Making Tax Digital - why it is good for your business!
- It is true that for some businesses the transition to using software to record all transactions has been painful. However, leaving behind the piles of paper is the first step to making the accounting process simpler and ultimately far more useful to business owners.
- As of 1st April 2019, virtually all VAT registered businesses have been required to adopt MTD. This means that VAT returns will have to be submitted using approved software, and all transactions must be recorded digitally. Within a year, software systems will have to be set up to ensure that the entire process from data entry to submission of the VAT return is controlled by means software. Why is that so good for businesses?
- We all know how easy it is to make mistakes when copying figures: Omitting, duplicating, transposing…. How much better to simply enter the figures once, and then have the software do the rest of the work automatically! In fact, there are numerous software systems available that use optical character recognition (OCR) to enter the data for you. All you have to do is scan or photograph your receipt or invoice. Things have moved on!
- So once the systems are in place, bookkeeping will be quicker, and reports will be more accurate. A word of warning, though, software can have bugs… and there may be errors. Some of those errors will be due to incorrect use of the software, and some will be errors within the software itself. So always check your VAT audit that the software will produce alongside the VAT return to make sure that there are no omissions, duplications etc.!
- Ultimately, though, this process of digitisation will liberate business from the paper mountains and backlogs of unentered transactions. You will have instant access to performance and cash flow reports. You will know where you are financially, and be empowered to make better business decisions. So yes, we can thank HMRC for pushing MTD - it is good for your business!