The big one everyone is taking about, MTD or to give it it's full title Making Tax Digital, which has forced some small business to change the way they do their bookkeeping.
VAT registered business have, by now, started to file their VAT returns digitally using third party software, although this did initially cause anxiety to some of the estimated 3 million small and micro businesses that were using either excel or paper based bookkeeping with training and support from cloud accounting bookkeepers and accountants most seem to have made the transition without too much drama.
For me as a Xero Certified Adviser this has provided an exciting opportunity to introduce more small businesses to Xero, the beautiful cloud based software. These small businesses are now able to have a more in depth view of their figures from management reports and a business snapshots which simply wasn't possible before. This, I am sure has resulted in business growth as decisions can now be made throughout the year as these businesses will now have up to the minute view of their financials instead of an annual snapshot when their accountant does their tax return. To watch any clients business grow and thrive is a wonderful thing.
What does this mean for bookkeepers?
The advent of the digital age also means that as a bookkeeper your horizons are wider, no longer do you have to be within easy driving distance of your client, the world is your oyster.
My furthest client is 95 miles from me a 2 hour car journey, that's if the traffic is extremely kind and there are no roadworks along the way, not often the case these days.
This would not work without cloud accounting it would not be at all practical to travel this kind of distance to work at their office on old fashioned desktop software or using paper ledgers. Instead paperwork is uploaded to Dext, which enables scanned copies of each bill to be imported into Xero which are then stored for 7 years for accountancy compliance, what could be simpler?
Many small clients especially those in the trades (not stereotyping here they know this is the case) have little or no processes in place. The results are obvious, receipts fade while they are stuffed in the windscreen of the van or worse get lost altogether. Invoices are missed as they rush from one customer to another they can often forget where they have been to by the end of the day and mileage is often not claimed as people forget to record it. In short these businesses owners are losing money, they are often stressed as the only indication they have on whether they have made any money is the balance in their bank account, which as we all know is not a good way to judge the health of a business.
How does digital bookkeeping help?
I work with my clients to put some simple processes in place to banish bookkeeping stress firstly, I set them up with Xero and Dext Cloud Software, for some this sounds terrifying as the reason they don't do their bookkeeping this way already is the fear of using a computer. Most of us have a smart phone these days so the first step is to get them to download the Xero and Dext Apps available on both android or iOS, now the magic starts to happen.
As my clients get those receipts, previously filed precariously on the windscreen, they simply open Dext app and take a photo that's it as simple as that, the receipts are taken care of in a jiffy, and as for those bills received via email, these are simply forwarded to Dext the way you'd forward any other email to another person. I can then see those receipts and bills and do the necessary categorisations these are then pushed through to Xero ready for reconciliation.
But what about the invoicing, clients who work on the road and go from customer to customer don't always raise invoices, in a timely manner and sometimes forget altogether, this can have a devastating impact on turnover. Xero provides the perfect solution to this, using the Xero App on their smart phone my clients now create an invoice and email it straight to the customer before they leave site and can confirm the customer has received it.
Once I show people how easy this is and give them back control over their paperwork their stress levels decrease and they are happier people. All clients want at the end of the day is for their stresses to disappear. I do still have client who arrives will all their accounts 'filed' in a supermarket carrier bag or two. My first ever client was a lovely guy who had been in business for 11 months, he had no idea whether he had made any money or not. While he wrote down what people had paid him in a book and had kept all of his receipts and invoices everything was going through his personal joint account along with his wife's salary and all the household bills, so as long as the bank was in the black he thought he was doing okay, this does seem quite typical of a new sole trader business. My advice, well Xero of course and a separate bank account is an absolute must for the business making everything transparent.
So, what then happens to the traditional bookkeeper?
The person who, arrived at the clients office once a week to process all the paperwork in a system that no one else knew how to use? Are they a thing of the past? Will the bookkeeper become extinct? The answer to this, in my opinion is a very definite no, the role will undoubtedly change with less of the data entry to do, but these clients will still want their VAT returns looked at before filing and their payroll doing as well as fixed assets to account for and management reporting.
The role will become more advisory, the bookkeeper will be valued for their knowledge and business advice rather than being a data entry clerk as many are now. There will always be the small businesses who don't have the time or inclination to do any of their bookkeeping and are happy to outsource everything, for these businesses the bookkeeper role will remain pretty much the same, or will it?