DOING MORE WITH CLOUD ACCOUNTING AND OUTSOURCING; A THEORETICAL CASE STUDY Even in this age of Making Tax Digital (MTD) and monthly software subscriptions, a number of businesses still manage their finances on desktop software isolated from the timely support of their accountant. Let’s explore how keeping your finances in the cloud, and sharing access with your accountant, could benefit both the business and its owner with this theoretical case study. The business owner currently maintains their records on desktop software and provides their accountant with a backup three months after the year end. This is the first time the accountant has seen the financials since last year. The accounts and corporation tax return are prepared showing a 50% increase in net profit, and a comparable increase in the corporation tax liability. There is now a cash surplus in the company bank account, but it is too late to do anything to minimise the tax liability. Now into month five of the current financial year, the business owner makes the decision to move to Xero. Albert Goodman setup Xero, transfer the trading balances from the desktop software and train the client on how to use the software. Aside from the initial time investment on training and setup, the benefits are almost immediate. By using Hubdoc, a free add-on, to automate the entry of purchase invoices, and bank feeds to automate the entry of bank transactions, the time saved means that the business owner now has additional time to reinvest in the business.
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This time is used to invoice customers more regularly and accurately based on costs being tracked within Xero. Invoice reminders are setup in Xero prompting customers to pay overdue invoices, thus reducing the time customers take to pay. Both these processes improve cash flow into the business. As invoices are being upload to Xero via Hubdoc, all the information required for Albert Goodman to review the quarter two VAT return was accessible remotely. This compliance review uncovers underclaimed VAT and gives comfort to the business owners over the accuracy of the information submitted to HMRC. Whilst this may have been picked up at the year end, doing it real time on a regular basis is much more effective and saves over/underpayments of VAT. On reviewing the quarter three VAT return it is apparent that the business is having another strong year; profits are anticipated to have increased by 200% at the year end. The accountant highlights this to the business owner and suggests ways to mitigate the tax liability: The business owner was already considering replacing the double-cab pickup truck they use to travel between sites. With the 130% first-year capital allowance super deduction available to companies until 31 March 2023, the £30,000 truck reduced the tax liability by circa
