If the thought of reading yet another article on how the government is 'making tax digital’ feels you with a sense of dread, you’re not alone. It’s happening, we all have to get on board with it and Making Tax Digital will greatly benefit organisations across all sectors over time. But rather than view this as yet another piece of legislation to fall in line with, charities now have the opportunity to take advantage of the range of possibilities it presents.
Indeed, regardless of whether you’re at the start of your digital journey or in full flow, Making Tax Digital could present the perfect opportunity to reassess the way you manage your organisation’s finances. At a time when charities are under increasing pressure to manage the dual challenges of keeping costs to a minimum, while ensuring continuity of high-quality services, the answer may lie in digitalisation.
Fast and efficient finances
We’re all aware of the challenges charities face when it comes to adopting new technology, from a lack of funding and digital leadership to finding the right people to fill an emerging skills gap. If you feel as though you’re behind the curve, and you’ve put off updating your systems, now is the time to change.
Making Tax Digital will transform the way you work, from paperwork and spreadsheets to user-friendly interfaces. Although it’s possible to install bridging software, reviewing your working practices and switching to an integrated cloud finance management solution that can meet future requirements will bring greater benefits long-term.
Recording your figures digitally means less room for error, and as cash flow is the beating heart of any organisation, getting this right will not only help you to keep growing and hit targets, it will lead to greater transparency – making it easier for you to track donations and spending. And, having adopted changes to the way you manage your finances, why stop there? Taking steps to make your tax digital will invariably increase your confidence to push for digital transformation across the board.
New ways of working
Many charities choose to take advantage of an external accountant, which takes the pressure off filing tax returns. If you’re using an external firm, then relax, as they will have everything covered. However, Making Tax Digital also gives you the option to consider bringing your finances in-house.
Having someone on the team internally, who can advise on business decisions, can add strategic value – especially when budgets are tight and change regularly due to fluctuations in available grants, donations and legacies. A good in-house accountant can work closely with staff on the ground to advice on how to proceed, and, thanks to new software systems, this option is so much viable than before. By implementing new technology, it becomes simpler to manage your finances, as well as cut down on employee workload so that you need less manpower to complete the same tasks as before. So, talk to suppliers, take advantage of their expertise and create something custom-built for you.
Making Tax Digital could lead to greater revenues for companies across the UK. Why? Because when cashflow is managed efficiently, businesses get paid faster and have access to capital for growth. The same applies for charities.
All charities have a responsibility to run operations in a way that benefits their core values and purpose. Reducing delays in the way donations are collected and recorded, for example, leads to a better cashflow, enabling money to better reach the places where it’s needed. A recent survey of over 150 accountancy firms shows that the way we record our finances as a nation desperately needs updating. An alarming 16 per cent of accountants recorded clients who still keep their receipts in a shoebox!
The trend for charity supporters donating electronically is growing, through smartphones, contactless donations and crowdfunding, so it’s only natural that charities follow suit when it comes to in-house practices.
Better software in the cloud
To comply with Making Tax Digital, you need software that allows you to submit VAT returns, as well as keeping records of your sales and purchases. So, when you’re looking for software compliant with HMRC, it’s worth considering cloud technology.
Not all models are the same, but to put it simply, cloud computing stores everything – from servers and databases to analytics – on the internet. Without the need for expensive hardware or an IT team, this model keeps your costs low and offers a flexible approach with the option to scale up and down as your organisational needs change.
Xledger specialises in the charity sector and understands the funding pressures faced by non-profits – in particular when it comes to VAT returns. Calculating partial exemptions can be fiddly, but with the right software, it’s possible to adjust percentages automatically as transactions are entered. With us, you can do just that, and we also offer charities discounted pay-as-you-go monthly subscriptions with a 30-day walk away period. With 63 per cent of UK charities opting for cloud software currently, it’s clear that there’s room for growth.
Tax on the go – access anywhere, anytime
Keeping digital records has so many advantages – HMRC wants to become a global player when it comes to digitally advanced tax. The aim is that, in the future, you won’t have to wait until the end of the year to find out how much tax you owe. And, if you opt for cloud software, you’ll be able to process your figures in real-time, making accurate and timely financial decisions.
An added advantage of going paperless is that employees don’t have to be in the office to view your finances, and for charities who often work remotely – sometimes on a global scale - is this a big benefit which helps to create better flow of communication. Finally, if you want to avoid sitting in a phone queue, thanks to Making Tax Digital, you have an alternative – interacting digitally with HMRC through web chat and secure messaging.
Tim Hooper is director of sales and marketing at accounting software provider Xledger.
This content has been supplied by a commercial partner.