Our first face-to-face Xerocon in several years was fun and joyous, but the tone – while optimistic – was serious.

Tobacco Dock, the venue for Xero’s big UK event, was far different venue to that of a hotel conference room. What were old storage rooms became pods for Xero’s app exhibitors (including AdvanceTrack); while the central courtyards provided much relief against the heat, creating a carnival-like atmosphere.

However, the context was a stagnating economy, high inflation and a cost-of-living crisis. And of course, MTD ITSA. Can accountancy firms act as ‘digital consultants’? asked Xero’s UK and EMEA managing director Alex von Schirmeister.

Sole traders and micro businesses are the seed for creativity and graspers of new models to serve markets. And they want accountants to support them in that journey of growth. So… can you, as an adviser, steer them through the compliance hurdles they face? And, then, develop that relationship to offer timely and strategic support?

It’s not easy. MTD is proving to be a moving feast. The practitioners we spoke to at Xerocon are looking at ways to make both themselves, and their clients, ready as soon as possible. They don’t want nasty surprises when MTD ITSA goes live. But, unfortunately, we’re still waiting on some of the fine detail.

Xero’s big launch was Xero Go – a ‘freemium’ app to create an entry point for the millions of sole traders to better manage and capture income and expenses data.

While it’s very early days, it’s clear that Xero Go is one of the steps needed to offer a quick and easy platform for the smallest businesses to begin the vital process of capturing that information.

Accountants have so much on their plate. Being a ‘digital consultant’ requires a very important first step – understanding your own tech and processes. Your clients need help to both understand how to capture information – but, where automation isn’t possible, to get in the habit of opening up Tax Go, or whatever other capture tool is used.

There is an argument that this flow of extra information to HMRC will be of little use to the taxman. However, as we’ve suggested previously: building more links, consistently, between client and adviser should be a good thing – at least something that the practice can leverage.

We’d love to help you manage the increase in scale of client touchpoints – it’s what we do for a living. If you’d like to speak to us about improving your practice’s processes and workflow, contact us here.

You may have heard of the term ‘KYC’, which means ‘know your client’. But what about ‘KYP’? And how does that relate to Making Tax Digital ITSA? OK, enough of the cryptic acronyms.

We know that Making Tax Digital for Income Tax Self-Assessment (that’s the MTD ITSA bit) comes into force for the tax year beginning in April 2024. Basically, sole traders and landlords will have to start making multiple filings to HMRC, replacing the singular filing that takes place at the moment.

There is an ever-increasing focus on accountancy and small business software vendors to have ‘solutions’ in place to help accountants and their clients cope with the change.

But, as is always the case, while technology is a vital tool in helping the business world operate there are many steps to be taken on the road to running smoothly and efficiently. And this is where the other acronyms come into play.

KYC is more of a regulatory reference than a business strategy. The terms came into play for financial services organisations – do they really know who they’re working with? Whose funds they are transferring? It broadly covers anti-money laundering policies.

Some accounting practices will be managing such client verification. But… the term ‘KYC’ could easily apply more fundamentally to knowing who your customer is, how they work with you, and how they operate in the normal course of running their business.

And then there’s ‘KYP’… which could well mean ‘know your practice’. Do you understand how your practice operates? For example, do you have unique processes for each client, or just a few? And how efficient are those processes… can they be compared? Have you checked that they’re the best way to work with those client subsets?

You may think to yourself: How does KYC and KYP relate to MTD ITSA? Without understanding how your practice works with its clients, or stress-testing the number of different ways you work with them (and how this can be streamlined or reduced). then you’re missing a fundamental number of steps prior to implementing the right tech to help you manage the huge tranche of extra filings that will follow MTD ITSA’s introduction.

Without knowing how your practice works, your clients work, or how you work together, it will be difficult to leverage technology to support you through this major tax filing change.

Vipul Sheth is MD and founder of AdvanceTrack Outsourcing. If you’d like to speak to Vipul and his team about improving your practice’s processes and workflow, contact him here.

It’s been quite a week for the accountancy profession. It’s been one in which (I hope) AdvanceTrack has played its part – and I hope some certainty has been provided to outsourcing as a critical part in the profession’s future.

The second week of May saw what were the first ‘unrestricted’ major events for accountants take place in the UK since Covid-19 struck.

We hosted our AdvanceTrack conference on 10 May, which then led into Accountex across 11 and 12 May.

Technology tends to ‘leap forward’, certainly when it comes to its use in professional services. And there are a number of reasons for that, but primarily it comes down to firms becoming ‘used’ to doing things in certain ways, for certain clients.

