Cloud Accounting Software
Over the last few years, the way businesses record their data and keep their books has changed considerably. In the good old days they would have a server in a dedicated room with AC and miles of cables, with computer screens taking up half your desk, but no more. In a relatively short time, the accounting software houses have gone virtual.
All the software packages still have desktop versions, but frankly why bother? You can be on the beach drinking pina coladas and still keep your finger on the pulse running the business. Better still, with cloud software if there’s a problem your accountant or IT person can go straight in and have a poke around.
But with loads of solutions out there (most of which I’ve used), how do you make a decision?
Taking the top sellers in the UK market, I have broken down their main attributes based on functionality, feel and price. I’ve also tried not to be biased. A lot of the software is you will see does the same thing. Which software to choose comes down to personal preference and the needs of the business at the time. Luckily the software is generally quite portable, so if a solution is no longer adequate you can easily move on.
Industry / Sector
All the software I’ve reviewed will work across most sectors from retail to the service industry. I have a couple of online retailers who obviously use various versions. They wouldn’t be suitable though for construction, manufacturing or tourism and hotel businesses.
Modules
So what can they do?
On a first view they all pretty much do the same thing. To try and find some differences one has to look at the GUI. They all say they are intuitive, but my view is that some are more so than others.
FreeAgent, Freshbooks, Kashflow and Xero all look the same; they have very similar colour schemes (what’s the thing about the blue?) and layouts. It can be confusing switching between them. Quickfile uses a white background. Both Quickbooks and Sage 50 have the traditional look you find on the desktop versions which unless you’re an accountant is awful to navigate.
|
Quickfile |
FreeAgent |
Freshbooks |
Kashflow |
Xero |
Quickbooks |
Sage 50 Professional |
|
|
Sales |
Y |
Y |
Y |
Y |
Y |
Y |
Y |
|
Sales Order processing |
Y |
N |
N |
Y |
Y |
Y |
Y |
|
Quotes |
Y |
Y |
Y |
Y |
Y |
Y |
Y |
|
Purchases |
Y |
Y |
Y |
Y |
Y |
Y |
Y |
|
Purchase Order Processing |
N |
Y |
N |
Y |
Y |
Y |
Y |
|
Stock |
N |
N |
Y |
from AUS$10 |
Y |
Y |
Y |
|
Payroll |
N |
N |
N |
+ £420 p.a |
Y |
£42 p.m package |
N |
|
VAT returns |
Y |
Y |
Y |
Y |
Y |
Y |
Y |
|
Reporting |
Y |
Y |
Y |
Y |
Y |
Y |
Y |
|
Annual accounts |
Y |
N |
N |
Y |
Y |
Y |
N |
Platforms
Interestingly, they all have versions for iPhones and iPads as well as android except Quickfile and FreeAgent.
Interfacing
They all have interfaces with banks allowing CSV files to be downloaded and by tagging can allocate to invoices, be that customers or suppliers. In fact if there isn’t a matching invoice they will set it up, brilliant!
Another handy function is the customer receipts. They all will allow you to take payments from PayPal and often other platforms including Sagepay. Just like the bank download these can be tagged.
What I really like is that you can file returns with HMRC. Why is that great? Audit trails: you can download or refer back later.
Dashboards
This for me is the best reporting tool. It’s the home screen when you go into the software, so sometime needs to ensure that only the pertinent information is shown. I like to see bank balances, debtors and creditors, and key dates for tax returns. Most will do this to a greater or less extent but my least favourite has to be Sage.
Pricing
I know that’s what it’s about but don’t be fooled. Are you’re getting what you pay? Watch the cost of add-ons these can be expensive.
|
Quickfile |
Freeagent |
Freshbooks |
Kashflow |
Xero |
Quickbooks |
Sage 50 Professional |
|
|
Customer |
Free |
£15-£25 |
$0 to $39.95 p.m. |
£18 p.m. |
£12 – £24 p.m. |
£9 -£29 pm |
£1,400 p.a (£117 p.m.) |
|
Accountant |
“Affinity” dashboard £94.90 p.a. per client +VAT (up to 10% volume discount) |
Has to log on as user |
Has to log on as user |
“Orbit” client manager – free |
“Practice Studio” – free |
“QuickBooks Online Accountant” – free |
N |
I really like Quickfile for its simplicity but have a problem with their pricing module, why charge the accountant for passing business their way. The competition often pay us accountants to introduce, oops, did I let that slip.
From FreeAgent to Quickbooks, there’s not much in it. Although FreeAgent, Freshbooks and Sage don’t have Accountants’ portals.
The drumroll goes to Sage: it’s not even web based, it’s a hosted service.
Payroll costs seem to be wildly different. Some providers have in-house solutions others have partnerships.
