By Tim Fouracre
Imagine if your business bank account was your accounting software. It sounds obvious, right? This is the concept of an accounting bank and this combination of accounting and banking is set to revolutionise how millions of entrepreneurs run their small business. It will simplify your business admin.
With the advent of cloud accounting software and API bank feeds, many small businesses increasingly use the bank statement as the primary source of their bookkeeping records. A bookkeeper typically imports all bank transactions into cloud accounting software and then goes through transaction by transaction explaining the account code, VAT rate and contact information.
This is a duplication of effort that is inefficient. For example, when you set up a payee in your bank account and make a payment out, you then repeat the same task in your accounting software, setting up a supplier and explaining the payment out.
Then there is the fact that many small business owners do not enjoy the accounting. It’s a foreign language that’s full of jargon; and tax is a minefield for most sole traders. As an administrative task the categorisation of transactions is time consuming and takes productivity away from actually growing your business.
For startups, setting up a new business current account takes time. In most cases it’s several long paper forms and about a month of back and forth with different bank reps. Even then the account may not be approved. The lack of a bank account when a business starts trading often creates a mess as personal accounts are used instead. Chaos sets in.
It is the businesses run on spreadsheets who are set to gain the most from an accounting bank. Making Tax Digital, HMRC’s transformation of tax, is set to cause these business owners a significant amount of pain over the next few years as they are forced to adopt digital systems to do online quarterly MTD filings for VAT, income tax and corporation tax.
So how does an accounting bank help solve all these problems?
With an accounting bank a small business can go about its day to day banking, a task they want to do. The accounting bank comes complete with a UK bank account number and sort code that can be opened within five minutes and not 30 days. Contactless Mastercard, faster payments, direct debits and BACS are all included.
The accounting is automated with transactions being automatically categorised as sales, travel, legal fees etc. No longer is there the need for back and forth between you and your accountant over a messy spreadsheet. In fact the bookkeeping is no longer a task the you need to do.
Accounting banks have MTD built in to let the business owner carry on with their banking as you always have done, for their accountant to make the MTD submissions seamlessly from the application.
You can create an invoice and when it’s paid it will automatically reconcile. You can view a profit and loss report or submit a VAT return. An accounting bank does everything you need to run your business.
Steve Jobs described creativity as connecting things and you need look no further than Tesla connecting cars and batteries or Sellotape connecting glue and cellophane to see how simple but obvious these solutions are. Think of an accounting bank as HSBC and Sage connected as one.
Tim Fouracre is founder of online accounting software Clear Books plc and launched Countingup.com in October 2017.