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Right now, businesses are switching their accounting systems to the cloud faster than at anytime before. Why? We live in a digital age and businesses not embracing cloud-based systems are falling behind with the times. Even HMRC are climbing on board, and have already taken the first step in Making Tax Digital.
From 1st April 2019 all VAT-registered businesses with a taxable turnover above the VAT threshold are required to keep records digitally and use appropriate software to submit VAT returns.
Some businesses are also taking part in a pilot to test and develop the Making Tax Digital service for Income Tax. HMRC’s ambition is to transform tax administration in the future so that all businesses and individuals report any required tax returns digitally. It aims to be the most digitally advanced tax system in the world.
So, does that mean your small business needs to switch its accounting records to the cloud? Not yet no, but there are actually many benefits, so the sooner you can the better.
Let’s take a look at exactly what cloud accounting is and some of the reasons why it’s time your small business made the switch.
What is cloud accounting?
You use the cloud every day. The cloud basically refers to software and services that run on the Internet (as opposed to locally on your computer). When logging into your bank account from your computer or phone, you are accessing data using the cloud, so chances are you are already using the cloud more than you think.
In simple terms, the cloud is really just a network of servers offering data storage. It doesn’t require the traditional software, once purchased as floppy discs or CDs. Instead with cloud accounting, you purchase software as a service (SaaS) by monthly subscription from the cloud.
Here are 7 reasons you may want to take the plunge and get your accounting transferred to the cloud.
1. HMRC are turning digital
While most small businesses aren’t required to report tax digitally at the moment, HMRC will be rolling out Making Tax Digital as a requirement for almost all businesses in the near future.
By 2020 all tax information will be collected from business bank accounts and third parties to minimise tax reporting requirements.
Incidentally, the current online service isn’t the same thing as the forthcoming digital tax service. The new digital service will require businesses to submit returns quarterly via an app or compatible digital software. See more on what small businesses need to know about Making Tax Digital here.
2. Collaboration easier
One of the greatest advantages of cloud-based accounting software is that you are able to easily collaborate with multiple users and all update the accounting system at the same time. Your accountant can also access data remotely (with your permission).
OS Accounting have helped many small and medium-sized businesses to make the transition to cloud accounting. Oliver Spevack, partner at OS Accounting, believes that a dynamic digital software solution is vital for business success and will be essential in the future for businesses to stay compliant.
3. Digital accounting solutions are smarter and faster
Cloud-based solutions tend to be faster and more efficient than their non-digital counterparts. Cloud-based solutions are continuously evolving to offer users a better experience. With traditional accounting software it is common for only one person to have access. It makes the sharing of financial data between teams cumbersome and slow, with reports often falling out of date by the time they reach the relevant person.
4. Increased reliability and security
Moving data from place to place with old-school accounting systems using a USB stick isn’t a secure or reliable way of operating. With a cloud-based accounting solution data is stored remotely on secure servers. Your digital data is encrypted and therefore better protected. Using cloud accounting software your data is better protected against theft, loss or being accidentally deleted.
5. Greater flexibility
Digital accounting software enables you to access your accounts from anywhere and from any of your devices. Most cloud-based accounting software packages also enable you to access accounts from your phone.
6. Cost effective
Cloud-based software is much more cost effective than traditional software with its expensive hardware, IT support and updates. Generally, cloud-based accounting software uses the SaaS model (software as a service), which offers monthly subscriptions to its users.
7. Easily scalable
With SaaS accounting, it is simple to scale users as your business grows. You simply pay for the number of users by monthly subscription.
Is the cloud really the future of small business accounting? Yes, it is. Why delay the inevitable? It makes perfect sense to get prepared now, update to the cloud and save any stress later on. Need further convincing? See more on why cloud accounting is good for business here.