Cloud accounting software: advantage or necessity?10th January 2017
This article by Jeff Williamson FCA, a specialist dental accountant for PFM Dental Accountancy, was first published in The Dentist January 2017.
Cloud based solutions are fast becoming the accepted model for most operating software used in dental practices. The perceived barriers of the past – security, privacy and reliability have all been much improved and the whole concept is much more understood. Accounting software hosted in this way is now the ‘must have’ in a modern practice and the potential benefits that the cloud software providers preach are very compelling. The headline benefits include:
1. Unlimited, continuous access. The ability to work any time, day or night, since the cloud gives you uninterrupted access to data and systems.
2. You can work from wherever suits you. If you have multiple practices, you want to work from home or another remote location or you are out of town, cloud-based computing gives you access from your laptop, tablet or even your smartphone. As accountants, we can also be granted access to your system to assist in bookkeeping or with management accounts.
3. You can use your choice of device. Cloud computing is browser based, not platform based, so access is more universal. Capacity is not an issue.
4. Security of data. Your cloud provider has better security than your dental office.
5. Business continuity. Should an unforeseen catastrophic event occur, your business will be unaffected, at least from a computer systems point of view.
6. You will avoid hefty up-front software costs and the ‘pay as you go’ approach ensures that you stay up to date. Cloud users typically benefit more from the fast deployment of software patches and security upgrades as part of the automatic upgrades. With cloud based accounting software, you purchase the right to use the software over the Internet via a subscription model.
7. You will enjoy real-time information and this can lead to more timely decision making and can be developed to monitor the key performance indicators of the practice. The software can be linked to your online banking feed to automatically record income and expenses as they occur.
Cloud based bookkeeping lends itself to the dental profession where recording transactions on a cash basis gives you a clear picture of the practice’s finances and you can choose to further improve the quality of the financial reporting if you wish.
We have many clients who are able to compare costs across different practices and use the data provided by the software to monitor key performance indicators, perhaps overhead costs expressed as a cost per UDA. Cost variances experienced from year to year, or between sites provide almost a bespoke benchmarking tool. This can really focus effort in a world where most costs are increasing.
With any computer system, the output is only as good as the input and be wary that simply linking your accounting software to your online bank feed will not in itself provide instant management information but it’s a great start.
Do I need cloud accounting software?
There are many cloud accounting software providers in the market and if you embrace the concept and can see, and more importantly value, the business advantages that cloud accounting can offer then that’s fine. But is cloud accounting really just a simple solution that gives you real-time basic bookkeeping or is it something more and do you actually need it?
Well, in this age of ‘simplification’ HMRC continues to strive for the Utopian tax system. We have seen real-time information for payroll, pensions have been simplified (allegedly) and workplace pensions are being rolled out through auto-enrolment. The next item on this agenda is the digital tax account.
Many will remember the advent of self-assessment in 1996 where reporting taxable profit became your responsibility, on a current year basis rather than a prior year basis. The digital tax account is the latest initiative that will eventually require individuals, businesses and limited companies to report their profits on a quarterly basis. Whilst there is no proposal at present to start to collect the tax quarterly, no doubt this will come.
The digital tax account is being ‘sold’ to us as something we want, HMRC states: “By 2020, businesses and individual taxpayers will be able to register, file, pay and update their information at any time of the day or night, and at any point in the year, to suit them. For the vast majority, there will be no need to fill in an annual tax return.”
It is fair to say that most clients won’t miss having to do a tax return but all businesses will need a system to provide reliable, timely profit information in an appropriate format to satisfy the new reporting regime. There will be penalties for late submission and estimates are not acceptable.
So, from early 2018 onwards these new reporting requirements will be upon us. Cloud accounting software will potentially prove to be the answer to providing this information. It is important that this significant change in tax reporting is recognised early and that you work with your accountant to ensure you can comply with the new requirements.
At PFM Dental Accountancy we have thorough, practical knowledge of the main cloud accounting software providers including Sage™, QuickBooks™, Xero™ to name a few. We can help you set up the system and make the transition to the digital tax regime a smooth one.
If you would like to discuss how cloud accounting could benefit your business, get in touch.