Making Tax Digital – how can your clients benefit?
Making Tax Digital (MTD) is just compliance and red tape, right? Maybe not… I want to share my thoughts on how I think IFA members and their clients can benefit from the digital change.
MTD is now knocking at the door of nearly all VAT registered businesses across the UK. Most VAT businesses are set to file at least one MTD VAT return in the next six months, given they are now mandated to do so (if their turnover is over the VAT threshold, currently £85,000).
As an IFA accountant or adviser, you will no doubt be aware of the changes relating to MTD and how they will impact both you and your clients.
Some clients will be ahead of the pack on MTD, though I am sure that many more will need a push. We know from our own IFA Cloud Advisor partner network that many businesses are behind the curve, though those using a cloud accounting solution, such as IPA Books+, should be easier to manage as the MTD functionality in their app has already been added automatically.
I believe that the MTD ‘story’ goes beyond compliance though, as there are many ways you and your clients can benefit from the digital switch that has been triggered by MTD. Communicating these positive upsides to your clients will be greatly beneficial.
- Business health visibility
With MTD requiring digital records to be maintained, your client’s finances could be more accessible and visible through the year. No longer will you have to wait for your client’s year end to see their accounts as you can log into a cloud accounting system to view ‘live’ data.
This provides a range of benefits – make better and more timely decisions, have access to a live ‘net position’ of clients, better predict cash flow and estimate tax liabilities and anticipate potential issues sooner. I would broadly term these as more advisory type services that you can offer to help and support your clients.
- Smarter, less hassle
The new MTD system will also make the end to end VAT process more efficient. Many cloud accounting systems can automate much of the data entry work using a combination of bank feeds, recurring transactions and third-party integrations. Automated import of data from banks and API integrated apps reduces the amount of time you and your clients will need to spend on preparing accounts and VAT calculations, as well as improve accuracy of data.
Furthermore, such systems reduce the workload associated with submitting VAT returns. With VAT return data pre-populated, the only action required is a check of the transactions to ensure data is accurate.
- Fewer mistakes
Submitting VAT returns manually or without using purpose made transaction recording software can increase the risk of error. Small mistakes can be missed and become bigger issues further down the line.
However, with MTD submissions using cloud accounting software and additional software features such as a robust bank rec process, mistakes don’t usually happen or will at least be picked up on much sooner. This will help avoid VAT return errors and the prospect of one of those awkward conversations with HMRC.
- Cloud accounting benefits
For many small businesses, the small step of upgrading from manual processes or excel sheets will be an enormous leap in terms of additional benefits.
MTD can be just the trigger needed for your clients to go digital. And for any user that has not yet had the pleasure of using cloud accounting software, they will find they benefit from a broad range of time saving and business boosting advantages for the first time. Its not unusual to hear a whoop or a holler at this point!
Not only will cloud accounting apps make MTD easier, they can also provide a range of other benefits, such as:
Centralised data - no need to back up, send and restore. Client data stored securely in the cloud with a ‘single version of the truth’ accessible to all users at the same time.
Any time, any place, anywhere functionality – the Martini benefit. Cloud accounting systems can be accessed from any device with a web browser and internet connection.
Offsite accounting – view your client data remotely.
Invoice and quotation management – create professional looking documents that are automatically posted to the business account.
Bank feeds – to bring a massive reduction in data entry time and improve accuracy.
Reporting and predicting abilities – if data is ‘the new gold’ in this increasingly high-tech era, it makes absolute sense to have a tool that can most effectively mine the ‘gold’.
Automation of tasks – cloud accounting apps can complete tasks and process data (or at least do most of the predictable, time consuming work) automatically.
Maybe it’s time to consider the broader range of benefits MTD can bring you are your clients?
Jon Martingale, senior product & partnership manager at Reckon