Why should I move to online accounting software? (Pros & cons)

We get asked regularly by our clients – ‘why should I move to online accounting software?’. The question is a good one because we understand that if you are going to move systems, you will want to make sure that you are making the right decision. In this article, we look at the pros and cons of switching to online accounting software to enable you to decide if it would be the right choice for you.


Pros of moving to online accounting software

Mobile online accounting

With online accounting software, you can access your data anywhere in the world with a desktop, laptop or mobile device and an internet connection.


Cashflow

Online accounting allows you to get a ‘real-time’ view of your financial position, who you owe and who owes you, which you can access at any time.


Team access and collaboration

Everyone in your team can access the same data at the same time, no matter where they are based. Your accountant can access the same information as you which means you can go through your financial position together, whilst in different locations.  There is also the functionality to restrict access to certain areas of the accounting system.


Tracking

It’s easy to invoice and track inventory and you can schedule and make batch payments to suppliers. You can also review and approve receipts in expense claims which can be uploaded from multiple members of staff. Also, your latest banking, credit card and PayPal transactions can be imported and categorised reducing data entry.


Updates

For most cloud-based packages, updates tend to be automatic, so you do not need to factor in any down-time whilst updates are being made, saving you time and money. This also means that you are always on the latest version.


Get paid faster

Some clients find that using online accounting software allows them to get paid quicker, as you can track when invoices have been opened or not, so non-payment of invoices can be actioned quicker.


Disaster recovery

Your data is backed-up automatically in the cloud and in the event of a disaster or cyber-attack for example, your data can be easily restored.


Easily integrated

Online accounting software can be easily integrated into your existing systems and in most cases will improve your processes. Also, with some planning, it’s easy to migrate data over to the cloud.


Fraud reduction

Automating some processes can increase the accuracy of financial reporting and there is some evidence to suggest that online accounting software reduces fraud as businesses have more control over data and access to data so anomalies can often be identified quicker.


Paperless

Using the cloud can support an organisation’s aim to become paperless. All accounting paperwork and records can be stored in the cloud and even receipts can be photographed from mobile devices and automatically filed into the online accounting software.


Online accounting add-ons

There are hundreds of add-on apps for online accounting software, some of which are industry or service-specific. Some are free and some you pay for but it’s worth investigating add-ons relating to banking, expenses, payroll, invoice approval and e-commerce which could potentially streamline more of your processes.


Tax planning

With the availability of financial information in a readily usable format, through the reporting functions available in the cloud packages, you will be able to see exactly how your business is doing, and how profitable it is.  You may then be able to explore ways of reducing your profits, ahead of your financial period end, and ultimately, your tax bill.  Only by having such information available to you will you be able to discuss the options with your accountant.


Informed decision making

As above, with the financial information that will now be at your fingertips, you will be able to make more informed decisions regarding the performance of your business – is an area underperforming and needing some attention or is an area performing well and requiring more focus?  You will no longer have to wait until your year end accounts have been prepared before you are in a position to look at these issues.


Cons of moving to online accounting software

Now let’s take a look at some of the cons of online accounting software.


Internet access

You are dependent on the internet in order to access your accounting data, but this is not dissimilar to many office applications. In most cases, if you do lose access to the internet it can often be restored quickly and easily.


Training

You will have to invest in some training for you and your staff on how to use the new system. Some accountancy firms offer training as part of your package and most online accounting providers produce ‘how-to’ guides, webinars and podcasts free of charge.


Research

You will have to do some research to find the right package for you, but it will be time well spent. You should also discuss options with your accountant as they should be able to provide some insight into the packages they have used.


Monthly packages

In most cases, you will save money by switching to online accounting software. However, it’s worth noting that there is a tipping point between monthly cloud options. For example, there are basic packages for sole traders and small businesses, but if you grow quickly and take on more employees you may end up having to move up to the next package to suit your growing needs, which could mean you are on the next pricing level but you are at the lower end of the criteria for this package, until you grow again.


Additional costs

If you need to download large amounts of information from your cloud-based system on a regular basis, you may incur more costs, so check this beforehand.


Cyber-attacks and data breaches

There have been some recent high profile cyber-attacks and data breaches of large global businesses, which means that online accounting providers are not immune to such attacks. However, their systems and processes for dealing with such an attack would in most cases be more advanced than a system you would use within your own organisation.


