Since HMRC announced its Making Tax Digital (MTD) initiatives, accounting processes have changed in multiple ways. Companies everywhere are gearing up for the big MTD for ITSA migration scheduled for April 2024.
It is interesting to see that even long-time traditional accountancy firms are moving to digital platforms, no doubt driven by these changes. Perhaps most noticeably, a significant fraction of accountants now offer bookkeeping as a service to their clients – and those who are not yet, plan to do so within the next couple of years. And this is mainly driven by the need to be compliant with MTD.
How real-time bookkeeping matters in MTD
By April 2024, all qualifying UK businesses, including self employed businesses and landlords, must be fully MTD-compliant. Your accounting firm will play a significant role in making that happen, which is why you should be deep-diving into your clients’ current bookkeeping capacities to assess how well they can adjust to the new regime.
In particular, there are several new rules that a company’s books must comply with, which involve extra effort on the company’s part or will require bringing in a specialist to take over. Some companies with smaller budgets might decide to handle it themselves – with all the compliance requirements.
However, they need to know that any mistakes could end up being extremely costly for them. Overall, therefore, and as you already know, trusting an expert like you from the get-go is the more reliable and cost-effective option. Here are four reasons you can use to convince them why real-time bookkeeping matters in MTD:
1. No more last minute chasing for paperwork
Real-time bookkeeping aims to eliminate the use of physical financial records and maximise the use of cloud receipt management and extraction technology. It requires a transition to keeping the records electronically and there are lots of different software out there like Dext, Hubdoc, AutoEntry, Xero, and many more which will make it easy for them.
Clients upload invoices and receipts directly using these software and therefore save themselves (and you) both time and money from all that manual record keeping. (Do not forget the associated storage cost either!). And since you will be working on the clients’ data more frequently it reduces the stress of chasing clients and juggling with deadlines.
Having instant access to their financial status rather than rifling through a carrier bag of receipts will bring numerous benefits for them and you. While changing to digital tax filing may seem stressful for them, once they get on board with it, they will realise how easy it actually is.
2. More accurate, powerful and timely insights
Digital tax management is far more efficient than sifting through physical documents or trying to manage multiple spreadsheets which can lead to errors, missed information.
Help your clients understand that real-time bookkeeping involves leveraging future-proof software to keep all their financial data consolidated and categorically organised on the cloud.
The data is entered once and both you and they have access to it. Monthly or weekly record-keeping creates better outcomes for your clients and your practice, and thus helps you in improving client relationships and of course, profitability.
3. Faster tax process and accurate provisioning
MTD empowers them to complete their tax reporting activities quickly. They have all their financial data ready through real-time bookkeeping and reporting, so all that you and they need is instantly available for review. This further helps in accurate provisioning of taxes and managing other short term and long term liabilities.
You can submit their taxes and reports without having the legwork of doing it manually, chasing them for information or risking potential fines for late submission.
4. Money saving
The enhanced accuracy and timeliness of their bookkeeping will help them avoid costly issues like revenue drains, avoid tax mistakes, and enable them to make stronger business decisions. Who does not want that? Think this will convince them? Real-time bookkeeping puts the time and controls back in your clients’ hands – even when they have delegated MTD to someone else.
Tips to smoothly automate real-time bookkeeping for clients
Building a real-time data stream for your clients’ transaction inputs makes bookkeeping for MTD much smoother. Here is how to set it up:
- Connect your clients’ bank feeds with their accounting software so that all transactions are automatically logged.
- Ensure all purchases and sales are either entered in the accounting ledgers or brought automatically from e-commerce and point-of-sale platforms or inventory management tools.
- Use a data capturing app to ensure that all transactions, including recurring ones like rent or utility bills, are recorded at the source. Make sure paper-based transactions are scanned and recorded, too – choose an app with handwriting recognition capabilities.
- Choose a solution that can learn how to categorise transactions based on your client’s accounting system so that all your books are quickly reconciled with minimal effort from your team.
This is also an excellent time to consider working with a specialised bookkeeper if your accounting firm is not entirely confident about handling the function. And do not worry about what your clients might say – they want their finances in order, even if that means you split the load by onboarding an expert of your own.
Is outsourced bookkeeping the way to go in MTD?
With outsourced bookkeeping, you can charge a substantial fee from your clients that covers the actual bookkeeping function and the effort you take to onboard them to digital. Once MTD kicks in, they will have to move to digital anyway.
Why not take over their bookkeeping and have enough time to handhold them through the process? Experts estimate that the need for personalised attention will go up hugely in 2022-24. So this is your chance to hike your fees and set the process in motion.
Another big advantage of outsourcing your clients’ bookkeeping is that you can get it all right the first time rather than fixing all the mistakes the client made and then doing it again. You can save a lot of time for your staff when they do accounting production work. No one likes to do repetitive work or clear someone’s mess. Plus, outsourcing your bookkeeping work is way cheaper than you getting it done by your in-house staff. Charge-out rate matters!
Over to you
In conclusion, clients and accounting firms that went through the 2019 round of MTD for VAT prep already know the importance of planning early, and those gearing up for the 2024 round would do well to start preparing soon.
An outsourced bookkeeping practice streamlines processes, removes ambiguity, ensures 100% accuracy and helps build closer relationships with clients. If you want to help your client roster transition smoothly to MTD, now is an ideal time to buck up with the help of outsourcing specialists and offer real-time bookkeeping as a core service.
Improve your existing tax processes and transform them into an efficient, future-proof system with Stellaripe. Bank on the positives of real-time bookkeeping asap. Get in touch with us to minimise your MTD workload considerably. Good luck!