Are you using the right finance tools for your business?

The pace of change in the accountancy software landscape is rapid. A high-level look at the Xero App Marketplace shows over 700 apps that you can plug into Xero to help manage the finances of your business.

This in itself presents a challenge because it can be hard to differentiate between what is essential to help you run your finances, what is a nice to have and what is simply a shiny new toy that will cost £30 per month for a subscription and then never be logged onto.

HMRC is also embracing this change and has recognised it as an opportunity to obtain more regular information, and payment, from taxpayers. Making Tax Digital for income tax lands in April 2023 and this significantly widens the net of taxpayers who will be required to maintain digital records for all business income and expenses.

This article will explore some of the key tools that can help you manage your business finances.

Cloud accountancy software

Xero and Quickbooks are the main players in the cloud accountancy space, having made huge inroads into the Sage customer base over the past decade. There are also many other very reputable cloud accountancy software providers out there. Some of these providers also offer their software free of charge at a basic entry level.

A cloud accountancy package must have:

■ The facility to set up a bank feed to automatically import bank transactions on a daily basis. Downloading bank statements from the bank website and loading them into your accountancy software is an unnecessarily time-consuming task. Having the daily bank feed enables transactions to be reconciled on a regular basis.

■ Mobile app. Cashflow is the lifeblood of every business so getting paid quickly is vital. Getting an invoice raised promptly after a job is completed is a key part of this.

With a mobile app an invoice can be raised as soon as a job is finished. Some of our clients have an invoiced raised, sent and paid before they have left the customer's property after completing a job! Invoicing on the go also significantly lessens the risk that you will forget to raise an invoice.

■ The ability to automate some credit control functions. Sadly, not all customers will pay on time and will need to be chased and chased to make payment of an invoice. Having cloud accountancy software that can send automatic reminders after an invoice is a certain number of days overdue gives the busy business owner one less job to worry about.

Receipt capture

Some bank accounts and most of the leading cloud accountancy software providers will enable a receipt to be uploaded and attached to an invoice that has been entered into the accounts. This is preferable to maintaining large collections of paper files.

However, the real power in the receipt capture space comes with tools like Receipt Bank (now Dext), HubDoc (free for subscribers to the Xero business edition) and Autoentry. With these tools they go above and beyond simply storing a receipt and they will gather the relevant details from the invoice and, subject to setting up the correct rules in the software, will directly post the invoice into the cloud accountancy software.

With the advancement in data capture in these tools there should be no need to ever key a purchase invoice or receipt manually any longer.

Cashflow forecasting

In case we needed it, the Covid pandemic has reminded us all that cashflow forecasting is of paramount importance for any business. Many businesses fail due to lack of cashflow. This can be due to a variety of reasons, overtrading, slow paying customers, or a simple lack of visibility of when cashflow troughs will occur.

Most businesses will start off with an Excel or Google spreadsheet. The modelling capabilities of these spreadsheets can facilitate some very complex forecasts. However, before you know where you are, you are on version 6 of the spreadsheet and there are so many assumptions entered into the sheet that you cannot remember which assumption is which!

Cashflow forecasting tools such as Float, Fathom or Fluidly can sync with the leading cloud accountancy software providers to enable actual results to be brought in as a base for the cashflow forecast. All these tools will then enable many scenarios to be created and stored to show, for example, the impact of 10% sales growth or the working out the breakeven point for the business. As with all finance processes, they need to be easy to complete and without the need for lots of manual handling as this lessens the chances that the forecast will be kept up to date.

Mileage Tracking

When using a personal car for business mileage, 45p per mile for the first 10,000 miles and 25p thereafter can be claimed from the business. These payments are tax-free and are also free of any benefit in kind implications, providing that the limits above are adhered to.

However, accurate records must be kept of the business mileage that has been claimed. Often a handwritten notebook of mileage is maintained but we often find that this can have gaps or can often be forgotten altogether. Remembering 12 months of business miles then becomes an impossible task at tax return time.

For the price of a weekly cup of coffee, a subscription to MileIQ or TripCatcher will give access to an app where at the click of a couple of buttons, all mileage will be electronically recorded and can be uploaded to the user’s accountancy software ready to make an expense claim.

These are some of the key areas where technology can be used to significantly improve the speed and accuracy with which the finances of a business can be maintained.

If robust cashflow forecasts and insightful performance reports are to be produced for a business to make key decisions from, it is vital that the bookkeeping and basic accounting records can be reconciled and maintained very quickly and easily.

If you feel like there is a finance task that takes too long to do in your business, speak to your accountant or bookkeeper as there is probably an app that can automate it.

Matthew Goude Zinc Books

Matthew is a chartered accountant and tax advisor based in Northampton.

By taking the time to understand client’s short and long term objectives, Matt is able to provide solutions and advice to help meet those objectives. Zincbooks has invested heavily in the latest accounting software in order to make clients’ lives easier and to give them time back.

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