For the accountancy profession, change is iterative and focused on the client i.e. keeping up to date with the latest accounting and tax legislation and their impact. Every so often, the changes put in place are seismic enough to drive firms to change how they do things. The push for online tax filing over the past 20 years has seen paper-based returns (almost) a thing of the past.

More recently, disruption came in the form of the pandemic, which required us all to embrace digital communication beyond just emails.

The conferences held last week were enormous fun and also insightful. Meeting people face-to-face always is, even more so after such a long hiatus. The AdvanceTrack conference’s theme was about you, your team and your practice growing. Discussion about ‘value-added’ services was never far away.

MTD to advisory?

Accountex was very much of a similar vein, there was plenty of discussion around ‘how can I manage Making Tax Digital for Income Tax Self-Assessment?’

I believe that growing your practice, while ‘dealing with MTD’ can be dealt with in similar ways. And that’s because the issues are similar. For advisory services, broadening your offering requires efficiencies and process – these in turn free up resource to get to know existing (or new) clients better – to have the conversations that open the door to new things.

MTD certainly isn’t as much ‘fun’ – or, it seems on the face of it that there’s not a lot of positives to be gleaned from many of your clients increasing the amount of reporting they have to undertake. Your people are not in a position to quadruple the amount of prepping and checking they can do. However, increasing the number of touchpoints with a client could well pay dividends longer-term if you can leverage that communication towards your service proposition.

Firms need to recruit both number-crunchers and those who can provide further analysis and ultimately higher-value services. For us at AdvanceTrack, we see our offering as critical in supporting practices – whether it’s gaining efficiencies or scaling up your service (both are interlinked).

Our tech and people enable firms to solve their recruitment woes, keep on top of new tech and processes, and ultimately providing the best client service. Don’t let the people war, or MTD, drag your practice down. Join the many others that are growing their offering by growing their links with us.

I’d be delighted to talk about what they’re doing and how you can do it too. Book a call. 

Vipul Sheth is founder and MD of AdvanceTrack Outsourcing

Who will benefit from Making Tax Digital (MTD)? Well, there’s an obvious answer…but I thought it a good idea to do a quick check.

Using LinkedIn’s clever polling tool I put the question out there: ‘who will benefit the most from the introduction of MTD for the remaining self-assessment taxpayers?’. The options were: accountants; bookkeepers; clients; or HMRC. You can see the poll, and some of the commentary it created, by clicking here.

Six out of ten respondents chose HMRC as their option. It’s unsurprising that an HMRC-driven project, which aims to both improve and increase the data it receives from sole traders, landlords and partnerships, would be flagged up as one in which they get the best results. It’s fair to point out that increasing the number of filings that the smallest businesses are making five-fold makes them a difficult choice among the other options. Indeed, only 11% picked them as the main beneficiary.

There are, too, big questions about how HMRC can utilise the data effectively, if at all. Some see it simply as a stepping stone towards an increase in the number of tax filings these taxpayers make. In other words, HMRC ultimately looking to get cash quicker.

But three in ten think that accountants and bookkeepers will fair best out of Making Tax Digital. Many accountants will shake their head at this – seeing benefits for bookkeepers to drive more regular client number-crunching but little for the accountant to benefit from.

Making Tax Digital for self-assessment tax doesn’t, in itself, ‘create’ better data. But it will push end clients in a direction to use software to manage their expenses and invoicing. MTD doesn’t ‘create’ better bookkeeping, but they might find a way to standardise their workflows so that most of their clients do things in the same way.

Making Tax Digital doesn’t ‘create’ a better accounting practice, but there’s absolutely no doubt that firms’ workflows and processes need to be polished, reliable and backed up with transparent information about their clients’ filing status.

If I was to be mischievous, I wonder if HMRC might benefit the least. Perhaps the tidying up of micro businesses’ books, alongside what I imagine would be more communication between client and accountant, might see this tranche of taxpayers able to better mitigate their tax.

It is, therefore, conceivable that all parties may find benefits from this digitisation movement.

Vipul Sheth is MD and founder of AdvanceTrack Outsourcing. If you’d like to speak to Vipul and his team about improving your practice’s processes and workflow, contact him here.

We don’t really need to tell you that Making Tax Digital is well underway – it’s been at the forefront of most accountant’s minds ever since HMRC first announced their rollout plans two years ago. 

It has been the focus of most accounting events, many many talks, and countless webinars. But so far, there’s been a lot of negative rhetoric around tax going digital:. 

