How an idea in the bath transformed this company’s approach to Making Tax Digital

Chris Bailey was sitting in the bath one day when he came up with an idea which was to totally change the way his accountancy practice worked.

“When I first heard about the MTD scenario, like a lot of accountants my first thought was ‘this is going to be a nightmare,” he said. “Straight away, it was either going to mean fees would go up by four times, I would have to employ four times as many staff, or we would need to completely change the way we work.”

His North East firm The Bailey Group, which has been going since 2010 and employees 64 people, mostly works with small SMEs turning over less than five million a year. Many are sole traders or partnerships, and have traditionally wanted an accountant to do their bookkeeping for them or needed a lot of help with it.

“They are shops and factories, people who lean on us like a walking stick,” Chris said. “They would bring us their books once a year. That created a lot of problems under MTD.

“How do you transition to it? Is the client going to be happy sending stuff directly to HMRC?”

Along with the difficulty of getting clients to file documents on a regular basis or adjust to new software, there was the issue of the extra time Chris was convinced it was going to take his staff. This cost would then be passed on to the client as The Bailey Group charges by the hour.

“What we need to do is help the clients, not just say to them ‘here’s the software, get on with it.’ They are not accountants and most of them hate doing their own accounts,” he said.

The problem that he was faced with that day in the bath was how to find a way to get the information directly from the clients on a regular basis, without it feeling like a chore.

After some research, Chris came up with the idea of taking the practice’s scanning machines directly to their clients. The MTD Scan Van was born – inside it, a printer, scanner and a desk, so clients’ documents can be taken directly from them and processed on the road. The high-speed scanner can scan 750 pages in five or six minutes.

“Our next problem was to find software which could handle that,” Chris said. In the end, the company found the Snap programme from IRIS, which captures the scan and fires it into a bookkeeping programme called Cashflow.

Cashflow is an AI programme which categorises items as they appear. The first time, the accountant has to manually categorise them, and after that, the programme remembers the classification for future times. As time goes on, this process gets faster and faster.

The human touch

The AI programme will flag up anomalies or unexpected items, meaning Chris’ employees still have to review and supervise the process to a certain extent. The MTD Scan Van is connected to the internet wirelessly, so information is being sent back to the office while it drives.

“There will always be an element of the human touch, but if we can cut that down as much as possible that reduces the clients’ fees,” said Chris.

The Bailey Group has been testing the software since August, and the van arrived in September.

So far, Chris isn’t aware of any other firms doing anything similar. He plans to take on 50 more staff as the MTD for VAT deadline approaches.

“No one’s doing it. At first, when I talked about this on stage at an IRIS roadshow, people thought I was talking rubbish, but then they realised what a good idea it is.”

The early adoption means they have had time to iron out any issues ahead of the April deadline, and adapt to the new working processes MTD inevitably entails. It has turned out that the third of Chris’s original hypotheses, that MTD would entirely change the way the firm worked, was the true one.

“This is the biggest change in accountancy since self-assessment.”

“If we had waited until April, we would have been snookered.

“We think we can probably do a set of accounts for a company which is VAT registered but has a turnover of less than £150,000 per year for less than £100 a month,” he said.

The process of adapting is still going on. The Bailey Group is holding seminars and home visits to clients, explaining what they will need to provide and how the new system will work.

Work/life balance

One of the clients Chris met at a roadshow, the wife of a tyre salesmen, said that their current system was to write invoices in a book every night, a process which took 90 minutes. After explaining that that process would happen automatically with the MTD Scan Van, “she said: where can I sign? Especially in this day and age with talk of work/life balance, clients’ time really matters,” Chris said.

For clients looking to save time and money, MTD is not the ‘nightmare’ it may first appear. But for accountants who have not yet embraced it, Chris has a simple message.

“I suspect a lot of them haven’t thought about it as we are into tax return season. They need to make a decision about which way they are going to go.

“This is the biggest change in accountancy since self-assessment.”