Cloud accounting software that's HMRC- and MTD-compliant is a powerful ally, especially when it's time to file your tax return.
For lots of people, Word and Excel are familiar tools that we know we can use successfully. So when you first start a business, it makes total sense to use them to organise the financial side of things. We know they’ll do the job properly, and we’re confident in our own ability to use them.
But you don’t necessarily stop to ask, ‘Is this the best way to do things?’
Especially as your business grows, your records, accounting, and taxes become more complicated. It’s wise to find out how the benefits of cloud accounting can boost your business now and into the future.
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What Is Cloud Accounting Software?
Cloud accounting software works on the same principles as your online banking. You can access your information from any connected device, anywhere, at your convenience.
Cloud accounting software means that you don’t have to wait until you get back to your desk to deal with your business finances. All your business books and financials are stored online. You get a much more agile tool for both everyday and tax-related tasks.
Benefits of Switching to Cloud Accounting Software Ahead of Tax Filing
There are 5 main benefits of retiring your Excel spreadsheet and switching to cloud accounting that help improve your tax return experience.
1. Reliable Record Keeping
All the evidence for your self-assessment tax returns, capital allowances claims, VAT returns, work expenses tax relief, and allowances claims, and anything else you tell HMRC is in your books.
You already know the importance of accurate record-keeping and having a tracking system in place. For example, you log all your expenses into your Excel spreadsheet once a month and keep the receipts together in labelled plastic wallets.
But how many hours does this take every year? And what happens if your laptop dies or gets stolen?
With cloud-based accounting software, you can cross ‘do the books’ off your list. Invoices, expenses, payments, proposals, and time tracking are all done online, not manually. That’s one interconnected place for everything.
No more receipts blowing out of their ‘safe place’ in the van door. You just take a photo of it instead, and voilà, it’s in the cloud. What’s more, is that HMRC accepts this digital copy as legitimate proof of your expenditure, so if they ever do an audit, you’ve got what you need.
2. Accurate Financial Reports and Tax Returns
At the moment, you are the link between all your business’s information and your completed tax returns. You have to reconcile everything on your spreadsheets and transfer it across to your self-assessment tax return, VAT return, or Company Tax return.
With HMRC-compliant cloud accounting software, like FreshBooks, you can take the potential for human error out of the equation. Because everything is connected, you just need to input data once, and the software will populate your tax forms for you. And you can submit everything straight to HMRC through its secure portal.
3. Accountant Accessibility
Another benefit of cloud accounting is the ease of collaboration. Nothing replaces the value of hiring a professional accountant to make sure that your books are tax-efficient. This is especially true if you own a growing business with more complex needs.
With cloud accounting, you can forget about delivering your box of books and bags of receipts. You just set up their access, and they can get into your cloud account to work their number magic. It really does seem like wizardry on occasion, doesn’t it?
4. Ease of Claiming Full Tax Relief
Cloud accounting makes claiming any kind of tax relief much simpler. You don’t have to waste time finding receipts; they’re all just there, a couple of clicks away
Your accountant can easily categorise expenses and apply the correct tax rates. Plus, they make sure that you get every single work expense tax allowance and relief, capital allowance, and VAT claim that you’re entitled to. And this can all be done without ever having to speak to you. Because all the information they need is right there in your cloud accounting tool.
There’s always the worry of making mistakes with tax relief claims, which leads to many businesses missing out or not claiming at all. This is largely because of HMRC’s penalty system, which starts with ‘making a mistake’ and goes all the way to tax avoidance and evasion. One of the main benefits of cloud accounting is a reduction in the risk of human errors.
5. Safe and Secure Data
A cloud-based accounting system is in the software-as-a-service or SaaS category. This means that all your financial information is stored and backed up on their servers, giving you much better disaster recovery capabilities. For example, if your office is broken into and all the hardware’s stolen, your financial data—and your clients’ financial information—is still safe.
Subscribing to a cloud technology provider relieves you of the cost of setting up and maintaining a cloud system yourself. Cloud accounting systems have automatic data backups—you don’t even have to initiate them.
Security monitoring is built into your cloud accounting system, and any subsequent software updates are made automatically as part of your package. User access to your account is determined by you. Depending on your business setup, it may be useful for multiple people on your team to be able to see the same information. But you have control over who has access and what information they have access to.
Why Cloud Accounting Is Better for Business
These are just the benefits of cloud accounting systems that specifically improve your tax filing experience.
But most businesses find that cloud accounting systems provide several additional benefits, such as:
Your time. Time previously spent filing receipts, keeping pen and paper records, entering data into an Excel spreadsheet, having to produce recurring invoices, and all the other necessary admin gubbins that businesses generate. That time’s now refocused back on the actual business as your cloud accounting software relieves you of the paperwork burden.
There are no extra or hidden costs with cloud accounting. They work on a subscription basis. You choose the right monthly or yearly cloud software package, and that’s it. There are no unexpected extras, you get the cloud accounting services you pay for—until your business expands and you need the next package up, of course!
Word to the wise: Keep an eye out for excellent cloud accounting offers that pop up during the year.
You no longer need to plan time at your desk to ‘sort the books out’. And with cloud accounting in your back pocket, you can now do even more, like:
- Send invoices
- Accept online payments
- Record work expenses
- File receipts
- Create reports
- Track time
- Send quotes
And the best part? Cloud accounting can be done at any time of day, wherever you are. All you need is an internet connection and your cloud-based software.
With cloud-based accounting, you can get a snapshot report of your current financial affairs based on real-time analytics.
Wondering when you’ll have the cash flow to hire a new member of staff? If you use a tool like FreshBooks, you can quickly glance at your Profit and Loss report straight from your Dashboard.
Cloud-based systems are designed to give you an up-to-date view of your business’s data. This has so many benefits when you apply all the features of FreshBooks’ online technology. Checking up-to-date data before you make a decision is just good business sense. And the cloud makes data readily accessible—right there at your fingertips.
Integrated Business Applications
If your cloud accounting software only integrates with your bank account, you’re using the wrong one. Look out for software that integrates with a whole host of business applications. These integrations provide even greater efficiencies, helping you get back to what’s important: Running your business.
As HMRC continues to roll out its Making Tax Digital (MTD) plans, look out for software that’s compliant with MTD for VAT. FreshBooks is one of these tools, and allows one-click submission of your VAT return to HMRC.
Give the Cloud a Try This Year With FreshBooks
If you recognise how much all these benefits of cloud accounting software could improve your business performance, check out your FreshBooks options. Many businesses appreciate how online accounting software decreases the time and stress involved in filing tax returns.
More than that, moving away from the bind of traditional desktop software and manual data entry to cloud-based accounting software transforms your whole work experience. To benefit from these many advantages, all you need is your FreshBooks account and internet access.
This post was updated in December 2023.