Find out why keeping digital records is such an important business practice in the UK.
Making Tax Digital (MTD) has been a hot topic over the past few years. Since April 2019, businesses with a VAT-taxable turnover over £85,000—in other words, earning above £85,000 per year—have been required to keep digital financial records and send off annual returns using MTD-compatible software.
Despite the initial uncertainty, MTD looks set to transform the UK’s tax system for good—but its benefits extend far beyond merely making life easier for the government. There are many reasons why keeping digital records is such an important year-round business practice. Done well, and it will transform your company: Making it more efficient, more profitable, and more enjoyable to run.
So let’s explore the 7 reasons why digital records are so important and how they can future-proof your business for years to come.
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The 7 Benefits of Embracing Digital Records
Whether you’re looking to save time, money, or a significant amount of stress, keeping digital records will revolutionise the way that you run your company. Here’s how:
1. You’ll Save Time
As necessary as it is, admin is an incredibly time-consuming activity. Of course, not all time spent on admin directly relates to creating, organising, and maintaining information in your physical filing system—but it certainly adds another task to your list. Physical records are also far more likely to accidentally be lost or misplaced. Even if you do manage to find them, you still wasted precious time digging through papers and folders.
Accurate digital records allow you to access all your key documents in just a few clicks. Embrace one single source of truth instead of digging around disparate documents stored here, there, and everywhere. Say goodbye to the painstaking process of manually reconciling transactions—instead, most modern accounting software automatically handles reconciliations for you.
Plus, if you store your digital files or records on the cloud, your whole team has access whenever they need it. You’ll never again have to sift through folders upon folders to find that one piece of crucial information. Imagine what you could do with all that extra time. Think of all those value-add activities you could focus on instead of being swamped with endless admin. Perhaps you could follow-up on your leads, spend more time creating detailed proposals, or just connect with (and help support) your team.
2. You’ll Save Money
We all know the adage: “Time is money”. Wasting hours on end doing important, yet low-value admin tasks can be frustrating. Not only that, but every minute you spend on admin is a minute that could’ve been spent on valuable activities: Finding clients, completing important projects, and generally doing what you love.
So how can you make doing paperwork and tracking your business as efficient as possible? It starts with digital records. As mentioned in the previous section, they’ll save you a considerable amount of time, which means you’ll also save money… surely you haven’t forgotten that time is money.
That’s not all. Using digital records means that you won’t have to hire an admin assistant—instead, everything is automatically stored and maintained online. Plus, your existing outgoings will plummet. Why print out paper records or pay for storage when you can simply access all your important documents and information online?
3. You’ll Make More Informed Decisions
If you plan to build a successful business you need to make smart investments, scale your team if possible, and properly plan for the future. But how? With the help of your data.
For example, when you use cloud accounting software, you have an all-in-one source of truth. Connect it to your business bank account, oversee all invoices and payments, identify how much time you’re spending on various projects, and seamlessly reconcile expenses. Simply log in each day and track in real-time how your company is performing.
This all-in-one source of truth means you can now make data-informed decisions. Looking to invest in a new piece of machinery or software? Dip into your digital records and check where you’re at for the month. Whether you’re in the red or in the black, you’ll know when it’s the right time to go ahead and make that purchase.
You can’t afford to wait until the end of the year to see how well you’re doing. Stay on top of your progress and plan for the future with more clarity. Not only will you make more accurate decisions, but you’ll make those decisions in just a few clicks.
4. Your Data Will Be Secure
Data is the lifeblood of your business, so you want to ensure that it’s safe and secure at all times. That’s where digital records come in. Of course, you probably already secure your data in one way, shape, or form. Perhaps you keep all-important company files in a locked safe inside your locked office. But what if there was a fire or flood—how confident are you that your documents would survive?
While the UK, fortunately, isn’t at risk of wildfires or tornadoes, there have certainly been a fair few floods in recent years. Still, something far less dramatic (but equally as damaging) can happen: You spill coffee over last year’s financial records. And just like that, your documents are wiped out.
Digital cloud-based storage is the best way to keep your data safe and secure. If you use Gmail, Hotmail, or Yahoo mail, you already trust the cloud to keep your sensitive emails secure—so why wouldn’t you trust it to keep your business records safe?
5. Your Customers Will Have a Better Experience
Customer experience has never been more important. Businesses that get it right attract lifelong customers who’ll stay by their side every step of the way. Those that get it wrong, however, struggle to grow—let alone stay afloat.
Digital records go a long way to ensuring top-notch customer experience. Imagine a customer calls you and wants to find out exactly how much they’ve spent over the past year: The precise quantities they bought, and when. Instead of awkwardly saying “I’ll have to go away and have a look before getting back to you”, you can immediately pull up that client’s information in just a few clicks.
Not only does this help the customer out but it also makes you look professional. By making your records easier for you to access, you also make life easier for your customers.
6. Your Business Will Be More Agile
2020 has reinforced the need for agility. When disaster strikes, your company needs to be agile or mobile enough to keep operating. And if recent events have taught us anything, remote working is now an accepted norm—not a “once in a blue moon” occurrence.
Imagine you have to break lockdown to go into your office and pick up your physical records. Not only that, but once you arrive home, you then have to manually take pictures of each page, share them with your team, and fret about whether or not they were keeping this data secure.
Digital cloud-based records allow you and your team to access key company information from anywhere, at any time. Whatever happens, you’ll have your business-critical data right at your fingertips.
7. You’ll Reduce Clutter
Whether you run a home-based business or you’ve invested in a swanky new office, one thing’s for sure: You always need more space. Not only does an uncluttered office look nice, but it can also drastically improve productivity—a study by the National Association of Professional Organisers found that cluttered workspaces lead to financial losses equivalent to 10% of a manager’s salary.
If you’re still using physical records then reducing clutter is tough—some companies have to keep their financial records for no less than 6 years. Do away with shoeboxes on top of banker’s boxes and use digital files and records. Free up space, unclutter your mind, and stop cramming yourself into your office space. And, if you operate out of a home office, this can really have a positive impact on your peace of mind and your productivity.
Ready to Go Digital Today?
MTD has provided many UK-based businesses with the momentum to start embracing digital records. However, even if you’re under the £85,000 threshold or still keeping physical records (and relying on your accountant to make them MTD-compliant), you should still adopt digital records, especially if you plan to grow. You’ll save you time, money, and focus, all while improving your customer experience and having the ability to make data-driven decisions.
Already begun the transition? If so, let us know how it’s going by leaving a comment below.