NEVER has the need for businesses, and their accountants, to have access to real-time data been more apparent than during the Coronavirus pandemic. Now, more than ever, companies need to be agile and responsive in order to ride out what are ever-changing and unpredictable economic conditions.
That means thinking hard about the tools you rely upon in your accounting software.
So, as we approach the close of the year and with no end to the uncertainty in sight, there is now an added impetus for accountants to review their existing software to see if it will allow them to better serve their clients by providing more timely and strategic advice.
And, this is something that will enhance the profitability of accounting firms too. The role of accounting is shifting from being compliance-based, to advisory-led and this shift is underpinned by the technological advancements of the software sitting at the heart of accounting propositions. By incorporating brand new digital technologies, accountants will benefit from the efficiency gains that innovation and automation can bring which, in turn, will afford them additional bandwidth to roll out other, value-added services.
Below we’ve put our experience of accounting technology to good use and put together a checklist of functionality you’ll want in your UK accounting software for 2021:
1. Move to the Cloud (if you haven’t done so already!)
Harnessing the potential of accounting software in 2021 invariably means moving to the cloud. Cloud software is superior to its desktop counterparts for multiple reasons which relate to collaboration, productivity and operational efficiency.
Cloud-based software is accessed online, meaning that users are always on the latest version and accountants don’t have to spend extra time, money and mental capacity worrying about whether they are receiving the updates they need in relation to new legislation and tax changes. The cloud service subscription-based model means that it is cost effective and relatively affordable to stay up to date in this way.
Core cloud accounting software makes collaboration easy, as accountants, team members and clients can work together using the same live ledger. This eliminates the conflict issues and duplicating of data that can often arise from team members using multiple or historic versions of accounting files.
Using real-time data, powered by the cloud, accountants can provide up-to-date insights to their clients. This, in turn, makes it easier to deliver forward-thinking, higher-value advisory services such as cash flow forecasting and business plan modelling.
Additionally, utilising cloud-based software means that staff can work remotely from anywhere (crucial in the context of the pandemic), provided they have a laptop and internet connection.
The security of cloud-accessed software is also arguably more secure than its desktop or server based counterpart. The big cloud providers - AWS, Azure and Google - invest significant funds to secure their systems. Even in less nefarious data security situations, such as version control and manual errors, it pays to have data backed up. We’ve all experienced the pain of losing a locally-saved important document, after all.
2. Incorporate bank feeds
Bank feeds are one of the main drivers of automation in accounting software. Using accounting software which connects to bank feeds saves significant book-keeping time. Bank transactions which historically had to be keyed manually can now be automatically downloaded into accounting software from banks.
The robustness of banking feeds has been enhanced over the last year with the introduction of Open Banking standards, enforced from March 2020. This overcomes concerns around security, with connections directly pulling data from business bank accounts. Access and control are enhanced by users having to renew access privileges every 90 days.
Processes can be further maximised by using core accounting software to set up matching rules for frequently occurring bank transactions which do not have receipts. Common examples include Transport for London (travel) and monthly bank fees. Time saved from coding transactions manually can instead be used to make accountants more au fait with technology, as well as building client relationships and undertaking advisory work.
Such automation is key to driving efficiency gains; replacing legacy, manual systems with a real-time and responsive, digital ones. Companies like My Digital offer platforms specifically designed to remove many of the manual processes associated with traditional payments processing and replace them with more agile, automated ones. Making and reconciling payments becomes greatly simplified as they can be triggered automatically without the need to extract files for upload to the banking system or having to wait for Bacs payments to clear by drawing on access to the Faster Payments scheme. Processes become fully integrated and happen in real time, providing greater visibility and a better end-to-end solution for both accountants and their clients.
3. Embrace the ecosystem
Adopting cloud accounting software which has a rich ecosystem of third-party apps and add-ons (providers tend to maintain a directory of these on their websites) will allow accountants to further benefit from automation capabilities, as well as being able to gain more timely and in-depth insights from clients’ businesses.
Popular add-ons include receipt scanning, inventory management and cash flow forecasting. These apps provide extra functionality which core accounting software may not provide and gives accountants a greater breadth of choice to build a technology stack specific to the needs of individual clients or those in particular sectors. For example, this may include adopting Vend (an EPOS system) and Unleashed (inventory management software) for clients working in retail.
Benefits of the latter include being able to provide accurate and complete reports on products to suppliers and customers, with direct integration into leading core accounting systems. As managing inventory can be particularly cumbersome this ensures that there is an accurate and seamless flow of inventory data into accounting software, removing the risk of human error from manual entry.
4. Ensure it is Making Tax Digital compliant
The introduction of Making Tax Digital (MTD) was one of the biggest forced changes to the UK tax regulatory system in years.
From April 2022 all VAT-registered businesses (i.e. not just those with a turnover above the VAT threshold) will be required to adopt MTD, with MTD for income tax becoming mandatory for many self-employed individuals, partnership companies and some sole traders with income from property from April 2023.
While bridging software (transferring data to HMRC from spreadsheets) can provide a short term workaround for accounting software which is not VAT compliant it is a sticking plaster rather than a long term solution so firms should seek to use accounting software which provides integration with HMRC.
5. Payment management
Using accountancy software which integrates with payments tools can save significant stress and time for firms already offering payments as a service and can provide a lucrative new revenue stream for those not already providing it to their clients. Tools like Modulr’s payments dashboard remove many of the pain points associated with the process by being able to transact from one centralised resource, removing the need to export and manually key data.
Other software which integrates payments is My Digital’s payroll payments, and the user-friendly and admin-light Sage Salary and Supplier Payments.
Clients are always given the final authority to approve payments, and payments are automatically reconciled back to the core accountancy platform so that reduced time is spent on matching bank transactions.
6. Connect to practice management to enhance firm productivity
Connecting core software to a practice management solution will turbocharge the operational efficiency of firms by helping them keep track of upcoming client deadlines (payroll, corporation tax, quarterly VAT returns etc.), plan staff resource, outstanding fees and business development activity.
Practice management software comes in a variety of different flavours so, depending on their size/focus, firms should weigh up whether they are looking for a holistic solution or a package which focuses on a particular area, such as sales.
Firms focussing on acquiring new clients should check out Practice Ignition, which is geared to putting together proposals for clients, and provides associated insights on closed sales and outstanding invoices.
At a minimum it is recommended firms incorporate solutions with direct integrations to Companies House to have full visibility on past and upcoming requirements related to statutory filings.
Switching to robust and scalable accounting software in 2021 will allow firms to better serve their client base, attract new clients, incorporate new service offerings and run their operations more profitably and smoothly.
While in the short term this may result in some change, switching to cloud based systems will enable firms to be nimble in the marketplace, responsive to the needs of clients and to package a clearly differentiated service offering.