Is the digitisation of bookkeeping the way forward?

Is the digitisation of bookkeeping the way forward?

There is proving to be some resistance to moving bookkeeping online, IRIS Software Group has revealed in a recent survey

Recent research conducted by IRIS Software Group has revealed that a worrying trend has emerged. Accountancy firms are struggling to move their clients over to digital bookkeeping.

In fact, 61% of those who took part in the survey admitted that they viewed this to be one of their biggest challenges they face when interacting with their clients.

“Many SMEs are worried about the time and cost of adopting a digital approach to tax and compliance.”

In their report, IRIS stated: “Given the conflicting reports on the readiness of UK SMEs in the run up to MTD, it is now clear most accountancy firms will continue to provide core compliance services.”

According to IRIS research, 60% of practices do provide bookkeeping services—especially those that use paper receipts and invoices.

“The younger generation of business owners are used to IT systems, so love the idea and convenience of digital bookkeeping.”

One of the main reasons why digital bookkeeping has not yet been fully embraced by SMEs is that it is a change to the unfamiliar. No matter how eligible it may be, the cost and time needed to fully migrate their system has been deemed as too difficult to navigate.

“Regardless of the countless reports on the readiness of eligible businesses, accountancy professionals are still relied upon for core compliance services,” said Nick Gregory, chief marketing officer at IRIS Software Group.

He continued: “Many SMEs are worried about the time and cost of adopting a digital approach to tax and compliance. As a result, they will – and continue to – ignore pleas from their accountant and HMRC until absolutely necessary.”

“Given the MTD news in the Spring Statement surrounding the light-touch approach to penalties in the first year, we see opportunity for everyone.”

“Especially in family-owned businesses,” Matthew Rawles, senior manager at GCSD Accountants, agreed. “It is often a non-IT literate parent, sibling, or close relative who undertakes the bookkeeping. As the company evolves, they are reluctant to let go of the reins, especially when change is imposed at a cost.”

In comparison, business leaders who have grown up with digitisation in the workplace as far more likely to accept its use. For example, the process behind the likes of receipt capture and bank reconciliation have hugely benefited from digitisation.

Rawles continued: “The younger generation of business owners are used to IT systems, so love the idea and convenience of digital bookkeeping.”

“Bookkeeping software will be a fundamental tool in the future, so practices should use the ‘soft-landing’ period to encourage as many clients as possible to adopt a digital approach.”

This is an issue that is having a knock-on effect in investment practices, IRIS has reported.

66% of respondents to their survey admitted to investing an average of £1,000 to becoming MTD ready, but 39% have not changed their technology, having decided to instead rely on bridging software. 48% of these practices invested in accounting software for their clients.

Linda Gibson, director at Gibson Whitter, said: “We always look to improve our practice technology. Our firm is growing quickly, so it is logical to identify efficiencies and increase productivity wherever possible. Especially when it comes to compliance work; using solutions such as receipt-capture software is a no-brainer.

“However, we have steered clear of bridging software as much as possible, as it is a short-term fix. We would not advise taking any client down this road in the long-term.”

“There are a few clients who we know will be impacted, but we cannot provide any specific advice until we know the outcome—if, of course, there is one.”

It could be argued that, with the threat of Brexit on the horizon, SMEs are looking to riding the wave, rather than to innovate.

73% of the firms surveyed believed that Brexit had not impacted their business plans, whereas 87% revealed that their level of investment had remained throughout a rather tumultuous three years. Nonetheless, this is not to say that the effect will not be felt in the future.

“There are a few clients who we know will be impacted, but we cannot provide any specific advice until we know the outcome—if, of course, there is one,” said Rawles.

This is not the only change on an accountant’s horizon. With MTD due to be enforced in April 2019, it is vital that they ensure they and their clients are MTD ready.

Gregory said: “Accountancy firms can make commoditised work pay and liberate fees earned to add more value. Given the MTD news in the Spring Statement surrounding the light-touch approach to penalties in the first year, we see opportunity for everyone.

The chief marketing officer concluded: “Bookkeeping software will be a fundamental tool in the future, so practices should use the ‘soft-landing’ period to encourage as many clients as possible to adopt a digital approach. This will free up time for the practice, allowing them to build on compliance services and capitalise on unexplored revenue opportunities.”

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