Cloud Accounting Insights

Flipchart imageAfter more than 30 years of experience within the I.T., accounting and change-management industries, I often speak to finance directors who are looking to smoothly transition from their existing legacy accounting software.

My experience of many financial directors is that while they understand the importance of cloud accounting, the number of options on the market can be confusing.

I have supported a number of recruitment companies to transition away from legacy software solutions such as Sage 50 and Advanced Exchequer, so in this article, I am going to highlight the top six points that financial directors should consider when reviewing any options for cloud accounting.

Laptop on desk 600x338The current COVID-19 pandemic is undoubtedly putting a huge strain on businesses across the world.

I often speak to finance directors, and for many, the current lockdown will be causing additional disruption because of their legacy accounting software.

In this article, I’ve outlined six pieces of advice for surviving the lockdown with the accounting software you have.

In summary, the Reverse Charge applies if you buy a B2B service (except for exempt supplies) from outside of the UK even if they have a UK VAT registration number.

You calculate the amount of VAT (output tax) on the full value of the services supplied to you and then enter on your VAT Return the:

  • amount of VAT you calculated in box 1 and, if you’re entitled to reclaim the VAT on your purchase of these supplies, also put the same figure in box 4 (this in effect cancels out the figure in box 1)
  • full value of the supply in both box 6 and box 7

The example below shows a VAT Return completed where a VATable service for £100.00 has been purchased from a company outside of the UK:

Looking to reduce support and overhead costs on your legacy accounting software? Do you want a tried and trusted, robust, 100% cloud-based accounting solution designed for larger organisations?

It’s my goal to explain the differences between Windows systems and ‘true’ cloud-based accounting systems for medium sized organisations and the differences between cloud accounting for smaller businesses and how a medium sized business will benefit from a more appropriately designed online solution.

There are two key areas that organisations can save money and time. First off are the savings in Service Agreements and Licence and Upgrade Fees and then there are the time saving capabilities of a browser-based solution that, when set up in the right way, uses built-in technology to reduce re-keying and duplication of work.

I know from experience (28 years now!) how important it is to be in control of the business finances. By being 'in control', I mean to know, right now, exactly how much money you're owed, how much money you owe and much money you have. Without this information, running a business is a bit like driving a car without glasses (if you need glasses) - you might get to your destination unscathed but it's gonna be a bit tricky!

Problem is that doing the books is rather tiresome, a job that needs to be done properly but it's not exactly exciting. However, it needs to be done and it needs to be done quite regularly, if not daily. So we need all the help we can get. We need to be confident that we're using software that is robust, well thought out and designed for a bookkeeper/accountant.

Making Tax Digital for VAT (MTD for VAT) is set to come into effect from 1 April 2019 for businesses which have a taxable turnover above the VAT registration threshold (currently £85,000). Under MTD, businesses will be required to maintain digital records and submit VAT returns using their accounting software.

These days, a lot of cheeky providers make clever use of the general confusion in the market about what is and is not cloud software. They ‘disguise’ their on-premise, desktop or hosted business software as bona fide 'cloud' software. They do this by stamping a 'cloud' label on itand offering it in neatly packaged (monthly) subscriptions. In the best case scenario this is actually hosted, single-tenant software.

  1. Understand what is currently happening. Describe the current systems and draw out the processes.
  2. Identify and clarify your objectives & constraints. Can they measured? Is there a value to achieving the objective? What do you want? Perhaps survey staff to identify their wants and concerns and get buy-in. If possible, pull together a guiding team who can help you look for improvements.
  3. Generate options. There may be some quick wins along with medium and longer term options.
  4. Evaluate the options. Test them. Pilot them. Embrace the unknown and learn from it.
  5. Put together a vision and a strategy / plan of how you are going to get there. Refine the plan. Clarify how to make the future a reality. Make sure others understand and accept the vision and the strategy.
  6. Implement.
  7. Review. Did you do what you said you would do?

Finding solutions is about coming up with an idea. The idea may solve a problem in one area but in all likelihood may create a perceived problem in another.

If you know what you want out of a cloud accounting system, if that is clearly defined, then it is clear what needs to be done to set it up and what needs to be entered in from the outset.

It’s not uncommon to download a trial balance into Excel and then make adjustments within Excel to produce the desired set of management reports. Problem is; that we’re back to using Excel and Excel, as good as it is, is notorious for allowing us humans to make mistakes.

Browser based accounting software will probably have ‘Dashboards’. Dashboards show top level summary views of information often in a graphical form.

One of the key benefits of accounting period control is the ability to close off each ledger once entering transactions for the period has been completed. This prevents users from changing information in a period where management reports have already been produced.

  • True browser based cloud solution
  • Accounting period control
  • Ability to handle profit/cost centres as well as departments/cost units
  • Multiple budget scenarios
  • Ease of uploading and downloading information from/to Excel
  • Import/feed bank statement data with good reconciliation functionality and ‘rules’
  • Easily classify sales and purchase accounts into multiple groups
  • Upload and view purchase invoice pdfs with data-entry fields on same screen
  • Handle foreign currency transactions storing the FC value as well as the base currency value, keeping track of exchange rates on a daily basis and good revaluation process.

What’s the difference between a browser based cloud application and the others?

Is there ever a good time to make a change? Probably not.

Is there ever a good time to start investigating whether to make a change? Yes – Now!

Times have changed; banking for most is now online and immediate. Gone are the days of writing out cheques for suppliers, paying in cheques from customers and waiting for the bank statement to arrive in the post.

Planning or, to put it another way, having a strategy will help smooth out the negative attributes that creep in when implementing. Taking the time to create a well thought out implementation plan might have the following benefits:

How many times do you here this? I hear it quite a lot but then I ask the question “Why do you do it that way?”

No one has ever said to me, “Well, we looked at the options recently and decided that this way would work best for now”. Perhaps the way it’s being done is fine, it’s easy, you’re used to it and it seemingly works.

What is it that we are trying to achieve and which aims do the objectives sit under? The objective to me is like a mini vision of the future or an element of the vision, a small but important part of it.

Stop, think – don’t rush.

Think about where you want to get to. Just like planning a route or setting the SatNav, it is better to do it before you set off.

Why is this important if you want to make improvements?

It’s a starting point. It clarifies the current processes and describes how things currently work. Writing out procedures, drawing diagrams, discussing them so that they are clearly understood is a key step.

Not for too long, just enough time to understand a few key concerns so we can look at a way of making the concern a little less of a concern.

Sometimes we struggle through without realising that if we learned the underlying principles, we would be a lot more able.