Online, or ‘ cloud’ accounting, as some like to call it, has changed the way that small businesses manage their finances.
Not only does it allow users to access their accounts anywhere they have an internet connection, it also makes the bookkeeping job so much easier. Automatic bank feeds have removed the drudgery of having to upload every bank transaction. The software will even remember regular transactions, which accounts they should go to etc, so all you have to do is click ‘ok’.
Apps like ReceiptBank have also made it much easier to get transactions into the system. Poor bookkeepers – there’s not a lot left for them to do!
Vive la Revolution!
The internet has revolutionised business accounting. It’s enabled the creation of businesses like FreeAgent who have thoughtfully redesigned the user experience to make accounting easier to understand for non-accountants.
No longer do you have to pay £000’s every year to a software behemoth, who will send you update disks every other month. These clunky systems no longer take over your desktop, with their horrible user interface and awkward language. No more month-end and year-end routines. No more backups.
So online accounting has to be a good thing, right?
However, like any system, online accounting will only be as good as the person using it, and that’s where the problems can lie. You see, these systems make it easy to do the accounting. Sometimes too easy, and if you don’t know what you’re doing then things can quickly spiral out of control.
Before you know it, you’re making business decisions based on incorrect information. You’re paying the wrong amounts to suppliers, employees, and to HMRC. The profit you thought you had – that your ‘dashboard’ showed you – didn’t really exist after all. You’re actually losing money and you underpaid your VAT because someone didn’t create the sales invoices properly.
HMRC find this out in a Vat inspection, and before you know it you’re facing fines and penalties.
How is that even possible – you’re using online accounting?!?
5 steps to make sure cloud accounting works for you
We’ve seen and heard of too many instances where this has happened, and where the business owner has faced hefty accounting fees to fix the problems. This usually involves the accountant having to check every entry and recreating the records, as they have no confidence in what’s been done by the client.
How do you avoid this nightmare scenario?
- Involve your accountant from the start. They’re the expert – ask them to help you select the right system for your business;
- Get them to help you setup the system ready for use. You’d be surprised how much can go wrong before you’ve entered a single transaction;
- Ask for some training. Just because it’s online, has a sexy website and looks good, doesn’t mean it’ll be easy to use. It can be, you just need to know how. Your accountant should be able to show you how to use the system, what to look out for etc.
- Have your accountant do periodic checks. With online accounting they can do that remotely, so you don’t have to pay for travel time and then sit down and show them your records. They’ll know pretty quickly if things are looking okay.
- Take your time when you’re entering transactions. That’s often when it goes wrong. Better still, get someone else to do it for you and concentrate on doing what you do best. Trying to do the bookkeeping yourself is a false economy.
So there you have it. Online Accounting is amazing, and will change the way you run your business. Just make sure you follow these five steps so that it doesn’t trip you up!