Doubts About Cloud Accounting Software You Should Clarify
With all different cloud accounting software packages out there you’re wondering which one would be most suitable for your business…
They all market the benefits but what are they not telling you? What should you check to make sure it’s fit for your business?
We have trained in various cloud accounting software packages and we want to help other business owners to avoid any potential pitfalls further down the line.
So, here it is… our gift to you – a checklist for choosing the right cloud accounting software for your business.
Checklist for choosing the right cloud accounting software for your business
- If your business is based in the UK, then check if the chosen cloud accounting software is compliant with the UK’s tax regulation
Some software providers such as FreshBooks or Wave have cool features and an elegant interface, but they are only good if your business’s turnover won’t reach the VAT threshold and you will have an accountant to do all the filings.
If you are running a VAT registered business, then your options are a bit more limited. Software packages especially set up for the UK based business and straightforward to use are FreeAgent, Xero, SageOne or Kashflow. However, you would need to check if the VAT scheme your company is using or planning to use is fully supported by the chosen software.
What would I recommend? FreeAgent software is particularly helpful for micro business owners as it even takes into account adjustments for UK corporation tax (CT) returns, so you can see your predicted corporation tax (CT) bill within the software. Currently, RBS offers this software for free with the new business bank accounts.
Practical aspects that can save you time going forward
- Making Tax Digital compliant
Is your chosen software provider preparing for the upcoming Making Tax Digital (MTD) changes? We know that the big providers such as QuickBooks, Xero, Kashflow or FreeAgent will be supporting MTD as they currently hold sessions and share progress on the changes with the users, but will the software you’ve chosen be compliant?
Would you like to avoid the pain of future data migrations and software changes? Then it’s definitely wise to check the software provider’s plans and implementation roadmap for MTD.
- Compatibility of cloud accounting software with other applications
Would you like your software to connect to other software packages and effortlessly transfer data without manual interference?
As you would expect, what applications and connections between the software package would be beneficial for your business and would save you time and money, would very much depend on the size of your business, your plans for the foreseeable future and what you would want your software to be able to do/automate.
Most accounting software packages nowadays have app marketplaces with software packages that are compatible and can be connected directly, here are the most popular app marketplaces:
Some accounting software packages may also/or only connect with other applications via other providers such as Zapier or Automattic, you can see a good overview of the ‘connectors’ here https://blog.teamwave.com/2017/02/02/zapier-alternatives/
Especially with the making tax digital changes, the integration between applications will be of great importance as almost all data will need to be transferred digitally, so it’s worth thinking about and actively preparing for it.
- Setting up Departments and Geographical Regions
Does your chosen accounting software enable setup of departments or geographical regions?
This feature is important if you’d like to track your business revenues and expenses based on the source and/or location, and especially if you are a growing business.
- Depreciation setup and automated allocation
Depreciation is in simple terms an accounting equivalent for wear and tear.
So, does your chosen software support it?
Some packages have an option to record assets and depreciation automatically, however, most of the time a journal recording depreciation would need to be posted.
- Storing of receipts
Does your chosen cloud accounting software have an app and enable you to store digital receipts within the software?
If not, does it have connectivity with apps which enable this functionality?
It’s not the most important feature but helps to avoid the famous ‘shoeboxes’ of receipts. And you can always see what that particular expense was for – saves time and effort long term.
- Ratios and KPI’s
Does your chosen software have an option to set up ratios or other key performance indicators (KPI’s)? For instance, Xero has this option and ratios can be incorporated as part of reports.
If not, can you export your reports to Excel or CSV or connect to apps that do show KPI’s such as Fathom?
Other aspects/features to consider:
- Job costing – can the software cost a particular product/service (for instance Kashflow has this capability)?
- Invoicing – does the software enable recurring invoices or allow to save templates for certain types of suppliers?
- Purchase and sales order processing – does the software have this capability when the company grows to require it?
- Multicurrency – does the software support other currencies except for British Pound (GBP)?
- Payroll – does the software connect to payroll? (irrelevant if you use a payroll bureau)
- Available categories with some guidance – are the categories for recording transactions clearly described?
- Types of reports – does the software enable financial reports comparing data by month/quarter/year?
- Reporting on projects – does the software enable tracking of revenues and costs by a project?
- Bank feeds – does the software enable direct bank feeds?
- Feeds from other payment providers like Stripe, PayPal, GoCardless or iZettle – does the software enable direct transactional feeds from payment providers?
- Compatibility with eBay or Amazon store if you’re an online seller – can the software connect to the online marketplaces and enable smooth transfer of data?
- Compatibility with a subscription calculating software if you’re a subscription-based business.
- Migration of data in the future – how can the data be exported from the software?
- Costs per user per month and options available within the chosen subscription type.
- Security and safety of data – where is the data stored? and how often is it backed up? Is it possible to obtain a free back-up of all the data?
- Also, what customer support is available – is it via email, contact telephone number in the UK, only within office hours or also outside office hours?
Filing of accounts via software such as Instafile or Taxfiler
Some software providers enable easy filing of accounts, however, we would strongly encourage you to speak with an accountant as it may be that even though it would cost you a bit more to file annual accounts with an accountant, you may save more money by utilising their professional knowledge and experience and save money in the process. Common examples of savings are R&D tax credits for IT companies or manufacturing companies which can result in £1000’s of money claimed back or £3000 a year saving on employer’s NI payments when there are at least 2 employees.
If there are any specific features you’d like to hear more about, please let us know in the comments section.
We would also be very interested to hear about your experience of using cloud accounting software.
What would you advise others? Please, share in the comments section.