How is Making Tax Digital shaping the accountancy world?
In a previous article, we explored what Making Tax Digital (MTD) means for businesses and how they can ensure they’re fully prepared for the flagship HMRC initiative once it comes into force.
Preparation aside, there’s no denying the fact that MTD is going to have a major impact on the accountancy world once it does land. After all, it’s the biggest change to hit the profession since Self-Assessment tax returns were introduced in 1996.
Having recently embraced cloud technology and with MTD now to contend with, the sector is evolving now more than ever before.
Is MTD a threat or opportunity?
With the advent of new cloud software encompassing enhanced forecasting (FUTRLI), automated data entry book-keeping (AutoEntry or Datamolino) and simplified payroll (Deputy), it is only natural to wonder if this rise in technology poses a threat to service offerings.
And the answer is, it doesn’t.
Proactive rather than reactive
Right now, the accountancy profession has an amazing opportunity to evolve its service offerings and truly add value to its clients. And MTD is the chance for accountants to become proactive, rather than reactive, which is the approach most accountants have taken over the years.
With this in mind, let me ask you a question – where do you factor in your clients’ business performance cycles? My guess is that you don’t, as most companies don’t tend to interact with their accountants until after year-end and then, it’s only for compliance. This is a real shame as the accountancy profession is about more than just compliance.
It could be up to 1 year and 9 months before you can assess a company’s performance. As a result, it can be incredibly difficult for you and your clients to make value-added decisions, let alone anticipate market trends.
How you can add more value now
It’s possible for you to start providing more value for your customers right now. By using MTD as the springboard for introducing change, you can start to offer higher value tasks that contribute to business growth and long-term success in a wide range of areas, including:
Area #1: Harnessing the power of ‘real-time’
Real-time allows us to choose when we analyse performance, effectively putting us in the decision-making driving seat. First of all, you need to understand the type of industry your client operates within and the key performance indicators that matter to the organisation. The next step is to then build and implement an effective reporting tool for the company’s business cycle.
For example, does the company’s performance fluctuate depending on the season? Is it a weekend business? Or is it even project-based, with a need to track project spend?
And what performance metrics are required to make informed decisions? What mix of products/services are being sold and why? Where is there spare capacity? How are costs fluctuating and how can the true cost of sales be determined?
By taking more of a consultative approach to accounting, it’s possible to truly harness the power of real-time by building a bespoke reporting function that provides companies with the financial information they need to make better and more informed decisions.
Area #2: Return on investment
Every company can make better decisions by understanding their return on investments.
This can be historic, such as quantifying the value of a marketing campaign, but there is a growing need to reduce uncertainty in making future investments. For instance, how often is it that a director isn’t equipped with knowing whether they can hire an additional person and the impact that extra person will then have on company performance?
Accountants can help with reviewing pricing models, advising how to efficiently monitor employee performance, and more, with an underlying focus on profitability.
Area #3: Operational performance
Accountants can offer a wide range of cost-cutting exercises and procurement services, given their breadth of exposure into a given industry. They can also introduce a new wave of technology that will enhance a company’s operational performance, such as Expensify or Concur, for managing employee’s expenses, or Receipt Bank to digitally record all invoices and expenses.
With so many new tools available, the sector can drive change and introduce technology that has the ability to enhance a company’s working cycle.
Area #4: Forecasting and the new-age budget
Real-time, ROI and operational performance aren’t the only areas accountants can help make a real difference in. We all know the importance of forecasting and budgeting, but do accountants or companies know where they would like to be in 3, 5 or 10 years from now? And more importantly, whether they’re on track to get there? The answer is probably, ‘no’.
Accountants can add value by participating in any part of this exercise. They can achieve this by either producing templates for clients and developing a budgeting schedule or reviewing financial forecasts. More importantly, the conversations about how to double clients’ turnover further down the line, need to start now.
Essentially, the focus should be on accountants and their clients formally making the time to collaboratively discuss and plan future ideas. In doing so, highly creative outcomes can be achieved and accountants become an integral part of steering their clients on the right path to delivering their future success.
So, accountants – let’s not wait for MTD to come into play in 2020, let’s embrace the change now, for the benefit of your clients and the accountancy profession – as a whole.