It’s only as good as the information you put in

We talk about the availability of good financial information is available within the online software to help with decision making and so on, but it should be noted that this is very much based on the quality of the information that you put into the system.  While many of the data input and collection functions can be automated, if this data is out of date or incorrectly posted, you may not be any better off than you are currently.


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Why should I move to cloud accounting software? (Pros & Cons)



Are you thinking about switching to cloud accounting software but are unsure if this is the best option for you?

In this short video Fiona Morgan, Partner & Head of Accounting at MHA Henderson Loggie, shares with you some of the benefits and drawbacks of using cloud accounting software.

Covered in this video:

✅ Benefits of cloud accounting software
✅ Cloud accounting software drawbacks

If you have any queries, or you are unsure what to do, please feel free to contact Fiona directly by email at fiona.morgan@hlca.co.uk


A question I’m regularly asked is, “Why should I move to cloud accounting software?” The question’s a good one, because what is it exactly that you’re moving from? Is it a manual cashbook? Is it an Excel spreadsheet, or are you moving away from a traditional desktop-based package? In this short video, I’m going to talk over some of the key pros and cons in respect of cloud accounting software.


Benefits of Cloud Accounting Software

One of the key benefits is the ability to access your data from anywhere in the world. From a laptop, a desktop, or a mobile device with an internet connection. Providing you with real-time information in respect of the financial position and performance of your business. For some, they may also be able to get paid faster, because you’ve got the ability to track invoices, check when they’ve been opened or not, and chase up the unpaid ones quicker. And of course, the cloud packages will be compliant for making tax digital purposes. Keeping your data up to date enables you to work with your accountant to seek out any tax planning opportunities that you would be able to then take advantage of.


Cloud Accounting Software Drawbacks

However, the main drawback is that it’s only as good as the data that you put in. So it’s imperative that you keep your data up to date so that you are in a good place to make some financial decisions with it. The other drawback that some people mention is cost, and this isn’t just the financial outlay for the package itself, which can range from anywhere between £10 to £20 a month, but it’s also the cost of the investment in training you and your teams on how to use the package effectively. It is worth spending some time making sure that you get the right package for you.


Any questions about cloud accounting software?

If you have any questions, please feel free to contact us via the form below.

The information in this video is of a general nature and seeks to highlight some of the issues which could be affecting you and/or your business, including changes to financial regulation and legislation. Viewers should not rely on this information without seeking professional advice on its application in their circumstances.

How to write a great business plan | 8 steps

A good business plan will help you to test the feasibility of your idea, identify gaps in your plan and help you to potentially secure finance. It will also help you to define your ‘why’ – why you are in business and what you are trying to achieve.

A video worth checking out is this edited TED Talk from Simon Sinek –  “Start with the Why”

We work closely with clients on their business plans, be it for new start-ups or for clients looking to grow, change, diversify or export. In this blog, we look at 8 steps to help you write a great business plan.


1. Executive summary

The executive summary is the most important part of your business plan. Positioned at the front of the document, it is the first part to be read, and in some cases, maybe the only part that will be read.  Faced with a large pile of funding requests, venture capitalists and banks have been known to separate business plans into ‘worth considering’ and ‘discard’ piles based on this section alone.

Although it is the first to be read, it should be the last page to be written.  It is a summary and therefore should bring out all the relevant headline information from the rest of the plan.  It is difficult to do this until the rest of the plan is written. It should be interesting, concise and should grab the reader’s attention. Financial information should be included but without the detail.

The executive summary is NOT:

  • A description of the business and its products. It’s a synopsis of the entire plan.
  • An extended table of contents. This makes for very dull reading. You should ensure it shows the highlights of the plan, rather than restating the details the plan contains.
  • Hype. While the executive summary should excite the reader enough to read the entire plan, an experienced investor or business person will recognise hype and this will undermine the plan’s credibility.

2. Product and suppliers

Be clear in your plan about what the business will supply, be it goods or services, or it could be both.

For goods, include as much information as you can about how you will price your product. Also, detail where the goods will be sourced from, the production lead times, the availability of the goods and the availability of credit to purchase the goods.

For services, again pricing is key, along with the availability of who will deliver the service, be it yourself or a member of your team. It’s also important to include any element of the service which might be outsourced.


