Following the postponement of MTD for Income Tax, it might feel like we’re in a well-deserved period of calm. But this is the perfect opportunity to make key process changes that bring long-term benefits.

There’s never been a better time to get clients trained in the kind of digital skills that are vital if the ongoing digitisation of taxes isn’t to put a strain on them—or on you.

This is true no matter where clients reside, and it isn’t just a UK issue. Most western countries are on journeys towards the digitisation of taxes, which present very similar challenges.  

‍Real-time‍

One vital digital skill is real-time accounting.

The goal is simple: clients address accounting and bookkeeping tasks when they arise, taking them in their stride as part of their working day.  

For example, they will issue invoices and collect payment when they’ve finished a task. If your client must be onsite to carry out their work, this can even be done immediately once the job has been completed.  

They will take a snapshot of receipts or invoices when they’re received, so the data is instantly moved to their accounting. Regular bills can also be fetched from online locations, removing client intervention entirely.

Few accountants realise the scale of the accounting administrative problem facing their clients, or why a solution is so desperately required.

A National Federation of Self Employed & Small Businesses survey amongst its members revealed the following startling issues:

• More than half of small business owners say growth is held back by the time they dedicate to business administration.
• Over two-thirds say the admin burden is preventing them from focusing on their business purpose.
• Three-quarters say they spend more time than they would like on issues like tax, accounting and more.

Clients “catch-up” at the weekend on tasks such as balancing the P&L, or inputting receipts, invoices and statement data into their ledgers, or preparing VAT, corporation tax or income tax returns.  

As a result, their work/life balance is often awful. None of them started their own business to do admin, yet this is what eats much of their time.

Similarly, preparing for tax crunch times like quarterly VAT returns can be a recurring nightmare that just never goes away.

But real-time accounting means the data is already there. Quarterly VAT returns become a matter of tapping a few buttons, sense-checking a few columns, clicking to submit—and then returning to work. This can even be done during a coffee break.

‍New processes‍

The solution is a fundamental rethink by your client about their accounting and bookkeeping processes.

They need to introduce new processes, and possibly even ditch others.

Yes, this can be scary.

But ultimately, it’s about building healthy new habits when it comes to their finances.

Spending time now doing this will save time in the long run—and prepare them for the relentless digitisation of taxes. As their trusted advisor, you can help them through it. It’s much more straightforward than you might think.

Clients that aim for real-time accounting and bookkeeping make their own lives easier, and also make your life easier. For them, they might gain back hours at the weekend. For you, it means significantly less chasing paperwork or data, and always being able to help instantly upon request.

Even better, if you assist in helping the client adapt to real-time accounting and bookkeeping, you’ll appear to be a superstar in their eyes. You’ll literally give them back hours of their lives to spend with their families.

This massively enhances attempts to move into a trusted advisor role, thereby putting you in the best position for the future. ‍

Results‍

AutoEntry was created to automate data entry, and it’s something we know a lot about. So, let’s use that as an example of how it empowers real-time accounting and bookkeeping—and what the results look like.

The goal is to help clients create a new habit of scanning receipts, invoices and paperwork such as credit card statements. Real-time accounting means this must be done as soon as they’re received.

For example, if a builder client buys supplies from a wholesaler, they should scan the receipt in their van before they drive away from the car park. When the morning’s mail is opened, receipts and statements should be scanned or snapshotted. Bills arriving by email should be forwarded to AutoEntry for automated processing.

Once these tasks are done, their accountant or bookkeeper pick-up the data, categorise it as required (or create rules to automate in future), and then publish to the accounting software.

Now, you may have tried to encourage this behaviour in the past, and come up against resistance. Clients have other things to think about, and even a task as quick and easy as taking a phone snapshot of a receipt can be forgotten.

‍Habit formation

‍That’s why I talked earlier about habit formation. Once a habit is formed, it doesn’t go away.

True, it requires effort. But there’s significant amounts of guidance out there about good habit formation—and millions of success stories.

The NHS has published clinical guidance about the topic. It did so to encourage healthy eating, but we can easily adapt the processes to encourage real-time accounting.

Here are its basic rules:

• Set a clear goal. For your client this could be, “I will scan all receipts using the AutoEntry app, freeing up several hours of data entry each week”. Goals are always about starting something new. Be careful not to set a goal to stop doing something. This is unlikely to work.
• Create a cue for the new habit. In other words, when will the AutoEntry app be used? For the client, this might be, “I will scan the receipt in the car or van immediately following a purchase”, and, “I will snapshot paper receipts as soon as I open the envelope”.
• Research suggests habit formation takes 10 weeks! In other words, it’s long-term investment—but after this it really will become automatic. Not undertaking the habit will feel odd. ‍

Incentivising‍

Your role is to educate, and also enforce. Check in often with the client, and provide paradigms from your own accounting, or other clients.

You must also focus on the output of the good habits the client builds. This is the secret sauce that incentivises clients to continue their new habits.

For example, the real-time data from AutoEntry feeds into reports that show instantly the cash flow situation for the client – especially if open banking is connected to the accounting software.

This empowers confident decision-making, such as making capital expenditure purchases or applying for financing. With real-time accounting, there’s no need for prep work, or hunting around for the data required to create reports.

The data is always already there, telling the necessary story.