with their clients.
VT Software wielded the knife because “the government plans that all VAT returns for businesses with a turnover above the VAT registration threshold must be submitted via MTD [Making Tax Digital] from April 2019. As a consequence, VT Transaction+ will no longer be suitable for these businesses.”
VT Software is not necessarily wrong in its judgement. Making Tax Digital will represent a significant shift in the way accountancy operates as a whole. However, the howls of despair from some quarters are not called for, as there are plenty of alternative software solutions out there that are relatively inexpensive and that improve accounting processes above and beyond what VT Transaction+ offered.
Many accountants who used VT Transaction+ were King Canutes wishing to hold back the tide of Cloud accounting and other modern practices, but tides unfortunately never retreat on command. Such ‘hold outs’ are also fundamentally mistaken, in that everything they were doing with VT Transaction+ was just badly replicating what Cloud accounting software does anyway. Indeed, by using tools such as Dropbox, they were using the Cloud to carry out their work. So why not make the next logical leap and just use purpose-built Cloud accounting software?
Well, the reason is cost. To be blunt, people begrudge paying for something that they think they can work around for free. While as a business person myself I can understand the need to minimise overheads as and when possible, sometimes one cannot avoid the inevitable expenditure that one has to incur to make a business function and comply with sector norms.
In any event, it is wrong to think that accounting software is wildly expensive, difficult to use and an additional burden to your business’s processes and bank balance. Actually, they offer an experience that is the diametric opposite of all those negatives.
For example, from just £10 per month, an accountant can use accounting software that not only replicates the functionality of VT Transaction+, but also easily supersedes it. Not only does most accounting software offer invoice generation that automatically emails the invoice to the customer and posts the bookkeeping transactions, it can generate all the graphs and tables you wish for (or actually need, which in my opinion is much less than some software offers) without cumbersome Excel formulae that invariably and sometimes horribly go wrong along the way.
Additionally, most Cloud-based accounting software is incredibly easy and intuitive to use, and all based on the same platform – in other words, no more downloading, uploading and using multiple programs to achieve a single goal, namely managing someone’s accounts. Modern accounting software is easy to grasp, with the margin of error minimised for both the client and the accountant. By being hosted on the internet, the information is securely stored in a central location where it can be viewed and added to by accountants and the relevant client. Cloud accounting is not some mysterious, insecure threat – accountants who rely on email and generic Cloud storage services like Dropbox and Google Drive are in effect already using the internet. They are just using the internet in an incredibly cumbersome, inefficient and insecure way.
Modern accounting software is more than just software, and arguably more than just accounting. The various additional and automated features that accounting software provides for both accountant and client, such as the aforementioned invoice generation and aged debtors reports, remove costly and time-consuming tasks. Accounting software should always make you more efficient, not less, and by embracing it you’re saving money for your business, and not adding further to your existing overheads.
VT Transaction+ users should not despair; they should welcome this opportunity to modernise their existing practices so they’re fit for purpose in the age of Making Tax Digital.