What is cloud accounting?
The world of cloud accounting is here
The accountancy world has changed over recent years with computers replacing many previously manual processes and hand written cashbooks. The original computer software used was all desktop based with accountants requiring a back up of the software to be prepared and sent to them to allow them to do their work. Once the work was completed, a back up was sent to the client to restore on their computer to reflect any adjustments needed. This was not only a time consuming process but also an inefficient one as any changes made after the back up were missed and data was therefore incomplete.
The development of cloud accounting changed the way we prepare our accounts as the computer records can be accessed via an internet connection from any connected device meaning they can be accessed anywhere at anytime and this is real time, up to date information. Therefore gone are the days of back ups and, instead, users have access to current information with any changes and updates being available to all users immediately.
- Ability to access real time data via an internet connection;
- Improved processes and controls;
- No need to back up data;
- Strong cloud security with data is stored in safe and secure locations;
- Automatic updates to cloud software;
- Sophisticated cloud solutions can be created to improve efficiencies and provide the user with greater insights into their data.
- Many of the accounting packages have their own mobile accounting app so users can undertake tasks while they are on the go (e.g. approve invoices, pay bills and prepare quotes) so overcoming delays and improving efficiencies.
The Add On Applications
The advent of cloud accounting has brought a number of efficiencies with it. This includes the development of add-on applications called “apps”. These apps “bolt on” to the main accounting packages to offer additional features and allow the business to develop a complete cloud solution.
There are more common apps used by certain industries and these so called “app stacks” can create a fully integrated package for the business with the overall aim to minimise manual tasks, provide additional features and to provide the end user with more meaningful data.
Examples of the efficiencies seen include the development of optical character recognition (OCR) software meaning an employee can take a photo of a receipt via the application’s mobile phone app, this is then processed and the entry is posted in the accounting records with a digital image of the receipt or invoice attached to it. Not only does this make the entry more complete, it also means that the business no longer needs to keep a paper copy of the entry as the digital one will suffice.
Digital Records and HMRC
From April 2019, HMRC has stated that VAT registered businesses have to provide their VAT returns in a digital format and that it will be a requirement to report Corporation Tax and Income Tax digitally soon after (the date has not been confirmed but it will be on or after April 2020). The initiative is called Making Tax Digital (MTD) and this has really focussed many businesses to move to a cloud based accounting package so they are ready for MTD.
Initially, MTD will focus on VAT registered businesses with taxable turnover above the VAT threshold (currently £85,000), the exceptions being group VAT registrations, overseas based traders, those required to make payments on account and annual accounting schemes in general.
This means that, from April 2019, businesses will no longer be able to submit their VAT returns through the Government Gateway and will be required to use MTD-compatible software which prepares a VAT return and sends it to HMRC. Alternatively, they can use a bridging tool as a temporary solution until April 2020. The bridging tool will effectively require a digital export of the VAT summary information which will link to the bridging tool to allow integration with HMRC systems.
HMRC have created a list of approved software providers for submissions for VAT return submissions under MTD and this list is being added to as more providers develop software to meet their requirements. The list of approved suppliers includes Xero, Intuit, Sage and FreeAgent.
The Future of cloud accounting?
So what is next in the world of cloud accounting? It is not possible to predict this with accuracy but there are many developments already made and this will continue. In addition we will see “smarter” processes emerging with the development of Artificial Intelligence (AI). This means that the system will start to think like a human and guess how we work and what we do.
Overall, the development of cloud accounting has meant that businesses have the ability to access up to date data at any time and from anywhere they have access to the internet. These new systems have created many efficiencies and additional features to give the end user greater viability of their accounting data.
The future will see further efficiencies develop and the time saved will free up time to allow business owners to focus on the business and the days on late nights manually processing invoices will soon become a thing of the past!
Read our Focus On sheet for Making Tax Digital - what could Cloud Accounting do for you?
If you would like to find out how we could help your business, or you have any queries relating to cloud accounting, please contact Cloud Manager, Caroline Harridence. Alternatively, send us an online enquiry.