Running a business comes with lots of responsibilities, and one of the things we need to consider is record keeping.
HMRC requires that records are kept in a correct manner, that they are accurate, factual and up-to-date. They can issue a business with a penalty for not keeping proper accounting records.
One of the ways to stay compliant is to use accounting software. That is, however, not the only thing that an accounting software can provide, so I thought I’d explain the main benefits for you.
Before you ask, there are no real disadvantages of accounting software, apart from the cost (which is always tax deductible anyway). There are some that are provided for free by certain banks, but it is essential to get the right software for your type of business.
So, what are the main advantages of accounting software?
Most accounting software is in the cloud, which means you are able to keep your records up to date no matter where you are – even on the beach!
It is encrypted, to keep everything secure, and this is as standard, not for an additional cost.
If you are not a VAT registered business, you need to be aware of your turnover figures to know whether you need to register for VAT. Accounting software enables you to run reports at any time to determine your 12-month rolling period and therefore decide if you need to be VAT registered.
Limited companies have to ensure they are profitable before dividends can be taken, and your software can provide you with a profit and loss account that can help ascertain if a dividend can be paid.
There are lots of different apps you can add to accounting software to make bookkeeping easier, faster and more efficient. AI is amazing and is available to us in many different forms, and an example of this is the app that allows you to upload invoices which are then read and processed easily into the accounting software.
Details of debtors can also be easily obtained, meaning chasing funds and easing cash flow should be a simpler process for you.
Better decision making around stock control and purchasing power can be made by using the various bespoke reports included within the software.
There are lots of different types of software available so it may be hard to decide which is the best. If you’re trying to decide which one is right for your business, I’d encourage you to speak to your accountant first, to determine which would suit your bookkeeping needs.
Episode 8 of my podcast, Your Business Hour, discusses the various accounting softwares from a user’s point of view, so that may be a useful listen for you.
Please always seek professional advice before taking any action. We are happy to answer questions in future issues. Please send your questions through the Contact Us page on our website.
Chantal Baker is the director and founder of Champ Consultants Ltd, an accountancy and tax consultancy practice in Caterham.
Please follow them on their various social media channels.
You can also follow Chantal on TikTok.
