Here’s why your business needs cloud accounting

Welcome to this week's podcast. Now, today, I'm diving into a topic

that many business owners, many freelancers either ignore,

even fear or avoid until it's too late. And that

topic is cloud accounting, otherwise known as digital

accounting. Now, before you've grown, before you poke your eyes out, skip ahead,

just hang on, because this will be worth your investment in

time. Let's crack on.

Firstly, let's start with this idea of what actually is cloud accounting.

Now, you may have come across the term before cloud accounting. You may even

think it means shoving your account into some digital folder

using an app instead of spreadsheets. You'd be half right, but

you'd also be half wrong and missing the point. Now, cloud

accounting is actually using software that actually lives online

to manage your business finances in real time. It's not just the

accounts. So not just keeping records of what you're spending, but actually

invoicing reports, finding out what's going on, connecting to

your numbers more closely, the whole shooting match. What does this

mean? Well, it means you can log in from your phone, your laptop or tablet.

You don't need to be office based. You could be sitting in your garden, sitting

on a beach, anytime, anywhere. You get what are called real

time updates. It's not guessing what's going on. As long as you've got

that data captured, you can actually see in real time where you are

financially, how much you're spending, what you're spending it on, on where your

money's coming from, what's overdue. You could automate the heavy lifting,

the boring stuff, perhaps like chasing your customers if they've not

paid their bills on time, sorting out the expenses, even getting

those tiresome receipts entered into your accounting system.

Now imagine this. You're in a coffee shop. You conclude your meeting with your

client, and instead of going back to your office or scribbling your notes on a

napkin, you pull out your phone, send them an invoice on the spot,

and instantly it's updated your accounts, instantly they've received

it. And what that means is you've got a greater chance of actually getting paid

promptly and on time. That's cloud accounting for you. And that's just

one illustration. What does this actually matter? Well,

let me tell you why it's important, because here's the thing. Too many business

owners are still stuck in the 90s. Too many business owners, for my

liking, are disconnected from their numbers. They see the

numbers, the record keeping, as a tedious exercise, which they'll actually do

on a annual exercise when they Submit their tax accounts.

Now, there's also a legislative imperative which I'm going to talk about in next

week's podcast, and that's something called mtd, which is the

acronym for Making Tax Digital. More of that towards the end of the

podcast. Now, paper receipts, desktop software,

spreadsheets, all that stuff serves its purpose. But the

future for your efficiency, for your money saving, taking

control of your business is in cloud accounting. Now those devices,

they do work. We've got many clients who still use

paper spreadsheets and that's great, but it's slow, it's

risky, and it's the decision making and access to information

that is the letdown. Now let's break that down a little bit more. Now,

time is money. Literally your time is worth something.

That time you're spending on tasks, which you can actually speed

up is time that you could be spending out there delivering work, chasing more

work, developing your business using cloud tools can literally

save you hours every week. Now as an illustration, take

Sandra, name has been disguised to hide. She's one of my clients, she's a

freelance designer and she got a number of projects going on. Now

typically pre cloud accounting should be spending some time either on

a Sunday morning, entering receipts, chasing invoices, and

groaning of having to do that necessary and essential

task of getting her records up to date. Now with cloud accounting,

she can auto upload, set up what's called a bank fee from her bank account,

so the bank automatically updates. She can send invoices out

with a click of a button or the tap of your phone if you prefer.

Her records are updated straight away and she's saved on average

three or four hours a week. Now, if you think about that, three or four

hours times, let's say for argument's sake, £20 an hour

over a course of a year, that's a lot of cost and time

that it's equated to. And also, by the way, she's getting paid faster.

In my experience, when you send out invoices on an

electronic basis, you tend to get paid slightly faster.

Now, it's not just time, it's also your mental bandwidth and

your sanity. Now secondly, mistakes, we all make

them. But with cloud accounting, if set up correctly, if

trained correctly, you avoid those costly mistakes. If you

do something manual, however brilliant you may be, your brain

sometimes will let you down and you will make mistakes. And if you've got to

correct those mistakes, it makes it very difficult to do. If you've got a manual

system, brackets, a spreadsheet with spreadsheets you've got the possibility of

dodgy formulas missing out lines and invoices, duplicating information.

Cloud systems can flag these issues in real time. You're not

walking a financial tightrope with a blindfold. What an image.

