Jess Radich is the Information Systems and Business Manager with BDO Central (NI). She has extensive experience assisting both small and medium sized entities with a wide range of Information Systems and advisory services. BDO Central are Chartered Accountants and Business Advisors, with offices in Napier and Palmerston North. BDO is able to support clients with a comprehensive suite of accounting, information systems and HR services. The firm is an independent member of BDO New Zealand and part of the global BDO network.
Small businesses in New Zealand and specifically Hawkes Bay are the backbone of our economy. The purpose of cloud based accounting software is to help SMEs spend more time focused on their business rather than their book keeping. Software providers are constantly working with government to help streamline compliance for small business. The proposed introduction of AIM and direct GST filing are examples of this. If your small business is yet to make the move to the cloud, now is the time to do so in preparation for the proposed Pay-As-You-Go Provisional Tax option due to be available from 1 April 2018.
The introduction of the Accounting Income Method (AIM) for small businesses means that using cloud based accounting software is about to become even more beneficial. Under the proposed method, businesses with gross income of less than $5 million per annum can use cloud based accounting software to calculate their provisional tax payments, removing the guesswork involved in the current system. Rather than making payments in 3 large instalments, AIM will work out tax payments regularly throughout the year based on taxable income provided by your cloud based accounting software, generally at the same time GST is due.
AIM will be particularly advantageous for start-ups or businesses with unpredictable income patterns as tax is only paid on results achieved. If a business’ tax liability drops, IRD will refund overpayments.
Software providers such as Xero, Reckon and MYOB have cloud based accounting solutions which are intuitive and user friendly. The transition from your current system can be daunting so using an information systems specialist who is also an accountant in the set-up and transition is recommended. This is to ensure software is set up correctly from day one so that your business is getting the most out of it. It is not a ‘one size fits all’ approach when it comes to accounting software, you need to consider what features and reporting requirements your business needs and a specialist can guide you through this process.
It is expected that most software packages will have the capability of automatically sending electronic information to IRD at each filing date. In adopting AIM correct coding within your chosen software will be more important than ever before. Your accountant should be able to help you set up bank rules to ensure like payments or receipts are coded to the same place with the correct tax rates, along with helping you decipher what expenditure is deductible to avoid under or overpayment of tax.
Why you should already be using cloud accounting software:
Real Time Data
The emergence of cloud based accounting software has been a game changer for business owners and accountants. Being able to access real time information at all times by multiple users enables informed and timely decision making. Having transactions flow directly from your bank into the software removes time consuming data entry, allowing business owners to spend more hands on time in their business.
Software such as Xero and MYOB have recently released the functionality of filing GST returns directly with Inland Revenue removing double entry of information. It is only a matter of time before all tax filing can be processed from within the software.
As long as you have an internet connection you can access your data at any time anywhere on any device. This allows greater flexibility for running your business and lends itself to that all important work/life balance. Sending an invoice or viewing the latest cash position can be accessed via a smart phone or tablet on the run (literally), removing these tasks from the confines of an office – in fact, many small businesses no longer need designated office space.
No Back-ups or upgrades necessary
Data saved in the cloud is a lot safer there than on your computer or in a paper file. Cloud companies spend millions of dollars on systems to protect your data. Being in the cloud, your information is constantly being backed up.
Upgrades happen while you sleep. This means that your software is always the most current version and you do not need pay for upgrades when software becomes incompatible or legislation is out of date.
Add on ecosystem
While cloud based accounting packages offer a vast range of functions, they can’t offer it all. New feature full and industry specific apps that fully integrate with a range of cloud accounting software are constantly being developed. These apps enable businesses to create their own personalised accounting platform while removing traditional double entry of information. Apps cover a range of industries such as agriculture, construction and trades, automotive and retail including functions for inventory management, point of sale, job costing and payroll to name a few.