Wondering if you need accounting software for your business watch on as business accountants. We spend all our days helping business owners with tax accounts and all the related queries. And as a result, one of the questions we get asked a lot is do we need something like Xero, QuickBooks these Cloud accounting software programs as they’re known in our business or carry on with my shoebox kind of use a spreadsheet. So the question is an interesting one because it very much depends on your exact circumstances, but we going to give you a few thoughts on it. So if you’re a song Trader, you’re a self-employed person and quite often in the UK. We get confused over what self-employed means but I’m going to talk about it from a tax perspective. So if you’re an individual, let’s say stereotypically, hairdressers. Taxi drivers Barbers do such people very normal.
Trade notes chippy, but potentially, you know that kind of stuff then you only really need to know what your taxable income and taxable expenditure are to go on your tax return. That’s the number one thing from a tax point of view. You need to work out. So actually the shoebox for the receipts some accountants can help you take those add up all the numbers and then put them at usually into a spreadsheet but then they can pull those numbers from and stick them on your tax return or if you do it yourself, you could, of course, do that and there’s plenty of people do that for many many years. So that does work and currently, there is an actual requirement to keep digital records for somebody who isn’t a VAT register so you can carry on doing that. We think if you’re working with an accountant, you probably find there’s a discount for putting it into a spreadsheet or certainly like with a practice like ours we give a discount for somebody who is using the cloud accounting product. But in terms of doing, you need it? No, no, you don’t need it at all. Legally. There’s no reason to keep digital records at moment again if you’re under the VAT threshold if you are over the 18.
Digital records because of the rules surrounding making text digital as it’s now in the current time of writing this article only apply to the VAT registered businesses. They were going to be from this April. Everybody was going to have to have this rule but a lot of accounting bodies and the Federation of small business those types of Institutions went back to Parliament and sort of lobbying against this introduction because we think they looked at it as something that would be easy for people to do and unfortunately, It is easy to do. You know you got a taxi driver book for example that is difficult enough to get them to write down each day what they’ve taken so getting them to put it all into software and transmit. Each quarter as was discussed was going to be difficult. So thankfully the minute that has yed but they are saying it will come in at some point. So to future-proof yourself is one of the reasons why you should consider it, but currently, as told, you don’t, the spreadsheet will do the job. However, there are some benefits to do it which I’ll cover in a minute.
Now as a limited company It’s the same you don’t need it. Somebody can put together a set of accounts. And with a limited company is slightly different in you bookkeeping requirement for me is a much more intense one. It needs to be more accurate every penny needs to be accounted for because you have to segregate the company’s money from you may as a Sole Trader. It doesn’t matter what happens as long as you know, what you’ve got, you know, what went out for tax reasons, you’re fine for a limited company to have to prepare a full set of accountants that show what the company owns who owes what money to whom and all the rest of it. So If you’re a director, there’s a thing called a directors Loan account. That does not tell you how much money you owe back to the company. Well how much the company owes you a lot of tax plans and an efficiency around saving money limited company happens around that bit. The only way you’d get to know that is to put together a full set of books and we have Al’s reconciling every penny that goes out that bank versus your receipts that you’ve got and all that kind of stuff. So as a result Cloud accounting software or some sort of accounting software a must with limited’s but technically it is possible and every year we come across people that still doing Inspections as technology moves on there is not any reason why you shouldn’t be looking for cloud accounting as a limited company.
Using accounting software has its advantages. Firstly studies show you get paid quicker. You can invoice straight from it. So you can do that remotely wherever you are as long as you’ve got an internet connection or 4G connection on your phone. You can email straight from the program it saves data so you can Copy all the invoices you can set up individual items so that it pre-fills all the prices. It handles VAT and CIF securing the construction industry.
So all those things made human voice quicker. Therefore we should get paid quicker. However, what the studies have shown is that if you build in something like a strike or some of these other ways you can get paid by a card that will be built into your invoice and does help you get paid quicker. So get paperwork, that would be a big one. The one for me as business owners are more interested in those how much time does it save me.
Talk every receipt into a spreadsheet with time dates what it was all that kind of stuff. I’d get frustrated quite quickly. It’s quite possible. Now with the way that it works. You can connect to these bits of software. You can connect your bank in as one just one really easy example, and then you go in each day and tell it what all the transactions are. You can set up rules so that recognizes regular ones and you can just press OK and applies the rule and it does speed up your bookkeeping. So something we talk about a lot internally is trying to do it small and often so that you can then get on with it. Day and go and earn some money. Now the other thing as accountants we love of course is it’s really easy to collaborate with clients. So there’s no user limit. So if you did some people might have had Sage that’s a naughty word in our office. We’re not a massive fan of it. And there was a desktop version, you know, many accountants of businesses used for years.
Then a bit more and more being built every day is people innovate around these core bits of technology. So definitely check those out now one of the restrictions to those types of programs is that you had to have multiple users. If you want multiple users like you wanted your accountants got to look at your records or you wanted someone else in the office to have it. You normally have to pay per license personal see or per person really with these online products. It’s not like that you have as many users as you want to access all
the time and as a result becomes really really cost-effective and as accountants, we can then you can add your accountant. They see the data. Use you see so if you’re keeping your bookkeeping yourself, the counting can go in and check and poke around and do their year-end or whatever else they want to do for you or give you advice in real more real-time because we can see where your fingers are right now or if you’ve got an accountant or bookkeeper doing it. You can also see their work to see if you’ll have where they have allocated things. That’s a very normal thing then to be able to turn around to accountants. Do you think we can locate this here because for me that makes more sense and that’s the collaborative thing about bookkeeping so that is made possible by this kind of product now?
That they’re normally both an app on your phone and also on your PC or your tablet. So we always think they’re more user-friendly on a bigger tablet or a laptop or a computer. But if you just firing off a quick invoice or doing smaller bits, then you can do that easily for an app on your phone. And as all these other technology things a plug-in like a receipt Bank, we can take pictures and when we talk about digital records at this moment in time, we’re just talking about the transaction data being stored electronically you don’t need photos. But again, it’s a cool thing to be able to love using it with our clients because then if Revenue Customs are going to look at something and on the iPad, it’s all there poke around as much as you like. It’s all lovely and clean and you can see it also definitely worth looking at that as well.
If you’re considering getting into the world of cloud accounting. So the biggest other saving apart from a time which for me is the most important one is tapped all the talk about this but the not my number one tax-saving tip is to keep better records. Don’t lose the receipts. That’s the number one thing and with the technology being able to snap on some of these apps or just record it more live.
Rapping about what slates traveling to tempering workplace and you thought I’m going to get myself a McDonald’s on the way home. You paid cash that they’ve seen the car or black window or whatever. He believes in a tax deduction potentially. Could you think you might not remember later on in the year? You spend that money and therefore you’ve lost your tax deduction. So these things do help save tax as well. So to round it all off in summary. We think if you’re a sole Trader you should strongly consider it if you’re ambitious and you’re looking to grow your business because it does allow collaboration with the counters. It gives you a real handle on your figure and allows you to get paid. Liquor if you’re limited at argue, you should have it because this double-entry this full reconcile bookkeeping is so important what you need to be doing. And of course, there are accountants. You can Outsource this to bookkeepers you can Outsource it to where you can learn it yourself or get to at least some to a good standard.