From the end of September, companies with fewer than 10 employees turning over less than £632,000 will be able to submit an abridged balance sheet and profit and loss account to Companies House for their annual accounts.
The announcement from the Department of Business, Innovation and Science follows a consultation exercise on proposals to reduce reporting requirements for “micro entities” that were first raised in European accounting directive revisions proposed more than two years ago.
Companies will, however, have to continue preparing traditional profit and loss accounts to comply with HMRC’s requirement to submit GAAP-compliant accounts with their corporation tax returns.
Does anyone care to remember what a day in the life of an accountant involved five years ago? Asks chartered accountant Charlie Carne.
Here’s a brief recap. Firstly, you would have been permanently based either in the office or at your client’s premises. Any travel time meant dead time. Every file you worked on would have to be printed out and saved in a heavy filing cabinet.
Secondly, it was hard to be proactive with clients. You would have to wait until quarter-end or year-end, when records were completed and sent to you to flag up any bookkeeping issues. That meant you were dealing with problems weeks, or sometimes months, after they actually occurred.
If, like me, you ran your own accountancy practice, you also had to cope with the additional headaches (and costs) of IT maintenance: installing updates, dealing with viruses, running servers and so on.
Fast-forward to today and the landscape for accountants looks vastly different.
Cloud-based bookkeeping has revolutionised the way we work. Now I can access a client’s records in real time – whether I’m in the office, at home, on holiday or on the train. If there are any problems, I can log on straight away and resolve them. I can make recommendations, offer insights into profitability and deliver advice on options for business change or expansion. I can also get one-click access to previous P&L and balance sheet reports. As a result, I’m able to provide a quicker, more responsive service to clients.
And then there are the environmental benefits. I no longer need to print out and post documents: nearly everything is filed electronically. I know some larger accountancy practices that have actually downsized their premises since moving to the Cloud. Online bookkeeping means they can do away with those clunky filing cabinets.
IT costs, meanwhile, have diminished. Cloud-based solutions, which I use with a number of my clients, have eliminated the need to install periodic software patches and updates because new features are added automatically. All I need is a computer or mobile phone connected to the internet to log in and do my job.
Some people worry about having their data in the Cloud, but the reality is that modern data centres have more robust security and back-up processes than you would have on your own PC. That’s not to say you should trust all providers. For me, it’s important the service is provided by a financially sound company and a well-known brand that I know will be in business for the long term.
I expect my accountancy practice to be fully “in the Cloud” within the next 12 months – and that means we’ll be able to embrace more flexible working practices. I’ll be employing more staff, including part-time and freelance accountants. Cloud-based bookkeeping makes far more sense for work-at-home mums (or dads), for example: if they only have two hours to spare each day, they can use their time productively rather than spending a chunk of it on travel.
By this time next year, I expect more accountants will have their heads in the Cloud. Welcome to the future of the industry.