Finally
We’ve helped loads of businesses migrate to the cloud. It’s not just about price but what is right for the business.
When making the move, don’t try doing it without professional assistance. If you mess it up it can be extremely costly to fix.
Testimonial from one of our clients, Carl Hughes of IT Hound
ODFS really has the knowledge in the cloud accountancy sector. I manage my business completely online and I wanted a product that could compliment this so I could do all my invoicing, sales and accounting in a browser and not have to install a program on my computer.
ODFS recommended Quickfile and helped me setup invoicing templates and a way of working so that I could manage outstanding invoices, use reports to give me a picture of how my business was doing and at the same time understand the various accountancy terms with ease.
I don’t feel the above could have been done as quickly using a traditional desktop accountancy program and the fact that ODFS could log in to my online account saved the endless emailing of reports and spreadsheets.
Its unusual to find an accountant who has such a vast knowledge of how to do finances in the cloud; so if you are looking for an efficient company to help you manage your accounts I highly recommend ODFS.
Employer v’s Employee Pension Payments (Net Relevant Earnings)
Currently the maximum pension payments allowed per year are £50,000 this for Employee and Employer payments, however, if your net relevant earnings (NRE) are below £50,000 your personal payments will be capped at the higher of your employment income or £3,600. (Carry Forward may be available)
NRE excludes Dividends and if your personal pension payments exceed the NRE then you will need to declare the over payment on your self assessment return and pay tax on it.
This can be a big issue for company directors-shareholders who often take a large part of their income in dividends.
The solution to this is for the company to make employer contributions. Employer contributions count towards the £50,000 limit but are ignored for the NRE cap.
The attached link is useful article on this subject
steve@bicknells.net
Confidence Accounting for Businesses
Andy Haldane (Executive Director for Financial Stability at the Bank of England) has recently been working with Long Finance/ACCA/CISI on a new method of accounting – Confidence Accounting.
http://www.accaglobal.com/content/dam/acca/global/PDF-technical/corporate-governance/tech-af-cap.pdf
In a world of Confidence Accounting, the end results of audits would be presentations of distributions for major
entries in the profit and loss, balance sheet and cash flow statements. Accountants would present uncertainties
as ranges to investors and managers, rather than as discrete numbers: ‘the balance sheet of Company X is
worth £Y, plus or minus £Z, and we are 95% confident that it falls within this range’. Auditors would verify these
ranges. This would move auditing towards ‘measurement science’, in line with the way most laboratories report
measurements. Audited accounts would be presented in a probabilistic manner, showing ranges. Over time,
investors could evaluate an audit firm on the basis of how closely historic accounts fell within the stated ranges.
Such evaluations might conclude that firms were too lax or too strict. Clients would be able to make their own
decisions about audit quality on the basis of historic evidence rather than having to rely on assertions of quality.
This sounds like a good approach to me, especially for larger businesses where lots of assumptions are taken in preparing the accounts.
Economic prosperity requires businesses to be financially robust and that requires sound financial reporting, this could definitely play a key role in achieving that.
steve@bicknells.net
‘Bean counter’ view of accountants is holding back entrepreneurs
Some entrepreneurs and small businesses may be holding themselves back by refusing to share information with their accountants who they sometimes regard as little more than “bean counters”, according to a new study.
There is a tendency for UK businesses, to make decisions without adequate financial information or analysis, there is often poor cash flow management and time and opportunities are being wasted because some owner-managers don’t want anyone else to know their business, it concludes.
The report, funded by the Chartered Institute of Management Accountants (CIMA) and compiled by Dr Michael Lucas of the Open University along with Professor Malcolm Prowle and Glynn Lowth, from Nottingham Business School, part of Nottingham Trent University urges accountants to improve their image by refuting bean counter accusations and promoting themselves in business partnering roles.
“Given the importance of financial issues and the increasing need for enterprises to operate economically, efficiently, effectively, efficaciously and ethically, management accounting has potentially a crucial role to play in improving the quality of planning, control and decision-making,” says the CIMA report called Management Accounting Practices of UK SME’s.
The authors also call for further research into the way small and medium-sized enterprises (SMEs) reach critical decisions and into the psychological profile of executives, particularly owner managers.
Dr Lucas said: “While most business owners are good at using accounting services for monitoring cash flow and costs they do not always appreciate that management accountants can add a great deal to decision making in the management of the business. Accountants were sometimes regarded as little more than bean counters, rather than potentially having a business partnering role where they can advise and improve efficiency
“Some entrepreneurs, in particular, are reluctant to employ management accountants, expressing a desire to maintain control and have exclusive access to information they consider sensitive.This could lead to higher costs in terms of management time which is turn can put constraints in time spend in growing the business.”
