Making Tax Digital
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WORKING IN THE CLOUD
If you’re a small or medium-sized business, you may still be using spreadsheets or desktop-based accounting software to manage your finances. But when compared to your current bookkeeping solution, the benefits of cloud accounting are considerable.
Here, we’ll explore what cloud-based software is and how using it for accounting purposes can benefit your business.
The defining feature of cloud-based software is that you can access it over the internet instead of locally on your computer.
Cloud software and apps run on secure servers that are located in data centers all over the world. With the right login credentials, you can access your data on cloud-based software and apps on any device, from anywhere with an internet connection. You can run it on your web browser - like Chrome, Safari or Firefox - or use a mobile app.
Many of the services that you might use for work every day are cloud-based. Some examples are:
Email services like Gmail, Office 365, iCloud email and Mail.com
File-sharing services such as Sharepoint, Google Drive, Microsoft OneDrive, Dropbox and Box
Social media accounts like LinkedIn, Facebook, Instagram and Twitter
Conferencing tools such as Zoom, Microsoft Teams, GoToMeeting, Skype and Webex
Is cloud-based software safe?
In many ways, cloud-based software is safer than software that runs locally on your hard drive. Here’s why:
Sharing data via the cloud is safer than via email and USB sticks. When you have two-factor authentication enabled on your cloud-based software (we recommend it), no one can access your data unless they have your login credentials as well as your phone. That’s a very unlikely scenario. On the other hand, desktop-based email services and USB sticks can usually be accessed by anyone if you leave them unattended.
With cloud-based software, it’s close to impossible to lose your data. Even if your hard drive gets damaged or your laptop gets stolen, you’ll always be able to access your cloud-based data from another device by logging in to your account. Data that’s stored on your hard drive locally, however, can be lost forever.
Updates and new features are added automatically. In contrast to desktop-based programmes that need time-consuming, often manual updates, cloud-based software is automatically updated with the latest safety features. This means that you can get on with business while the software provider takes care of safety and security.
Forgot to click ‘save’? No problem. Most cloud-based software makes automatic backups of your progress, so you can still access your latest changes even if you forgot to click ‘save’.
Now that you have a basic understanding of what cloud-based software is, it’s easier to understand the meaning of cloud accounting software.
Cloud accounting software is accounting software that runs online. It allows you to access your data from anywhere on any device, as long as you have the right login details.
When you use cloud accounting software your data is encrypted, much like a bank’s. This means that only people with login details - that’s usually you and anyone who you’d like to set up as a user - can access your business’s financial information.
The issues with traditional accounting software
If you’re still using traditional accounting software or even spreadsheets to run your business finances, you should be prepared to run into the following issues.
It’s not recognised by HMRC as Making Tax Digital-compatible software.
The data isn’t updated regularly and therefore less reliable.
Key stakeholders within your organisation can’t access the data.
It’s hard to share the data in a safe and controlled way.
The backup process is costly and complicated.
Updates take a long time to install, keeping you from doing your work.
There are many benefits to using cloud accounting software, and in the long run, it really is the only way to go for UK businesses. Here’s why.
When you use HMRC-recognised cloud accounting software, you have the right bookkeeping tools in place to comply with the government’s tax regulations in the long run. With Making Tax Digital, the UK government is on a mission to create one of the world’s most advanced digital tax systems and in order to reach that goal, more and more UK businesses are required to keep digital records and submit their tax returns using HMRC-recognised cloud accounting software. At the moment, Making Tax Digital rules only apply to VAT-registered businesses, but in the coming years, businesses who pay Self Assessment Income Tax and Corporation Tax will need to digitise their bookkeeping practices too.
Using cloud accounting software is more cost-effective than you might think. Whereas desktop-based software is expensive and requires a time-consuming setup, cloud-based accounting software is available at an affordable monthly fee. Once you’ve created your account, your digital bookkeeping system can be up and running within an hour. What’s more, thanks to all of its benefits, cloud accounting software pays for itself in terms of time saved. And why would you spend more time on accounting if you can spend it on running your business instead?
When compared to traditional accounting software or spreadsheets, cloud accounting software comes with more automation features. With QuickBooks Online, for example, you can automatically import your bank feed, reconcile your transactions, organise your business expenses, set up recurring invoices and check your VAT returns for errors. If you have employees, you can choose to add Payroll features that automate pension submissions, pay slips and pay runs and update tax codes automatically. When HMRC changes its rules and legislations, you can rest assured that your cloud accounting software automatically updates to help you with compliance.
Cloud accounting software, in general, is designed to be more intuitive and user-friendly than traditional accounting software. Even if you’re not a finance professional, you’ll find it easy to understand the dashboards that give you a top-level overview of where your business is at and what’s ahead. Don’t be fooled by this simplicity, however. Cloud accounting software like QuickBooks actually has advanced features and functionality in place that accommodate advanced accounting and the creation of detailed reports.
When you use cloud accounting software, your financial data is encrypted and stored securely in the cloud. This means that you don’t need to be behind a desktop in order to get on with business - you can create and send invoices, add business expenses, track mileage, get cash flow insights, create reports and more, from anywhere and from any device. All you need is an internet connection and all your financial data is right there beneath your fingertips.
By setting up multiple users, you can share and collaborate on your books in real time. Everyone’s on the same page with your collaborative cloud accounting software that provides a real-time overview of how your business is doing. If your books need to be checked, corrected or audited by a colleague or a qualified accountant, you can simply create a user account for them. At all times, you’re in control of the access rights.
If your business has ambitions to transition to a paperless office, moving to the cloud is crucial. With invoices being created digitally, receipts being snapped via the app, payslips being sent automatically and more, you can easily run your business without a single printer in sight.
Switching to cloud accounting is easy. With QuickBooks’ handy data import integrations, you can upload years worth of financial data to your new cloud accounting software in less than a day. Once you’re set up, getting to grips with the new interface is easy. If you run into a problem, it’s quickly solved with the help of step-by-step guides, how-to videos, in-product support and more.
If your business wants to stay ahead of the game while saving time and making bookkeeping easier, making the switch to cloud accounting software is the way to go. Discover the benefits of using QuickBooks Online, the HMRC-recognised software made for small and medium-sized businesses.
We hope you’ve found this article about the benefits of cloud accounting useful. Did you know that the QuickBooks blog is full of tips and guidance for small business owners? Have a browse around to see how else we can inspire you to level up your business.