  • It’s coming
  • Better hurry
  • Biggest change to tax system in 20 years
  • If you’re not ready, you’ll face penalties.
  • How to make MTD pain free
  • Are you ready?

As an accountant and adviser there is a big opportunity in Making Tax Digital, and it’s all about how you frame this change to your clients. 

 

The benefit of Making Tax Digital isn’t digital tax

You might be finding it difficult to communicate the benefits of MTD to your clients because you feel like it’s a burden to ask them to step up and do more, more often. 

It may feel like the only benefit you’re getting from MTD is that it’ll keep your clients on their toes. It’s a good excuse to hammer home that they can’t be late submitting records to you, but little else. 

 

Reframe the value

MTD has big business benefits for your clients. That benefit to them isn’t that tax is going digital. They don’t care about the formalities of submissions – that’s your remit. The benefit is the value they’ll get from moving their accounts over to the cloud.

  • It’ll eliminate their fear of costly mistakes
  • They can transform the productivity of their business and better prioritise their time
  • They’ll be able to predict issues before they arise
  • They’ll cut costs and will have more available cash 
  • They’ll have the tools to grow their business
  • They’ll be in complete control of their business as it does grow

Not to mention that moving to cloud software allows your clients to have an upgraded relationship with you. You’ll become more like a strategic business partner than an accountant. 

 

Your confidence transfers to your clients 

For many business owners, Making Tax Digital is a blip on their radar. They’ve got lots of other things to think about to keep their business running day to day. They’ll likely be leaving all the MTD stuff in your hands, and putting their confidence in you, because you’re the tax expert.

That means that you need to have confidence in the value you’re delivering, rather than fearful of the implications of HMRC demanding more. If you’re scared about your ability to deliver, your message will be wrong. 

The thing is – you can deliver it! You likely already are…

Think about your best client – one who’s already moved to cloud software and seen success. Think of how it has transformed their business. You know the value, because you’re seeing it in the work you’re already doing for your clients. 

You just need to look beyond the features of cloud accounting – the apps themselves or the ease of bookkeeping. Instead think about the emotional benefits – less anxiety, more confidence, more time at home, more control, more money, more status. 

Many of you will already know and be using some form of pricing and onboarding software. Whichever platform you use for generating proposals and automating the process, what these products are really offering Accountants is a tool to price consistently, sell more confidently and grow more profitably. 

What are the top three emotional benefits of moving to the cloud, specific to your clients? Create your next conversation around those next time you talk about tax going digital. 

And if you want further accountability in creating those relationships with clients, then talk to us about our Growth Academy, designed to help you move away from deadline driven work and become a master of deep, systematic change.

 

New software is going to be vital in making MTD work, for both practitioners and clients. Communication between staff and customers is a key step towards ensuring a painless transition

While Making Tax Digital (MTD) plans for personal tax have been put on hold, MTD for VAT filing is still pushing ahead – coming into force for periods ending 31 March 2019 and beyond.

Some practitioners will see managing the filing and reporting of VAT easier for them and their clients, compared with personal tax – after all, they make quarterly VAT filings already.

But if only it was that simple. There is a major change in that, effectively, some form of software will be required to transmit the information to HM Revenue & Customs’ new online portal.

This means important tech decisions for both practitioner and client. These will revolve around understanding current software needs, alongside mapping where current clients are on the technology ladder.

An absolutely crucial aspect of this change is managing communication to both staff and clients. Thought will then go to longer-term planning: how information is shared between client, practitioner and HMRC on an ongoing basis, and what ramifications that has for the practices’ processes, billing and strategy.

Before communication – or anything else – can take place, practices are having to take stock of which clients are making VAT filings, how they are doing so, and whether it is handled in-house or by the practice on their behalf.

“MTD is the clients’ responsibility,” says Richard Sergeant, accountancy marketing specialist and MD of Principle Point. “But you have a professional obligation and expectation to support them through this process. Your main objectives are to understand where every single client is on MTD, then track and monitor.”

A good example of taking this approach is Kreston Reeves. The 50+ partner firm manages some 10,000 tax returns a year, so moves towards quarterly reporting and digital-only filing represent serious consideration – but an opportunity to automate.

But before the promise of efficiency, smooth processes and transparent client information, the hard slog must come first.

There are myriad potential sub-sets that clients may fit in, from those using VAT-registered micro-businesses gathering information on paper and transferring onto a spreadsheet, to those already ‘effectively compliant’ by using an established cloud-based bookkeeping and filing system, through to larger businesses who – ironically – may have to gather information on a spreadsheet due to the complexity of VAT.

