You may have heard about Making Tax Digital (MTD). Well, this is the new directive from HMRC, From 1 April 2019 businesses with sales above £85,000 will be required to keep digital records. Many business owners and accountants will see this as an unnecessary disruption. However, I am going to tell you why I think Making Tax Digital is a good thing.
Opportunity not a cost
If you’re a business owner who perhaps keeps paper ledgers or spreadsheets. You might be thinking this will mean more work and more cost. In fact, this is a huge opportunity for your business. From my many years of working with small businesses, I have rarely seen businesses with up to date accurate financials. If I asked you whats’s your profit as of today? What is your tax or VAT liability?
Surprises aren’t good
Surprises are not a good thing in business. Therefore fingers crossed when it comes to your businesses finances just won’t cut it. Have you ever received your VAT or tax liability and had a nasty shock? Or looked at the bank balance and wondered where the money has gone? I was speaking to a business owner last week who didn’t know where the money in the bank account was going. Needless to say, the bank balance when he checked his online account was unexpected.
Advantages of MTD
Keeping digital records is an opportunity for businesses to have better data and eradicate the surprises mentioned above. You can save significant time by using automation tools such as Receipt Bank. I have saved businesses many hours every month by implementing such software. We both know how valuable your time is.
Having up to date software can show you at a glance, what money is due in and due out. Your bank balances, profit, tax and vat liabilities. This is why Making Tax Digital is a good thing for you and your business.
You may have heard the phrase ‘what gets measured gets done’. This basically means regular measurement and reporting gives you the insights to make smarter decisions to improve your results. Your most critical measurements are called Key Performance Indicators. Every business should have KPI’s these can include such as. New monthly revenue, profitability, customer satisfaction and customer retention levels.
We can track financial and non-financial KPI’s in reporting software such as
As a business
Does your accountant bring you value?
During this transition to Making Tax Digital, I have come across business owners showing resistance to MTD. A common theme is they do not see the value in using software and up to date numbers. It’s crazy to think you can run a business if you don’t know how it is performing. Traditionally accountants have worked in the past on outdated data. Afterall annual accounts ts are not due for filing until 9 months after the year-end.
Too much focus has been on tax. If you were ill you wouldn’t wait until 3/6/9 months down the line to see a doctor. As a business owner you will get a feeling how your business in performing. Perhaps there is a lack of cash, overdue bills or struggling to make payroll. A more positive note is perhaps you are doing really well and smashing sales targets. However, with an upside usually comes a downside. More sales can mean more profit. More profit can mean more taxes due to HMRC.
Having great information and someone (Accounting Inc.) to interpret what this data means for your business in real time will bring you great value. If you see your accountants fee as a cost rather than an investment I’m afraid you’re likely working with the wrong accountant. See my recent article on why working with a great accountant pays for itself.
We are running a number of special offers to get you Making Tax Digital (MTD) ready. This includes a free Xero and Receipt Bank licence worth £600 rrp to manage your books.
If you would like to dicuss how we can help your business please contract us for a free informal consultation.