Staying on top of data has always been one of the major challenges for a small business with limited resources, but help is at hand, says Matthew Chapman.
The administrative side of a business does not need to rely on endless spreadsheets and trawling through bank accounts to track payments. Nowadays, there is a wealth of accounting software on the market that can do all the heavy lifting for a small business.
These systems often use cloud computing to store data on a global network of computer servers, which provides an additional safety net if, heaven forbid, anything were to happen to a computer hard drive or USB flash drive holding a company’s key data.
Nevertheless, as an extra precaution it is always wise to keep a hard copy of such data.
Today there is the added incentive of utilising software for accounting due to the government’s controversial ‘Making Tax Digital’ scheme, which is bringing in radical changes in the way businesses report earnings to HMRC.
‘Making Tax Digital’ is scrapping paper returns and requires people to report to the taxman on a quarterly basis.
Accounting software services can make quick work of everything from invoicing to payroll. Many also provide a free trial, which allows users to make a risk free assessment of whether it is a system that suits their needs.
The best known of these is QuickBooks, which is currently raising awareness still further by running a TV ad campaign in the UK. It was estimated in 2015 that QuickBooks had an 80% market share among small businesses that used financial management software.
It claims it can save small businesses around eight hours a month. Its core services include the management of VAT, which is designed to calculate and track VAT automatically, and will submit returns that are “always” HMRC compliant.
The software should also be able to help independent pharmacists comply with the more onerous reporting demands made by HMRC.
For instance, QuickBooks automatically sends Real Time Information (RTI) data to HMRC and manages auto enrolment in an effort to help businesses stay on top of PAYE, National Insurance and other deductions.
Perhaps the most impressive innovation from QuickBooks is the ease at which it allows its users to transform paper receipts into a digital record of expenses.
The app has built in functionality where a user can take a picture of a receipt and it will automatically recognise and store the relevant information.
QuickBooks is one of the services that offers a free trial, and beyond that users can pay for it on a monthly basis with the first six months half price.
Its ‘essentials’ package costs £15 a month, while the ‘plus’ option is £25 a month but has additional functionality such as the ability to manage stock.
However, there are plenty of other options on the market beyond QuickBooks with some of the best alternatives including Xero, Zoho Books, FreeAgent and Sage One.
All have different price plans and features so it is well worth doing a bit of shopping around to find the best solution. For instance, a stand out feature of Zoho Books is a portal that allows suppliers to log in and view recent or pending payments.
FreeAgent, which was voted the UK’s number one accounting software for small businesses in the 2017 Software Excellence Awards, has a simpler pricing structure based
on the type of company you are.
As is so often the case in life, you get what you pay for. For instance, be careful if tempted to go for the cheapest packages available.
Xero’s starter package only costs £10 a month, but it limits users to sending just five invoices and quotes each month.
And there is even free software on the market, but the capability of those will be much more limited.
For instance, Wave is a free cloud-based accounting software solution for small businesses but it is primarily aimed at US and Canada and as a consequence it is not geared towards managing VAT payments.
Multiple log-ins for such services are also available, which means a business owner can provide access for the software to their accountants, who are often well versed in such systems.
Therefore, it can make their lives easier for everything from bank reconciliation to VAT returns. This saves time, and as a consequence money, which means the software could soon end up paying for itself.
It would be well worth asking your accountant on advice on the best software to choose.
Care must, of course, be taken when using accounting software because, like everything, it is not infallible. The human eye can often pick up errors that software cannot, so it
is wise to remain vigilant rather than being totally reliant on the machines.