David Greenlees, Director, Priority Software UK offers this insight…
Business owner? Financial manager? Even if you’re just starting out be it a start-up or other business venture, you’re well acquainted of MTD. But if you’re not, Making Tax Digital, in effect as of April 1st, is a UK government initiative aimed at digitising tax administration to make it more effective, more efficient and easier for taxpayers to simply… get it right.
With just a few months out of the starting gate, UK’s VAT-registered businesses with a taxable turnover above the VAT threshold, have been using the MTD service to store digital records and software to submit their VAT returns.
While the majority of businesses have embraced the change in VAT reporting, some have been slow on the uptake. It can be a challenging process, especially for those digital newcomers. Businesses that have been handling their accounts manually, for example, are facing a difficult transition when the time comes to go digital.
Here’s where business management software, such as ERP, can help. In fact, ERP has become a driving force for businesses who are looking to become and remain, MTD compliant.
Going, going, gone… digital
ERP is technology that helps companies manage and analyse their activities throughout the business – including finances and accounting – and there are several reasons why it will play a key role in the future of MTD.
Despite the rise of digital transformation, many businesses still rely on manual processes or spreadsheets to manage their accounting. This can pretty tough, especially when it comes to submitting accurate tax reports – and that it’s also very time-intensive.
With ERP, processes and accounts can be digitised, enabling companies to submit VAT returns digitally in accordance with MTD regulations. The benefits are great in number – increasing overall efficiency, streamlining internal processes, and more importantly, with company data centralised in one location, business can ensure full visibility into financial records.
Digitising accounts with ERP software also provides businesses with a host of benefits, such as giving employees the tools they need to work remotely. Moreover, financial data can be integrated into mobile apps, giving employees easy access to the information they need from wherever they are, in turn, enabling them to be more productive – and more efficient.
But what about security?
Yes, we are all fallible and we make mistakes that are clearly ‘human’ in the business world. Accounting is no exception. But ERP has the ability to significantly reduce the chance of errors being made, as well as being able to keep data secure.
With traditional spreadsheets or paper records, content, especially figures, can easily be changed – either accidentally or on purpose – which of course has potential legal ramifications. Similarly, one wrong formula can lead to incorrect figures, which could result in fines if the correct tax isn’t being paid.
ERP removes these risks by allowing businesses to store records digitally. Not only does this meet HMRC requirements that say VAT records must be maintained and stored, but it also provides an additional layer of security.
Features such as role-based and data-based security prevent employees from accessing data they’re not meant to, while the ability to secure and encrypt passwords can help keep confidential information out of reach of prying eyes. Given the sensitive nature of financial data, ensuring the security of records is something businesses can’t afford to overlook.
Bridging the digital divide
Finally, companies can use MTD as a springboard to digitise other areas of the business. This is vitally necessary in today’s digital world. MTD can also help companies keep pace with their competitors, or even give them a competitive advantage.
Businesses must remember, however, that accounting software is just one key feature of ERP. The technology can be used to transform many other areas and support a wide range of operational needs. This includes the likes of sales, warehouse management, supply chain, HR, and business intelligence, all centred around providing real-time access to data in order to enhance business efficiency.
Rather than limiting themselves to just one operational area, companies have to be prepared to think holistically when it comes to ERP and consider how it can apply to other areas of the business. Those companies struggling to manage an eclectic mix of spreadsheets, printed documents and handwritten invoices – of which there are many – will fast discover that an ERP system can be a great way to remove the burden on employees.
For MTD specifically, ERP offers a host of practical benefits. But, when looking at the bigger picture of digital business, it can act as the catalyst for a wider transformation.