Recently there has been a revolution in accounting software due to the development and adoption of cloud based tools with unparalleled automation capabilities.
In the UK, due to the rollout of the government mandate Making Tax Digital (MTD), cloud accounting software usage is on the rise. The MTD requires companies and individuals to maintain their financial records digitally. The UK government wants to become one of the most digitally advanced tax administrations in the world.
Selecting the appropriate accounting software is highly important to meet business’s needs today and support growth ambitions. Failing in doing this can negatively impact companies by disrupting transactions, company filings, audits, management information, and KPIs.
Cloud vs. Desktop
Despite the wider use of cloud accounting software, there are still many desktop packages on the market. Cloud accounting software has numerous benefits over desktop.
One of them is accessing up to date financial information from anywhere. This access will speed up finance workflows. Users can complete many tasks such as submitting invoices and reconcile bank transactions, with their mobile devices.
Cloud accounting software also makes collaboration easy, allowing multiple users to view the same set of financial data at once. This is particularly useful as remote working has become the new normal. Another benefit of cloud vs desktop is that you are always using the latest version without needing expensive upgrades.
Using an accounting software which imports bank feeds can be a significant productivity boost for CFOs and their teams. Manually entering bank transactions or inputting CSV files into the accounting software is time consuming and can create errors. Even if mistakes are spotted at the end of the month, correcting them adds more work.
Thanks to Open Banking integrations, bank feeds can be safely imported directly into the accounting software. In the UK, Open Banking feeds are available for the nine largest CMA 9 banks. Moreover, Bank Feed software can import transactions from bank accounts and be categorised in the accounting software in just one click.
Next level automation
Wherever possible, choose an accounting software that has automation features to enhance the finance team’s productivity. Software providers, such as Quickbooks and Xero, allow users to log assets, set their depreciation policy, and elaborate recurring journals.
Another automation example is releasing prepayments for annual contracts so they are smoothed out over their respective periods. Manual prepayments adjustments and reconciliation schedules are time consuming, and differences often occur from manual entries.
Bank reconciliation automation reduces the likelihood of duplicate payments to suppliers. This reconciliation can be faster by setting up rules to automatically post transactions with specific keywords to the relevant category, with the appropriate VAT rate. Another benefit is that bank lines are automatically matched to invoices by recognizing their supplier name and same value.
Many leading cloud accounting providers integrate with third-party software tools through their own marketplaces via open APIs. Enabling CFOs to build their own app stacks aligned to the needs and nuances of their business.
Leading categories in these app marketplaces include inventory management (Unleashed), cash flow forecasting (Futrli, Fluidly,), payment tools (Stripe, GoCardless, and Square), and expense management (Payhawk).
Payhawk is the only finance platform that combines credit cards, payments, expenses, invoice handling and pre-accounting into one integrated experience. Allowing CFOs to have maximum control and visibility over their company spend.
The MTD initiative was first rolled out in April 2019 for VAT registered businesses above the VAT threshold (£85,000). In April next year all VAT registered businesses will have to comply with MTD.
MTD for Corporation Tax and will not mandate its usage before 2026. If you need to switch to an MTD software, find here a complete list of MTD compatible software vendors.
Company groups CFOs should consider utilising accounting software that can consolidate data across all companies, no matter where they are based. Surprisingly many groups still consolidate manually in Excel at the end of the month. This is hugely inefficient and time consuming. Additionally, this makes it easy to generate mistakes related to currency conversion and transfers.
Using an accounting software that consolidates at group level minimises the chance of errors due to automated reporting. Moreover, it applies consistent accounting treatment for specific categories of transactions that are recognised across all companies.
Netsuite, Oracle, and Sage allow for consolidation directly into their software, but Xero and Quickbooks, more focused on SMEs, do not allow for inter-company consolidations. To solve this, third party add-ons, such as Spotlight Reporting and Fathom, can pull data from core cloud software to create group consolidations.
CFOs should take the time to understand day to day financial processes and company needs to choose the right accounting software. Being able to access accurate and timely financial data will allow them to be agile and make strategic decisions easily. CFOs should include key internal stakeholders who are involved in day to day financial tasks to have a stake in deciding the accounting software.