For Kreston Reeves’ trainee chartered accountant Chloe Dray, this has meant tackling the project “head-on”, gathering information on who is VAT-registered in their client base, and then gauging the best approach.

Refreshingly, they have found little resistance to moving clients onto accounting systems. “We’ve tackled it head-on as a team,” she says. “It was quite a project gauging who was VAT-registered, and what would be their best approach. We’ve made progress in ensuring everyone’s compliant.”

Get your message across

For any practitioners using this initial phase to put off speaking to clients directly, ACCA’s head of advisory Glenn Collins issues a stark warning: You could damage client relationships if your messaging doesn’t occur soon.

He says: “Informing clients is vital at this stage as there’s a lot of noise out there, and there are other firms that will take advantage of you if you haven’t taken any action.

“You don’t want clients to come back part-way through the process and say ‘you didn’t let me know this would happen, now how can you help me?’ Get clients on board and have discussions about fees.”

ICAEW Tax Faculty manager Caroline Miskin believes MTD will be “a sideshow” for some practices where clients are already using digital account and tax production technology. “They’re now waiting to accept the software upgrades from existing suppliers,” she says.

But for “a significant number” of practitioners, their clients will be keeping paper records on basic spreadsheets. And as our other commentators have suggested, they need to “alert clients to change” and understand their situation, and finally support them.

Building bridges

A key area of complexity will be where businesses stick with spreadsheets. Some form of ‘bridging software’ will be required to manage the process – to port data from one system or spreadsheet, into another.A recent article by AccountingWeb covered off some of the confusing number of variations that exist on this theme.

Bearing in mind HMRC backtracked on the use of spreadsheets, Miskin warns: “I don’t think a spreadsheet option is future-proof.”

Although there is still a hint of doubt – that politicians still have the capacity to pull the plug on the project – the ICAEW is being clear “that this is happening”, as far as their own communications are concerned: “We’re running plenty of workshops, webinars and courses, and will push our communication. We also need HMRC to communicate with the 1.2 million businesses affected by this change.”

Despite the scintilla of doubt, the ICAEW supports the direction of travel that MTD drives, even without supporting the mandatory nature of the legislation.

The way of the world

MTD shouldn’t be the driver to practices going digital, but it’s the way the world is going. If you want to provide compliance services as a practice then it will be “impossible” without digitisation.

“The profession is not embracing digital as quickly as it should,” Miskin warns. “There’s still a long way for the profession to go.”

For Kreston Reeves executive chairman Clive Stevens, MTD is a “big opportunity” to help transform practices – although he agrees with the ICAEW’s stance for a voluntary, rather than compulsory, shift.

“It will help transform our business from compliance to one where people devote time to other things,” he explains.

The production of its 10,000 tax returns sees work “concertinaed” into the last six months of the year. “It’s a real pressure and it isn’t going away,” he says. “It would be great if, in three years’ time, it’s all automated, digitised, and can be delivered quarterly, allowing our people to go and see clients – perhaps work more closely with them and our financial services team to discuss investment and planning – rather than worry about the physical process of ‘how many returns are there to go?’.”

MTD isn’t the be all and end all of practice transformation. What will staff do? “Well, our internal processes have been automated and some jobs have disappeared,” says Stevens. “But now they have more interesting jobs to do.”

While there is the potential for the tech to move faster than what people and processes can keep up with, the nature of changing embedded systems means that “most staff would complain about IT not keeping up with the pace of change”, says Stevens. “We can train people to be good advisers – it’s impacting on Chloe’s training today.” MTD’s impact is driving “evolution, but it’s part of a wider piece”.

Vipul’s view

As AdvanceTrack managing director and founder Vipul Sheth ponders on MTD for VAT, he makes several conclusions

Firstly, while the spreadsheet interface is currently a requirement, digitisation will lead to its demise. It is, after all, inherently linked with both the manual entry and transfer of data. “This does not fit into HM Revenue & Customs’ view of the world,” says Sheth.

“If you think about auditability, everything is about electronic record-keeping – you can’t have paper records making their way onto an electronic form.

“And while we are concerned about whether HMRC can handle another big change to its systems alongside change that could come from Brexit, all businesses, practices and software companies will be looking at further automation in the near future.”

“Forward-thinking” firms will already have a plan, and some will be ready. But Sheth is worried that a “large number” will wait until they have traversed the self-assessment filing deadline of 31 January.

While there appears a slim chance that the MTD VAT plans won’t go ahead, Sheth believes that HMRC “can’t face another credibility shock” on this issue, having pushed back other MTD deadlines in to the long grass.