The report says its exploratory findings give important insights which should inform the development of further large-scale survey research into whether accounting tools were used and, if not, why not.
These tools include: Product costing; budgets for planning and control; standard costing variance analysis; cost-volume-profit analysis; responsibility centres; capital expenditure appraisal techniques; working capital measures; and strategic management accounting.
Dr Lucas is Senior Lecturer in Accounting at the Open University Business School, Professor Prowle is professor of business performance at Nottingham Business School and Mr Lowth, who is a former President of CIMA, is a visiting fellow at the Nottingham business school.
It ain’t what you do, it’s the way that you do it!
We are guests of honour!
These are the immortal words of Bananarama (or Nigel Botterill this weekend).
27th-28th September saw the first annual Entrepreneurs’ Convention at Birmingham’s International Convention Centre. Conference organiser Nigel Botterill is by any definition a very successful entrepreneur himself and the aim of the convention was to impart some of the knowledge and tools which have helped him build 8 £1m businesses in 7 years.
I went with Helen Lacey of Redberry Recruitment and we came back incredibly motivated with a box of tools we can implement in our businesses straight away. My new newsletter – Bright Business Bulletin – is a direct result of this new found zeal.
Nigel himself is a little like marmite (I am sure he won’t mind me saying that his approach is either inspiring or irritating), but it is hard to deny the relevance and effectiveness of his message to business owners who truly want to build the best businesses they can.
In Nigel’s words ‘Entrepreneurship is living a few years of your life like most people won’t…so you can spend the rest of your life like most people can’t.’
Whether we think of ourselves as ‘entrepreneurs’ or not, if we employ people or if we want our business to have a value, even when we are not working in it ourselves, we do need to think entrepreneurially.
I was also pleasantly surprised to see so many familiar faces. In a hall of over 1300 entrepreneurs from all over the country, there were 11 people I already knew. So Kim, Antony, Jonathan, Helen, Carly, Sanjeev, Fiona, Liz, Mary, Mark, John and Cynthia I hope you are all working on the nuggets you took away.
A key nugget for me was that speed is the key to growing a business. Money loves speed, speed attracts talent, talent drives innovation and innovation drives value. As the key is to minimise the gap between the idea and the action, I need to be quicker to get started on, and implement, the ideas I have for my business.
The highlight of the convention was Sir Chris Hoy. He gave an excellent talk about what it took for him to win 6 gold medals over 3 Olympic Games (not to mention world championships and Commonwealth gold medals). The type of dedication he needed, and the physical training he had to put his body through, to get to his end goals was truly inspiring.
We will certainly be going to next year’s convention and I recommend it to any business owner who is serious about growing their business. The dates for your diary are 21st-22nd October 2014.
fiona 🙂
The Cash Cycle – What is it? what is your Cycle? How can you improve it?
As the saying goes, Sales are Vanity, Profit is Sanity and Cash is King. The Cash Cycle also known as the Working Capital Cycle helps you to quickly understand how much cash you need to run your business.
Here is a great example from Steve Grice for an average business
| Average time to collect payment from customers | 60 days | Add |
| Average days sales held in stock | 25 days | Add |
| Average days taken to pay suppliers | 35 days | Subtract |
| Cash cycle | 50 days |
http://stevegrice.wordpress.com/2012/02/06/working-capital-cycle/
Here is a brilliant Cash Flow Improvement Tool from NAB http://oms.nab.com.au/media/10/power_of_one/CF.html
This model quickly and easily calculates your cash cycle but also shows the effect of making improvements.
Having discovered what the cashflow cycle is, what can you do to improve it? well that depends, assuming you have agreed the best possible terms with your suppliers, you need to find ways to speed up cash received from Customers, if your business Sells to other businesses the first thing to look at is Credit Management.
CIMA have produce a comprehensive guide http://www.cimaglobal.com/Documents/ImportedDocuments/cid_improving_cashflow_using_credit_mgm_Apr09.pdf.pdf
But Credit Management may not be enough on its own, perhaps Invoice Finance might help?
Invoice discounting is an excellent, cost-effective way for certain businesses to improve their cashflow position.
- Invoice discounting is most suitable for businesses with good financial controls in place and a strong financial background.
- Invoice Discounting is ideal if you have an annual turnover above £500,000
- Invoice discounting is suitable for business with an established credit control department.
- Invoice Discounting is suitable for a wide range of businesses including manufacturers, wholesalers, transport firms, employment agencies and providers of some business services.
- Suitable businesses for invoice discounting are growing businesses because the level of funding grows in line with increasing sales.
If your business sells to end customers you might consider Card Processing Advances.
