Almost a quarter of small businesses in the UK are sacrificing higher rates of growth and productivity by maintaining their accounting records on paper rather than online, according to an independent study by the team at Accounts and Legal.
The research has been based on data collected from the company’s “Interactive Instant Quote tool”, whereby businesses answer simple questions such as, business size; annual turnover; no. of employees; frequency of accountant input; and current internal accounts system.
Of the 10,000-strong sample, an incredible 22% businesses when asked how they “currently ran their internal accounts” selected Paper over Excel or Accounting Software. In many of these cases no aggregated accounting data of any kind was prepared, meaning the businesses had no insight into their performance beyond what their bank balance said. Those with the old-style approach were most prominent in businesses with an annual turnover of less than £500,000, with 94% of the paper system adoptees being represented in this bracket.
Perhaps most surprisingly, given the level of marketing and PR by the likes of Xero and Quickbooks regarding cloud accounting software in the last 5 years, and its relatively low cost, the study shows the number of small businesses actually adopting accounting software only began to noticeably increase during 2017.
Despite this, the study shows the most popular choice of accounting method among the UK’s 5.5 million small businesses remains Microsoft Excel, which, although a better solution than paper in our view, does not offer the efficiency or insight of a properly maintained cloud accounting software system. Overall, 49% currently employ the Microsoft package as their choice of accounting system.
Just as some small businesses are unwilling or unable to embrace cloud storage services like Dropbox, some are also resistant to the concept of cloud accounting. However, modern “intelligent” accounting technology has proven why small businesses should embrace the power of cloud computing. The future of cloud accounting is going to be something of a given for all small businesses, rather than the optional extra it is today.
Cloud accounting platforms employ a host of sophisticated algorithms to automate the process of data entry, sorting data and calculations. They also automatically update calculations or amend balances when any adjustments are made. Modern accounting platforms automatically import a business’ bank transactions (using the bank feeds provided by the business’ own bank), and can recognise, categorise and allocate different types of transactions, foregoing the need to manually input, sort and label each transaction.
Cloud accounting software allows for greater integration with other accounting, financial reporting and financial services tools, such as HMRC’s services, payroll, and inventory management, to name a few. These integrations make cloud accounting platforms infinitely more valuable and efficient than paper methods, enabling users to optimise and automate data sharing and data processing across platforms – securely and in real time.
Many cloud accounting platforms operate a “Software-as-a-Service” (SaaS) model, whereby customers pay a generally small monthly fee on an ongoing basis, rather than having to pay a large lump sum upfront.
The cloud computing technology at the core of modern accounting systems means a small business is no longer burdened with the need to store its data on their own computer hard drive. Cloud accounting platforms store a business’s accounting data securely “in the cloud”, meaning the data can be accessed from anywhere and everywhere provided the correct security credentials are entered. This data is never lost, regardless of whether a hard drive kicks the bucket or a server malfunctions, your data will be safe at all times.