3. Plan your marketing approach

Your marketing approach should be directly linked to your ‘why’ – which is your Unique Selling Proposition. Your USP is what will differentiate you from the marketplace and is a key area of interest for an investor. Use the information gathered from researching your target audience and competitors to clearly set out your marketing strategy.

This section does not need to be as in-depth as a standalone marketing plan but should set out who your target market is, how you will reach them and why they would buy from you. You should include your target market size, historical data about its development and key current issues. You should set out how you will communicate with your target audience, what method you will use to do this and how you will measure the return on investment from your marketing costs.

A key element to your marketing will be your brand, which is directly linked to your ‘why’. Branding is not just about the name or the logo, it’s about the story behind the brand. What are your core business values? What do you stand for? Think about your target audience, will this brand resonate with them? Not just in the look, feel, taste but the whole customer experience from start to finish and repeat business.


4. Identify your customers and target audience

Who is going to buy your product or service? Consumers or businesses? As part of your plan, you should identify your ideal customer and target audience. Try and be as specific as possible, for example; how old are they, are they married/single, where do they live, where do they shop, what type of job do they have and how much do they earn. If you are targeting a buyer within an organisation, you may want to consider what they do on a day-to-day basis, who they report to, what challenges they have and how will your product or service improve or enhance their role.

A good idea is to create a buyer persona or empathy map. This can be a great exercise to think about the specific type of customer you want to target. It can help you to identify their interests, work/home responsibilities and preferred communication channels so you can target them appropriately.


5. Determine your competitors

It’s important to identify your direct and indirect competitors within the plan. Highlight businesses that offer the same service or product as you and businesses that offer a service which fulfils the same need with a different product/service.  Identify who they are, how they work and what share of the market they hold. It’s important to state what differentiates you from your competitors.


6. You and your team

It’s a good idea to include background information about you and your team in your plan, especially when looking for funding or support. Include a CV or paragraph on each individual, outlining their background, relevant experience and qualifications. Ensure that everyone you include in your plan has clearly defined roles. If you have a larger operation, give details of your workforce including:

  • staff numbers by department
  • sales or profit per employee
  • salaries
  • productivity

Also, include any future recruitment or training plans, including timescales and costs.


7. Financial projections

You will need to include a set of financial projections which translate what you have said about your business into numbers. This should include a profit and loss forecast together with an associated balance sheet – which will provide a statement of the trading position of the business. Show the level of profit you expect to make and the costs of providing goods and/or services. Ideally, you should include forecasting for three to five years. Include all your overheads such as the cost of premises, equipment, materials, wages, marketing, website and advertising.

Include cash flow projections and monthly cashflow patterns – the aim of which is to show that your business will have enough working capital to survive. Make sure you have considered the key factors such as the timing of sales and salaries. Also, consider the timing of payments such as VAT and PAYE. This should highlight any funding requirements, and of course, if funding is required you will have to demonstrate that any planned repayments can be met. It’s also worth including key assumptions, for example, what you have assumed to happen which will allow sales to grow.

Some sensitivity analysis can also be useful, for example, what would happen if sales come in 20% below forecast, what if your customers take 60 rather than 30 days to pay you or what if the cost of buying from your suppliers increases more than you expect. Be clear about what your Break-Even Point is, which is the level of sales at which your business is producing enough sales revenue to cover both your variable and fixed costs. Once you reached this point any additional revenue after variable costs, is profit.


8. Scenario planning

Detailing your long-term objectives in your business plan is a good way to demonstrate your potential to investors. The plan to achieve these objectives may change as your business develops so it’s worth including some scenario planning within your plan. For example, if you failed to grow your product range, what might the alternative growth plan be for the original range?

You may have ambitious plans for growth or you may have a target income but high growth is not a priority for you. Either way planning for growth beyond your original plans could help identify gaps in your plan or opportunities you may not have considered.

Remember: Don’t confuse the message and make it clear that there is a Plan A. It’s a good idea to put your scenario planning as workings in the appendix to avoid any confusion.


Summary

Most importantly, above all else, a business plan is for YOU – the owner of the business. It’s your vision and defines where your business is now and where you want it to go to – it’s the route map of how you get there. Use your plan as a working document to keep you on track and keep you accountable for what you set out to achieve.

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