12 Reasons to Keep Digital Accounting Records
Why is keeping digital accounting records important?
1. It prepares you and your business for the future in compliance with Making Tax Digital. Already VAT registered businesses with a turnover of £85,000 or more must file their VAT return digitally. From 6 April 2023 self-employed and landlords with a turnover of £10,000 or more will need to file quarterly digital reports with HMRC by law.
2. It enables you to manage your business and make it grow. Reliable information is vital for sound decision-making. Contrary to manual records, which are prone to error, digital records are more likely to be accurate.
3. Helps to stay organised when dealing with customers and suppliers. Producing invoices, quotations and statements digitally is vital. Accounting accuracy can be the difference between keeping an healthy cashflow or between winning and losing jobs. Similarly do not rely on suppliers’ statements. You need to know before they tell you how much you owe.
4. Makes it easy to prepare management accounts. Have you ever wondered whether you are making or losing money? Digital management accounts do that for you. You want to know how your business is performing. With digital management accounts you can compare one period with another, this year with the previous year.
5. Makes it possible to find important information and documents quickly. Has HMRC asked you for a copy of your petrol receipts? Is someone disputing your invoice? Take a picture of your receipts and save them with your digital records. Discard the paper copy. By being organised you can quickly and easily find information regarding the original bills, invoices or the goods and work supplied.
6. Makes it easier to get a bank loan or overdraft. Yes, banks like it when you seek an overdraft for the right reason and at the right time. Don’t wait until you need one to ask for it. Produce financial information as and when required promptly and without delays.
7. Helps you plan in advance for tax payments and other liabilities. Tax planning is for everybody. Set money aside when you have the cash. Or make an arrangement with HMRC in good time. Digital records make planning easier. Furthemore, with the introduction of Making Tax Digital for self-employed, you will be required to file digital summaries of your records every quarter instead of filing a tax return. HMRC will let you know on a quarterly basis how much tax you owe.
8. Helps us to check your tax position accurately. Does HMRC make any mistake? Sometimes they do. By being organised and keepinh digital records you can check and compare the information provided by HMRC.
9. Helps to reduce your accountant’s fees and save them time. We will always help by giving you extra value for your money. But if records are really untidy eventually this will cost you more.
10. Makes you filling your tax return easier and can save you tax. It allows you to file your tax return quickly. Even now you can register for Making Tax Digital and file quarterly digital summaries of your income and expenditure with HMRC. By being organised you are sure to include everything you are entitled to claim.
11. Avoid interest and penalties by making it easier to pay the right tax at the right time. Penalties are there to stay!!! We are here to help you avoid them, but you can do a great deal to never again receive a penalty. By the time a deadline comes everything will be filed and in good order.
12. Record keeping complies with the law. Good record keeping is a legal requirement under the rules of assessment. Digital records are a requirement under the rules of Making Tax Digital. So, by being organised not only you have all of the above benefits, but you stay within the law.
Complying with HMRC requirements is in fact a very important reason why you should keep good digital records.