You must be masterful. Managing cash flow is a skill and only a firm grip on the cash conversion process will yield
results.
steve@bicknells.net
Tax Advantages of a Classic Car
A classic car is one where:
- the age of the car at the end of the year of assessment is 15 years or more and
- the market value of the car for the year is £15,000
I found a 1968 Jaguar MkII for sale for £15,000 on
http://www.classiccarsforsale.co.uk/classic-car-page/165880/1968-jaguar-mkii/
The Mark 2 gained a reputation as a capable car among criminals and law enforcement alike; the 3.8 Litre model being particularly fast with its 220 bhp (164 kW) engine driving the car from 0-60 mph (97 km/h) in 8.5 seconds and to a top speed of 125 mph (201 km/h) with enough room for five adults. Popular as getaway cars, they were also employed by the Police to patrol British motorways.
The Mark 2 is also well known as the car driven by fictional TV detective Inspector Morse played by John Thaw
http://en.wikipedia.org/wiki/Jaguar_Mark_2
Assuming the list price was £2,000 (I can’t find the actual list price), the taxable benefit in kind would be £2,000 x 35% (maximum)x 40% (higher rate tax) = £280
As long as the Market Value is below £15,000 these rules apply above £15,000 the market value is used for the calculation, you can pay for your private fuel to avoid the tax on that.
steve@bicknells.net
How HMRC use IT systems to seek out tax evaders
There is no doubting the resolve of HMRC to track down and prosecute tax evaders.
The Government has committed to spend £917m to tackle tax evasion and raise an additional £7bn each year by 2014/15.
HMRC are using 2,500 staff to tackle avoidance, evasion and fraud, there is also a website to help those who want to declare income https://www.gov.uk/sortmytax
In the search for tax evaders, HMRC have a £45m computer system called Connect which in 2011 delivered £1.4bn in tax revenue and the system is getting bigger and better all the time. According to Accounting Web:
It uses a mathematical technique to search previously unrelated information and detect otherwise invisible ‘relationship’ networks. Using Connect, HMRC sifts through information on property transactions at the Land Registry, company ownerships, loans, bank accounts, employment history, voting and local authority rates registers and compares with self-assessment records to spot taxpayers who might be under-declaring or not declaring income.
Last year Connect made links between tax records and third party data from hospitals, pharmaceutical companies, insurers and even gas SAFE registrations. DVLA records and the shipping and Civil Aviation Authority registers help identify owners of cars and planes who declare income that the computer suggests cannot support such purchases.
In addition HMRC have also identified 200 accountants, lawyers and professionals who advise on tax avoidance structures and its currently unclear how HMRC will be dealing with them and their clients.
It is important to remember that most people pay the correct tax, in fact HMRC calculate that 93% of tax due is paid correctly, its only a small minority who try to evade tax.
steve@bicknells.net
Deadline to register for self assessment tax return is 5th October
You may never have worried about filling in a tax return before now. Unfortunately you could be in for a shock and a penalty if you fail to register a new source of income for the tax year ending April 2013. You have until October 5th to register any change in circumstances with HMRC. This is particularly likely to affect those employees with earnings over £50,000 still claiming child benefit.
So who needs to complete a tax return?
You need to complete a self assessment tax return if any of the following apply:
- You are self-employed
- You are a company director, unless it is a non-profit organisation and you don’t receive payments or benefits
- You are a Minister of Religion of any faith
- You are a Lloyds Name/Member
- You have annual income over £100,000
- You are an employee/pensioner but have other taxable income
- You are over £10,000 taxed income from savings/investments.
- You have over £2,500 of untaxed savings/investments.
- You have over £10,000 of property income before expenses or £2,500 property income after expenses
- You earn over £50,000 and are still claiming child benefit.
A phone call to the HMRC self assessment helpline on 0300 200 3310 will enable you to beat the deadline and register for a tax return for your income source. But allow yourself plenty of time for the call. My phone call this morning to register for a tax return took 25 minutes to be connected to an HM Revenue & Customs Officer.
Helen Alexander ACMA
helen@millbrookfm.co.uk
Associates don’t have to be taxing
The small companies rate of Corporation Tax is 20% compared to main rate of 23% (2013/14). The small company rate is applied if your profits are below £300k, however, if you have associate companies, the £300k is spread between them equally.
For the purposes of CTA10/S25 (4), formerly ICTA88/S13 (4), a company is an associated company of another at a given time if at that time:
- one of the companies has control of the other, or
- both of the companies are under the control of the same person or persons
http://www.hmrc.gov.uk/manuals/ctmanual/CTM03710.htm
But what some businesses forget is that if you have a subsidiary that has become dormant it stops being associated
an associated company which has not carried on any trade or business at any time during the accounting period is disregarded – if it is an associated company for part only of the accounting period, the rule applies to any time during that part.
http://www.hmrc.gov.uk/manuals/ctmanual/ctm03580.htm
steve@bicknells.net
Business Accountant 