WHY CLOUD ACCOUNTING SHOULD NEVER REPLACE GOOD ADVICE

by | Oct 6, 2019 | Business, MTD

 

I’m not a technophobe—I’ve always been something of an ‘early adopter’. And I’ve always used technology to try and work more efficiently and to provide a broader set of services for my clients. But there are now many different and complicated software ‘solutions’ in the market. By 2020, most businesses, self-employed people and landlords will be required to keep track of their tax affairs digitally and update HMRC at least quarterly via their digital tax account. These changes will be introduced for some businesses from April 2018, and will be phased-in by 2020, giving businesses time to adapt. And the HMRC is continuing its push for greater online reporting and automation. That’s why, more than ever before, there’s really no substitute for the knowledge and experience of your accountant and business adviser…

In the beginning…

I qualified with a big firm in the 80′s and things were becoming increasingly digitalised. And certainly by the time I joined my previous firm there was widespread computerisation—most modern practices were ahead of the game and widely used technology.

But the level of digitalisation on the client side was varied. Some adopted early and began to get their accounts computerised. Some would give you a suitcase of receipts and tell you to sort it out. Others wrote up books manually. Lots of clients still write their books up manually. And that’s OK.

Who’s driving?

I think the drive toward digital has been driven more from the professionals—our desire to work more efficiently – rather than our clients. The majority of business owners don’t care how you do it. They just care that you do!

At Ripe, we’re fully digital so we’re able to offer digital services in a way that’s more efficient. But if you’re a small business it’s a very different matter.

Fear of the unknown

We also come across client resistance to technology and the cloud. Fear of the unknown. Fear of data being accessed by anyone. Fear of being out of control. And, of course, a lack of technical knowledge and experience.

It’s one thing to list out all of your sales and your purchases manually. It’s a very different matter to enter that data into a computer and know whether things are going to come out in the right place or not.

We’ve had clients who have computerised their accounts and end up with software that produces rubbish at the other end. And that’s partly because the client doesn’t know what they’re doing in terms of bookkeeping.  And that’s the problem.

Garbage in > Garbage out

Put frankly, if business owners are entering poor data, then the reports at the other end aren’t going to be reliable. Doing bookkeeping without the bookkeeping skills can be dangerous. It can get messy (and costly) to clean up. That’s not efficiency.

Technology is a tool. It’s not the magic bullet.

I use the example where a client was using Xero. They wanted to access the system to see what their profit and loss looked like. They were under the false impression that it would be up to date because it downloads data automatically from the bank.

They lacked the understanding that the bank transactions were only one part of what makes up a set of accounts. So they were being mislead because of a mistaken belief that the technology was magic. Whereas of course, it’s just a tool.

It’s a tool to aid efficiency. But there are real dangers and risks if it’s not operated properly. It doesn’t remove the need for processing the information intelligently. And it doesn’t remove the need for reporting accurately. It’s not the magic bullet.

The bottom line (if you’ll excuse the pun) is that the bookkeeping still has to be done professionally and accurately. You can’t get away from that irrespective of the tool,  mechanism or package that you use. It’s unavoidable.

And in steps the HMRC

Added to this is the HMRC’s push for increased automation. Of course we already have online tax returns and payroll. Company accounts are filed electronically. We have online Self Assessment. And now the general move to digital is set to include direct access to clients’ computers so they can read the information themselves.

That scares clients an awful lot. And it worries some professionals, too. They’re concerned about the risk of being cut out. Why would you need an accountant when you can talk directly to the revenue?

But I don’t share that view. If the HMRC ends up with direct access to accounts then there’ll be even greater need for us to monitor, review and check.

Increasingly it will be our role to make sure the set of figures they access are the right ones. To prevent our clients from paying too much (or too little). We’ll be in the position to use our skills, knowledge and experience to help fulfil a role as the auditor or gatekeeper between our clients and the HMRC.
Every change is an opportunity…

In summary

Accountants have always used technology. We like it and we adopt early. But some of our clients don’t necessarily have the same appetite for a digital solution. And if they do use accounting software, they don’t always us it correctly. With the HMRC forcing the issue there’s the potential for an increase in errors, issues and problems.

That’s the reason why businesses will continue to need their advisers and accountants. And why, more than ever, cloud accounting and digital solutions should always be accompanied by good advice