Why spreadsheets could be holding back your business
Spreadsheets are perfect for some numerical tasks, but managing your small business accounts is not one of them. With HMRC introducing new rules on digital record keeping and tax submissions, how confident are you that your Excel accounting spreadsheet can keep you in line with current legislation?
Even the most complex accounting spreadsheets are prone to errors, have a constant need for care and attention and are unable to execute some of the most basic tasks of accounting software. As a hard-working business owner you really owe it to yourself to wave your beloved spreadsheet goodbye and welcome in a modern accounting system that can help you see the big picture, relax about tax and nail the daily admin.
Here are our top reasons why you should look to switch from spreadsheet accounting as soon as you can:
1. Tax is changing
There has never been a more pressing time to ensure that the systems you use to manage your business accounts are up to scratch. HMRC’s Making Tax Digital initiative began in April 2019, requiring certain VAT-registered businesses to keep digital records and use MTD-compatible software to submit their VAT returns electronically. The scope of MTD for VAT expanded on 1st April 2022 and all VAT-registered businesses are now required to follow these rules.
While spreadsheets can be compatible with parts of the MTD legislation, this is only if they’re combined with specialist bridging software that enables the relevant data to be passed on to HMRC. However, with most bridging software, the onus will still be on you to find a compliant way to store all your business’s financial data digitally. One way or another, if you’re still using spreadsheets for bookkeeping and accounting, it’s likely that you’ll have to overhaul your systems at some point over the next few years.
A simpler solution is to switch to tried and tested accounting software, like FreeAgent. Our software already supports Making Tax Digital for VAT submissions and it's on HMRC’s list of compatible software for MTD for Income Tax for businesses. This means that if you're a business owner, you'll be able to use FreeAgent to follow the rules of MTD for Income Tax and make the required tax submissions to HMRC before the legislation comes into effect in April 2024. We're working closely with HMRC to ensure that FreeAgent will support MTD for Income Tax submissions for property through FreeAgent for Landlords - a brand new version of our software that's built specifically for landlords - before the legislation comes into effect in April 2024. Find out more about how FreeAgent supports Making Tax Digital.
Take a closer look at MTD-compatible VAT filing in FreeAgent to see how it will work for your business.
2. Spreadsheets lack the power that modern small business accounting requires
We’ve mentioned that you can file your VAT return directly to HMRC from FreeAgent, but that’s really just a tiny part of what sets the software apart from spreadsheets. Here’s a quick comparison:
|Record money in and money out|
|Create, send and automatically chase invoices|
|Take photos of receipts and upload as expense figures|
|Manage all invoices, expenses, bank accounts in one place|
|Track the time you work|
|Automatically import bank transactions|
|Dedicated UK-based support by phone and email|
|File Self Assessment tax returns direct to HMRC|
|Automatically generate VAT returns and file direct to HMRC|
With our team of engineers constantly adding to the functionality of the FreeAgent app, there’s really no way that your spreadsheet can keep up. Take a look at FreeAgent’s feature overview for a full picture of the possibilities of using accounting and bookkeeping software for your business.
3. Spreadsheets can be wrong
Spreadsheets are prone to error – and there have been some whoppers in recent times! In 2012, an error in a spreadsheet formula caused JP Morgan to lose £6 billion. Another famous spreadsheet error led to the organisers for the London Olympic games overselling a swimming event by 10,000 tickets.
The moral of these spreadsheet horror stories is that mistakes are easy to make and not always easy to catch or rectify. Is it really worth the risk of using a simple bookkeeping spreadsheet for something as important as your small business accounts?
4. Spreadsheets can’t help you when they go wrong
When your spreadsheet template isn’t working, you’re on your own. Finding and fixing errors can be an annoying time-drain when you're trying to get on with running your business. However, when you have a problem with your accounts in FreeAgent, our superhero support team and library of user guides and how-to videos are on hand to help you get back on track.