It is not often that HMRC does something to help us entrepreneurs and small business owners (it is usually the opposite) but in this week's Autumn Statement the Chancellor did just that in the form of digital filing of tax information.
Now don't get me wrong, there is a lot wrong with the current proposals for
digital filing (not least that they are being introduced with any consultation) and the current shambles that is HMRC, but there is one aspect of the proposals that will significantly help entrepreneurial businesses.
....and that is the requirement for quarterly reporting.
You see one of the biggest problems faced by business owners is that they don't know their business numbers well enough. Too many still only get reliable figures after
their year-end WHEN IT IS FAR TOO LATE TO TAKE ANY ACTION.
Running a business is a bit like flying an aeroplane. Most of the time you are off course. But the pilot of an aeroplane has a dashboard with the relevant numbers to allow him to make subtle corrections and arrive at his intended destination.
Without a business dashboard, entrepreneurs risk only getting their figures after their year-end only to find that they have arrived at the wrong destination!
HMRC's proposals
will at least mean that business owners will have to up their game and get a proper accounting system (probably cloud based) to access their numbers - and that will mean they can access them not just quarterly but monthly, weekly and daily.
As I said in my 2014 book, Figure it Out:
“a tax charge is included [in a profit and loss account]– not because it has been paid, or is
even payable for many months, but because it has to be paid sometime and so it should be accounted for now (and ideally put away in a separate bank account so it isn’t spent!)”
Having up to date financial information and knowing how much tax you owe is a must for all businesses.
Two of the
objections I have heard relating to digital filing are that it will increase the 'burden' on small businesses and that it will be expensive.
These are just plain wrong.
And probably because they are trotted out by people who don’t understand the fundamental shift that has taken place in the world of accounting over the past five years.
It is now possible for a business owner to spend no more than one hour a week doing their books (and in many cases 30
minutes will do).
Don't just take my word for it. A report by big 4 firm KPMG reported recently that with cloud accounting, direct bank feeds, app based accounts payable recording and a simple dashboard, business owners can now free themselves from time consuming paperwork by automating their entire bookkeeping process.
And at a fraction of the cost of doing it themselves or employing a
bookkeeper. The cost of this powerful software is less than £50 a month for any business other than those with complicated needs.
So if you haven’t already moved your bookkeeping into the cloud, now is the time to do so.
To your success.
Noel Guilford