No one likes the admin involved in filing taxes, with roughly 7% of people missing the selfassessment deadline each year. The Government has even considered introducing a points system similar to the driving offences model, to deter serial late payers.
Most people would agree that tax can be a headache when it comes around. But what if it was something you didn’t even notice? 2020 is hopefully going to be the year that UK businesses feel a lot more clarity around their accounts.
Largely because accounting is evolving, and everything from bookkeeping to paying taxes has changed dramatically in the past 5 years. Thanks to digitisation bookkeeping is faster, more streamlined and less frustrating, which means accounts can be closer to real-time and taxes can be submitted directly.
There are several factors to back this up, from the UK Government’s efforts to digitise tax across the country to the array of sophisticated accounting tools and services available today.
1. The Government are getting on board
The biggest and most important change to tax protocol in decades was Making Tax Digital. Despite a few hiccups during the rollout process this year, HMRC is ironing out the kinks now. When they do, MTD should be a marked improvement on the old system. Businesses that embrace MTD by moving to a digital accounting and bookkeeping solution will quickly discover the benefits and should be more on top of their finances as a result. The digitisation of tax puts an end to the crude ‘receipts in a shoebox’ approach, improving accuracy, speed, as well as automating a lot of the most painful parts of VAT.
2. The rise of next-gen accountants and bookkeepers
It’s not just the tax process that’s changing, accountants and bookkeepers are changing for the better too. The digitisation and automation of bookkeeping mean they can spend less time on compliance and more on presenting the numbers in a useful way. In addition, they’ll have more time available to help clients with tough decisions and creative problem-solving.
What’s more, is that progressive accounting firms have been taking a leaf out of the advertising or digital agency playbook. Trends have led them to be more proactive in their client communications and encouraging two-way feedback.
3. There are better tools and services
The rise of cloud-based accounting services isn’t just a time saver, it means accountants and business owners are armed with more powerful reporting tools to do financial tasks more effectively. These intuitive tools can also be used to create boardroom-ready presentations and charts in a click of a button, rather than spending hours in Excel.
Having such quick and easy access to fully visualised financial data will help any business owner report to key stakeholders. However, it is especially valuable for start-ups and high growth businesses seeking new finance who need to quickly demonstrate financial projections and ROI to potential investors.
4. There’s open banking
Having the right accounting tools and services is important, but most depend on having good data. Financial records that are weeks or months out of date are no use. When a business doesn’t have an accurate or up-to-date understanding of their financial health, it cannot make good financial decisions. They risk spending more than they have, or not investing enough in their business and sitting on cash – not to mention that this situation can be incredibly stressful.
This is why open banking is so badly needed for businesses. The introduction of reliable real-time financial bank feeds, which can be imported dynamically from between bank accounts to accounting software, means data is more reliable and accounts can be reconciled daily or weekly, rather than monthly or even quarterly. When I said earlier there could be a day when taxes are done without businesses even noticing, open banking plays a pivotal part in this.
5. Cash flow woes are gone
Cash flow has always been the number one issue that keeps business owners awake at night. However, with modern payments systems like Stripe and GoCardless, real-time Bank feeds (open banking) and digital bookkeeping (ReceiptBank) it’s easier than ever to build forecasts you can trust.
It’s also easier to predict when the business might need to access finance or to model the cash impact of big business decisions like opening a new office or hiring a new sales lead.
Cash will always be top of mind for business owners, but having a granular understanding of cash flow at any point in the month should build confidence. It should also make for less sleepless nights and less reliance on error-prone spreadsheets.
2020 is likely going to be a tumultuous year for business owners, but taxes are one challenge that they should feel more certain and more positive about. The infamous “tax doesn’t have to be taxing” line from HMRC should hold true more than ever.
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