Meet the firm that’s comfortable with HMRC’s proposals for Making Tax Digital.
HMRC’s ongoing consultation on its plans for Making Tax Digital (MTD) has resulted in a flood of comments from ACCA’s practitioners across the country.
While many have raised concerns with certain aspects of the proposals, one Bedford-based practice believes the concept makes sense in the long term.
When Alex Falcon Huerta established Soaring Falcon Accountancy, she committed to operating solely in the cloud. She believes cloud accounting is changing how we do business today.
Real time accounting information is vital to any business, allowing the owner to make important decisions faster and before it is too late. Alex believes HMRC’s bold plans set it on a path to embrace the digital future – and ultimately make life easier for small businesses and their owners.
‘You shouldn't have to wait until your financial year end to find out what profit you have made – or what the tax bill is going to be,’ says Alex. ‘Even today, that just sounds crazy.
‘When HMRC announced its plans I was happy because it felt like vindication that my business is going in the right direction.
‘HMRC is not known for its forward-thinking approach. Now, if HMRC is moving ahead of your firm, don’t you find that scary?’ says Alex bullishly.
‘Going digital will help clients be more aware of their tax position. A sole trader can have apps on their smartphone which show at a glance the business’s current financial position. The firm also no longer has to worry about a big tax bill at the end of the year. Surely clients want to be in more control throughout the year rather than leave it to the last minute and be faced with a daunting tax return?’
Quicker and easier Moving to the cloud isn't a long winded process. When meeting with a potential new client, Alex likes to gather as much information as possible about how the business functions, what its short and longer term goals are, and how it manages its most precious resources – its people.
From this point forward the online journey begins. ‘With all the tools we use – such as Xero, Receipt Bank and Practice Ignition – we can get a business online quickly and efficiently and eliminate many of the manual processing tasks,’ explains Alex.
‘Only this week I met with a potential client, who after that initial meeting, “signed” their engagement letter via their smartphone and allowed us to immediately start creating their online package.’
With over 20 years’ experience in practice, Alex is only too aware of how the process used to be, with engagement letters taking days in the post in each direction. Today ‘millennials’ increasingly expect things to be done instantly.
Most accountancy firms have made the move from paper-based accounts to Excel and now many are moving into the cloud. MTD represents part of this and Alex is convinced it will help deliver huge efficiencies overall.
She cites the use of a tool such as Receipt Bank as one example of how it can help clients save money. ‘We attach a value to each client. We work out what their hourly rate is and look at how technology can free up time for business development and everything that directors should be doing.
‘Until recently two directors of a client were processing around 50 invoices per month, using around £350 of their billable time. Yet by going digital for only £20 a month plus another £10 for an admin assistant, they are be able to focus on actively growing their business.’
Big data Big data is a term bandied around a lot, but in simple terms, the intelligent use of data is creating many opportunities for businesses in the future. Better understanding and analysis of data allows for greater insight into the future and what trends will emerge. Real-time data will help investors make critical calls on growing businesses.
Penalties HMRC’s proposed penalties regime – the only part of its proposals that won’t be in real time – have drawn the most criticism from accountants so far. Alex understands these concerns: ‘It can be hard pushing clients to keep on top of tax returns and the associated paperwork. It can take up far too much of our time.’
Yet she also sees opportunities offered by practice and client management to improve working practices. ‘It’s about educating clients. I try and gear as many clients as possible to operate on a monthly cashflow. Many bills are paid monthly now. This increased discipline will help minimise clients’ risk of being penalised by HMRC.’
Summing up ‘Who can remember when mobile phones first appeared?’ asks Alex. Now, many people will carry a work and personal mobile and increasingly conduct their business from the palm of their hand.
HMRC’s MTD proposals may be fraught with hurdles to overcome, but if the accountancy profession is going to move with the times – and technology – they are worth conquering to ensure your practice is fit for the future.