Posted on 15 May, 2018 | 4 mins
The 9 Spokes team is at Accountex in London 23 - 24 May, which got us thinking about the upcoming changes to tax reporting. It might not sound thrilling on the surface, we'll admit, but Making Tax Digital is going to be a game changer for accountants and their business clients. We’d love to discuss your thoughts too—so come find us at booth 776, 23–24 May, at ExCeL!
By April 2019, many UK businesses will be required to keep and submit their tax records digitally—whether through a personalised HMRC account or integration with their accounting software.
That’s going to bring huge opportunities for businesses to make a productive change in their day-to-day running. Directly and indirectly, it’ll also be a big bonus for accountants, as their clients take a bigger step into the digital world.
Here are five benefits from the incoming Making Tax Digital roll out:
1. More businesses will go digital
The cliché of a business that’s so bad at bookkeeping the owner keeps a shoebox full of receipts is just an exaggeration, right? Unfortunately, it’s not.
Research from last year showed that a startling 16% of SMEs use a shoebox for that very purpose, 23% use manual bookkeeping, and 27% use spreadsheets and other similar tools¹. Only a third use software.
Making Tax Digital can pull many of these companies into the 21st century—whether they want to enter it or not.
The issue will be that while 27% have a simple data-importing tax to comply with Making Tax Digital, 23% have to spend some time manually entering the numbers into their new software, and 16% have a longer, more tortuous journey ahead picking through their shoebox. Accountants will be tasked to help, of course—and we’ll touch upon that later.
Most importantly, digitisation is a worthwhile piece of business transformation that’s long overdue for some. And with a little luck, that shoebox can finally be used for shoes again. Imagine that!
2. Getting in the cloud can bring growth
When we say business digitisation will bring benefits, we mean it.
Using cloud business tools—like the bookkeeping software many businesses will start using after Making Tax Digital comes into play—can lead to average revenue growth of a huge 20%.
When businesses use three or more of these cloud tools, that number jumps to 25%².
So, Making Tax Digital isn’t just a case of companies staying compliant with HMRC; it’s a way to elevate how that business works—automate its processes, start saving more time and gain better control of its most important information.
And when a business adviser gets their client to this point, the benefits to the relationship are clear.
3. Fewer tax mistakes
The vast majority of businesses want to get tax right, but it can be complicated, while mistakes prove costly. Even filing your tax return late will lend an owner with a bill somewhere between £100 and 20% of the tax amount, depending how late it is.
HMRC also says avoidable tax mistakes cost the Exchequer more than £8 billion a year, with £3.5 billion of revenue lost because of VAT-return mistakes alone³.
Making Tax Digital aims to dramatically reduce this amount—for businesses and the economy as a whole.
4. Better relationships for tech-savvy accountants
Remember that 16% of small businesses who still use a shoebox? They’ll be in desperate need of help before Making Tax Digital rolls out—as will the manual record users and our only-slightly-more-advanced spreadsheet enthusiasts.
But that’s a great opportunity for accountants to get them online and using digital tools. By taking them into the world of cloud accounting—not to mention the other cloud apps that can help them run their businesses—accountants are offering a valuable service.
But more importantly, by helping them thrive in that ecosystem, accountants are taking steps towards what’s been seen as the Holy Grail for them in recent years: becoming a trusted adviser.
It’s great for accountants who want to be more proactive and future-focussed in their client relationships, which ultimately helps them keep clients on side. Business owners say they’re twice as happy with tech-savvy accountants⁴, after all, while a lack of proactive advice was found to be the most common reason businesses switch accountants⁵.
5. A chance for accountants to evolve
We’ve said before that Making Tax Digital is one small step for SMEs, one giant leap for accountants. The reason is an expansion of our fourth point: because accountants can start giving their clients more of what they value.
When small businesses were asked what their accountants can improve upon:
- 21% said they want more speed and responsiveness
- 16% want greater understanding of their market sector
- 14% want greater data analysis
- 12% want greater IT and software knowledge
- 12% want better communication skills6
If accountants take the time to become familiar with the cloud apps on offer for small businesses—outside of just the accounting side of things, but the people, sales, customers, product and marketing apps that can further help them grow—they can touch upon all these points of improvement.
And on that point, let us tell you a bit about what we do at 9 Spokes.
What we do
9 Spokes is an app marketplace for small businesses, where we recommend apps that we’ve curated and found to be most useful for SMEs. We’re also a business dashboard, where businesses can see key information pulled from their numerous apps on one screen—at any time, from any location.
Through our data dashboard for accountants, you can see your client information in one place and be more responsive to their issues, learn more about what’s going on in the wider market, analyse data simply and have more conversations about the future.
So yes, Making Tax Digital is coming, and it might be a headache for some. But when businesses take that step towards digitisation—with their accountant’s guidance—we’re confident that they won’t look back.