Thirdly, you can see the big picture and this is a real

powerful asset to your business. Imagine driving your car

when your windscreen is all frosted over, it's got dirt on there and

there's no water in the bottle. Would you drive a car with a

frosted windscreen? Unlikely. And if you do, that's very dangerous.

Now, running your business is very much like that. Cloud

accounting will give you what's called dashboards, reports. You can

literally log on and see at a glance how much money is in your bank

account, who owes you money, what you owe to your suppliers, what you've

spent. If you want to dive deeper to see where that money is going, if

configured correctly, the insights you gain will be

invaluable. What does that mean? Well, it means you make better decisions, you

give some clarity to your thoughts, and there's no panic arising

in terms of unexpected costs. Now, you might rightly be saying, but isn't

it complicated? Well, that's a bit of a myth. You don't need to be a

techie or a numbers nerd to actually get this right. Tools like

Xero, which is our personal recommendation, are built for real people.

They're not necessarily designed for accountants. Accountants use them.

Individuals who aren't financially trained use them as well. Most of them

are configured, set up and literally a plug and play. When we

set up clients with cloud accounting, we will always train them, induct

them, give them an overview of how to operate the systems effectively.

You can connect your bank, you can upload receipts with a photograph. And

we've got clients who hate paperwork, can't think why, and they've got their

phones. We can set things up, they can take a picture and that's it, job

done. They can throw that piece of paper away and that information is now

in their accounting system. You can configure your systems to remind you when

invoices are overdue. It's like having on tap a digital finance

assistant that doesn't complain or takes a holiday. But you still

may not be convinced, you still may see it as a cost and as opposed

to an investment. Well, let me talk you through some of the costs involved if

you do decide to avoid it. And let's imagine a worst case

scenario. Work has been really hectic, funny life,

things going on have been such that you've neglected to keep on top of your

accounts, to keep on top of your records and your books. You don't know who

owes you money. You don't know who you owe money to. You've got work coming

up, but you don't actually know where you stand, what you've been spending, how

much to charge. You don't know if you can actually afford it. Invoicing has

been delayed. You haven't got those invoices out to customers. You've got bills

outstanding but you've not been able to chase them up. You spend more money than

you realize that you've got. You've got a tax bill coming around the corner. You

can see where I'm going with this one. This is effectively getting in the way

of your business. It's silent financial sabotage. But it

is avoidable with the right system, with the right mindset, and

obviously with the right people helping you. Now it's a understandable

thought you might be thinking, hang on, I've got to change from one system to

another. That's going to be a lot of hassle, a lot of activation. But it

doesn't have to be. Here's a brief outline of what I would suggest. Number

one, select your software again on a Hands up here

on a personal recommendation. Xero would be my tool of choice.

We are a Xero Platinum Partner, by the way, fol and we are able

to provide zero systems and set things up for clients and we

manage to pass on the discounts that we get. Familiarize yourself.

Understand the system. Remember, you don't have to be an expert accountant

here, but you need to have an understanding about how to navigate the system. Get

your bank account. Get it set up correctly from the beginning. No more entering

in bank transactions. The systems can be configured

automatically. Get yourself a simple workflow. So focus on getting

those invoices out to clients, recording those expenses, and do

it, say, once a week. 30 minutes a week is better than several

hours buried under paper or digital otherwise. And stick to

it. Consistency. Small regular habits like brushing your teeth.

Beat those big panic sessions. If you still need more, drop us a

line. We have a link to a free digital guide on

cloud accounting. And remember, cloud accounting isn't about going digital just

for the sake of it. It's about taking control, saving time and making

better decisions. Keeping your business lean, profitable and ready to grow.

Now, I did say at the beginning of the podcast, there's a legislative imperative

talking about in more detail in next week's podcast. We have something

called Making Tax Digital, and that is where HMRC

are compelling small businesses and landlords to submit their

accounts on a quarterly basis. And to do that, you need

digital accounting at your side. So apart from all the

favorable business reasons for doing it, you've also got a potential

legislative and a compunction reason to do it. The sooner you get familiar with

it, the less hassle and aggravation you're going to have. Now, folks, if

you found this episode useful, if you found it of value,

then I'd love it if you not only subscribe to the show, but share it

with someone who you feel can benefit from it as well. Remember,

plan it, do it, and profit.