Making Tax Digital and Xero: What does it mean for you?
Posted on 14th February 2019
This major piece of legislation hits us in April – and there’s no doubt it’s going to come around quicker than you know.
We’ve known about this upcoming change for quite some time. At Effective Accounting, we have spared you the tedium of reading the masses of information out there, and selflessly sat through hours (days, in fact!) of conferences, training and webinars.
There is heaps of information to read about this new regime (and indeed if you are struggling to sleep at night, feel free to Google or download our fact sheet here) – but essentially, from April 2019, any business above the VAT threshold, or indeed, voluntarily registered for VAT, will need to keep all their accounting records digitally, and submit all VAT returns using digital commercial software.
We have been preparing for this behind the scenes – and so, after careful consideration and evaluation of all the main software options available (FreeAgent, Kashflow, SAGE One, Clearbooks etc), we have selected Xero as our preferred choice!
As such, we are pleased to announce that we are now a Xero Silver Partner!
That’s great – but what does it all mean?
For all our clients who sign-up to our bookkeeping package, we now manage your bookkeeping through Xero. We previously managed on SAGE Desktop Software.
Xero is a fantastic piece of cloud bookkeeping software that allows us to maintain your business records, categorise your income and expenses, prepare and review your VAT returns and manage the end-of-year accounts and tax returns.
For our clients who still used the trusted Excel spreadsheet to maintain their records, unfortunately it was time for change. We have now migrated over 200 of our clients over to Xero and are really happy with the success of the transition!
Other benefits of Xero
Real-time updates
Sage, although much loved by accountants over the years, doesn’t provide live information. The data has to be manually entered (which can take lots of time in itself), and, owing to the fact it is not cloud based, there is little automation of the main bookkeeping processes.
With Xero, everything is up to date because it’s in real-time. All the key numbers are kept in one place, so it’s really easy to use. There’s even an option in which you can set up Xero to receive your bank account information through a feed, so you can see all your transactions in process.
Even better, this means that when you export a report, it will be 100% up to date.
Xero software is constantly updated and therefore always compliant
With desktop-based software, you constantly need to be on the ball about changes in legislation and any updates normally require purchase and installation. With Xero, it handles all of that for you. It’s always running the latest version, and, being based on the cloud, it’s constantly connected to the internet meaning your information is always being backed up.
Any changes to tax rates or legislation are set to update automatically in Xero, meaning the software is always compliant, negating the need for you to manually enter changes and updates yourself.
Mobile access for all!
In this tech-driven age, mobile access is expected for pretty much every type of software we use on our desktop PCs and laptops. It’s a huge benefit to know that you can access important information on the go.
Xero is sat on the cloud, which means that all information within the software is available at all times, provided you have access to the internet. The information is accessible through both a smartphone app and your mobile web browser, as well as being there on your laptop or desktop PC.
As well as this being a huge plus for the hectic, ever moving world we now live in, it makes it much simpler for both accountants and clients to collaborate. Gone are the days of awkward screensharing over glitchy video conferencing software!
What about security? Is bookkeeping on the cloud with Xero safe?
Despite the fact that we are constantly being fed headlines about data leaks and internet hackers, cloud bookkeeping software is extremely safe. Only the people you invite to access the software are granted permission – and it is all password protected. After a certain number of wrong password attempts, you are locked out.
Further, the information sent to Xero by your bank is all encrypted to industry standard – it has the same level of security as your online banking – so you can be safe in the knowledge that your confidential information is protected from hackers and criminals.
The servers that hold your data are highly sophisticated and extremely secure. The Xero servers are protected by a complex firewall, and are located in highly secure hosting facilities with advanced biometric technology controlling who has access to the data.
There are multiple layers of security used to protect your information, and each piece of data is backed up onto different servers which means that in the event of one Xero server being destroyed, your data can be accessed from a back-up location very easily.
We are entirely confident that Xero is the best cloud accounting software to use in terms of its ease, accessibility and superior security features.
What do I need to do now?
If you are a client of ours who already uses our bookkeeping service, we have some good news for you.
During the first half of 2018, we spent lots of time migrating our clients from basic hand-written books, spreadsheet records and Sage to Xero. We have completed Xero Certification, Migration Certification and Reporting training, and are now fully MTD ready!
We also picked up the cost of the software for you – it normally costs £22 +VAT per month for the Xero standard package – and we haven’t charged you for the time spent moving you across.
We truly care for our clients at Effective Accounting, and we are ready to help you with all your queries about Making Tax Digital.
We do have a few ground rules, though...
Don’t worry, we aren’t turning all strict on you.
We do, however, need you to bear in mind that for us to continue our personalised, efficient and cost-effective service, we need your help.
We ask that you follow just four simple guidelines so that we can maintain the high level of service we pride ourselves on:
1. Raise invoices to your client/customer and email copies to us as you send them (in real-time).
2. Only use your company bank or credit card for business transactions (no personal usage).
3. Sign up for a direct bank feed so that we have instant access to your bank transactions.
4. Use your company bank or credit card for business expenses. If you use cash, keep a record of this on an expenses sheet.
Next steps
If you’re stuck and need advice about Making Tax Digital, please get in touch so that we can advise you on how to make the transition to digital bookkeeping as smooth as possible.
Remember, after April 2020 (exact date still tbc) it will be compulsory for all sole traders, landlords and partnerships earning between £10k and £85k per annum and paying corporation or income tax to also make the switch, so it’s best to get on board earlier rather than later.
Written by:
Nicola J Sorrell -
Effective Accounting
Founder | Xero Champion | IR35 Expert
Tagged as: Budget & Tax Rates, For - Contractors, For - Limited Companies, For - Property Owners & Landlords, For - Self-Employed, Making Tax Digital, Xero
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