“However, there are a swathe of firms who are struggling to convince clients that this is happening,” he adds.

The changing practice landscape, the impact of MTD, investment into the cloud by the major software companies, and how AdvanceTrack® is helping support practices be fit for the future. The company’s founder Vipul Sheth talks to former Accountancy Age editor Kevin Reed about these key topics, and more

Vipul, what are the pressing issues for practices in the next 24 months?

Technology is the number one issue. Knowing which tech companies will be the winners – that’s a very big unknown. They have made a lot of investment, but we don’t know which will stand the test of time. I do think Xero and QuickBooks will be the two global cloud platforms… I can’t see Sage being there. Unless Sage come up with something amazing, they’re not in the game – as a Brit, I feel disappointed about that.

The profession is losing skilled staff through retirement and mergers, leaving a gap in experience and advisory skills. Younger staff like to use tech but are not always so proficient or experienced in client engagement – that’s not true of everybody, but many naturally communicate through devices. The next generation don’t always want to take the risk of running a firm, with the responsibility and financial exposure. Firms must consider how to provide work/life balance.

Back to tech-based communication: this will be ne for 90% of scenarios, but there will be an element of the client base that wants to engage, to meet up face-to-face. The next generation of practitioner needs to be able to ‘press the flesh’, and gain the confidence of the client in a one-to-one situation. As such, succession planning is an issue that’s never far away.

Is Making Tax Digital (MTD) the game-changer, and if so, why?

MTD is absolutely front and centre for everyone, but my view is ‘never let the government write your business plan’. Build a business that goes beyond dealing with numbers; build a business that clients feel they can’t do without.

MTD is concertinaing the time window to migrate people to the cloud to do things effectively. It’s important that MTD is making firms visit this – but they should look beyond it. The law will make us help clients be compliant, but what do you do with that information? MTD will ‘help’ you keep clients out of jail – but it won’t help you make more money. What will enable that is how you use that information to make clients run their business better.

What about longer-term for practices?

Everything comes down to client service. Moving to the cloud is an essential part of providing advisory services – keeping them compliant but using other tools to give better insight to what will be increasingly operational data. By offering clients insight, you can use data to justify where you are and what decisions you’re making.

There will continue to be a market for compliance business but, over time, technology and self-service will replace those firms – if that’s all you’re delivering to clients.

Automation and AI – what should practices consider with regards their strategy, and staff levels?

Our top clients have already started moving staff to client-facing roles. When they recruit people today, the type they recruit are those they think could be partners in 10-15 years’ time. If you have enough coming through with that skillset, you’ll automatically have in-built succession… practices forget they’re running businesses.

Tech is used in young people’s everyday lives. So practices must look at the range of skills they will need. You will rarely find someone that can be an accounting technician, fully IT-literate, can run a practice and serve clients. Teams will need to be built to cover the bases.

Is it tough for firms to serve clients while everything is changing so quickly around them?

Forward-thinking firms have a small group of people running change programmes. They’re the ones most successful at implementation, and some with non-accountants going into the technological change roles.

We all need to re-skill and keep developing. I’ve had several professional roles in my career, and am doing something very different to what I did 15 years ago. We must recognise that in ourselves, and also give people the time and framework to adapt.

What types of practice are impressing you, and why?

Some cloud-only firms are very impressive. They have no shackles, and are not wedded to a particular technology. Staff can work anywhere (which comes back to staff wanting work/life balance).

There are a handful of ‘traditional’ firms that have impressed me by having a big client and team base, looking after SMEs and using AdvanceTrack® and other technologies to service a much wider cross- section of clients than they would have in the past – regional practices operating on a national or international level.

Where does AdvanceTrack® fit into all this change?

We have been a tech-first supplier/provider to the profession. We will adopt tech that’s developed by third-parties, or develop our own. Where we have really continued to progress is our need to be efficient, particularly in collecting and processing data efficiently – to help our practice clients deliver an amazing service.

Off the back of MTD and the need to keep clients compliant, we’re able to give scalable bookkeeping solutions to practices and enable them to work with real-time data. This solution feeds into practices’ other advisory- led and insight services.

What do potential clients ask you about AdvanceTrack’s services, and what is your response?

The questions have hardly changed over the years! First, quality – how do you maintain it? How do you keep clients’ data secure?

Our biggest challenge is those in the industry that have offered bad service, which makes it much harder for practices to revisit the option of outsourcing.

Some clients have come to our offices. They want to ensure that if working with a provider, we’d also look after our staff when working on their projects – part of their due diligence is to visit our offices and ask our team members any questions they want.