Clients come to accountants for a number of reasons, for many, whether you are bakers, IT consultants, plumbers, project managers or web designers, it is because you are great at what you provide to your customers. Keeping up to date with tax and accounting rules, completing your own business marketing and raising finance are probably not in your skill set. We understand that as we use marketing and IT consultants, so we can focus on providing sound tax advice and a seamless accounts preparation and filing service for our clients.
What do HMRC think?
HMRC think you can do it all, and get it right, because the tax legislation is easy to understand and therefore all you need to use is software and that is where the “making tax digital” agenda comes from.
A fellow small accounting practice has undertaken an experiment to see how efficient and accurate different ways of record keeping can be.
For this experiment they used:
- A gap year student with no experience of accounts or tax
- A set of invoices and expenses for three businesses; and
- Three ways of recording the transactions, by hand writing in a book, completing an Excel spreadsheet and using an accounting/expense recording App to automatically upload the data.
The business selected were:
- Business A – an IT services provider;
- Business B – a caterer and bakery; and
- Business C – a plasterer.
The expense recording App selected was Expensify which includes auto recognition and has 2.5 million users and has been available in the market for over 7 years.
The objective was to enter the invoices and expenses into the system accurately and as quickly as possible.
The quickest was data entry into an Excel spreadsheet. The expense recording App was 40% slower than the spreadsheet. Even handwriting the accounts was quicker than the App by 20%.
The test results showed that business B, the caterer and bakery business took over 5 hours to enter the details using the App, doubling the time it took on the spreadsheet.
In terms of accuracy, there were very high error rates in the categorisation of the App auto recognition function which therefore needed a high level of manual override.
What does this tell us?
Accounting and expense recording Apps are not necessarily the answer to your accounting needs
Making tax digital is expected to add to the work load of small businesses and their accountants. HMRC have deferred for a year but this change is coming so you may want to think about how you keep your accounts now.
At Clearways Accountants, we like to make your life as easy as possible, so we provide a simple to use bookkeeping Excel spreadsheet which records the key information needed for your accounting records, with minimal time and fuss! If you would like to find out more, just get in touch.