On Friday the 12th of October, 2018, hundreds of business owners descended on Carlisle Racecourse to spend the day learning about Business, Innovation, Technology, and Efficiency.
Or ‘BITE’ for short.
Saint & Co. welcomed a number of guest speakers to the stage to share their insight and expertise. And we couldn’t be more pleased to have had the brains behind BITE – our very own Andrew Liddle – kick things off in the morning with his talk called ‘How accounting sits at the core of your business.’
If you missed the event, or you’d like to refresh your memory, here is an edited transcript of Andrew’s talk:
Good morning ladies and gentlemen.
For those of you who do not know me, I am Andrew Liddle, a partner at Saint & Co., and the person who had the idea to bring this event to our community.
When looking through the final running order for today, we realised that there was an omission – so there is change to our running order this morning. You will be pleased to know there will be a tea and coffee break at 11am!
The idea (for BITE) came to me when I attended a conference held by Xero – we use Xero internally for a significant number of our quarterly and monthly bookkeeping assignments for clients. I was visiting to see what the latest developments to the software we use were, and to see what was coming next in terms of features and enhancements.
The event was held at the Excel Arena, and as I entered the exhibition hall I was immediately struck by the number of people attending, and the huge array of applications that connected directly into Xero.
Yes, some of these applications were related directly to the accounting function, but a number were dealing with other business areas, such as advertising and marketing, which are traditionally outside the accounting function but used Xero as the hub of these tasks.
This intrigued me, and I spent the best part of two days looking at these applications and listening to talks about the impact of technology. At the conference I met Karen – whose firm we use for our marketing – and we were talking about how rapidly the technologies are moving and how this creates opportunities and threats, and realised that a smaller, focused event would be of interest to the business community our firm serves. Our businesses want to learn, develop and improve, and why should they have to travel to the major cities to do so when we could bring an event like BITE to them here?
This event was also where I first became aware of our keynote speakers this afternoon, Andrew and Pete, who stood out from all the talks I attended over those two days as the ones I would most want to hear again.
Finally, I would like to thank my fellow partners for embracing this idea to enable us to bring it to you all today.
A Story of Innovation
From the receipt of a ZX Spectrum some 40 years ago, I have always been interested in technology and innovation. The ZX Spectrum brought computers into the home environment for the first time. All programs were installed via a cassette tape and could take up to 10 minutes to load as you sat eagerly awaiting the installation of your new game – Manic Miner and Daley Thompson’s Decathlon were particular favourites!
Some would say that 10 minutes to load a program is quick in comparison to the time you’re sat waiting for Windows to download and install the latest security patch on your computer.
Throughout the 80s and early 90s, computers were gradually becoming more and more commonplace in the workplace and the home. When I first started at Saint, we had 4 computers in the entire office which we had to book a slot to use. Most sets of accounts were produced on handwritten schedules, with the finished accounts produced on typewriters.
Giant Leaps; Same Old Mistakes
Now we have a server in every office, computers on every desk, with the majority of staff using 2 screens to ease multi-tasking, and the ability to work anywhere in the world as long as you have an internet connection.
It will not be long once Elon Musk’s space tourism business commences where it will be possible to file your VAT return while orbiting the moon. Or, more likely, sharing selfies on your social media platforms while commenting that the freeze-dried rocket food you have been served on the flight tastes just like chicken!
Throughout all these technological advances, we still see that a large number of clients continue to bring in their accounting records months after the event, which makes their numbers simply a historic scorecard.
A significant minority of our clients are using the improvements in technology and software applications available to have their accounting information accessible in real-time. And they use this data to enhance their business and personal life.
The story I am about to tell is one such example.
I have a client who, to protect his identity, I am going to call David.
Now, David runs his own business and is successful, but the one thing he hates is paying tax. I used to dread his phone calls every time he had to make a payment to the Inland Revenue, as he would always say “how much?” and “is this correct?”
“Yes”, I would reply, “it is correct and you need to pay it by the end of the month.”
The industry he operates has become increasingly regulated to such an extent that he was faced with having to submit quarterly accounts to his regulator within 6 weeks of the quarter end. So he rings me up and says he has this problem and, as he is the chief cook and bottle washer, he is going to need some help as he doesn’t have enough hours in the day to cope with this change.
David’s record keeping in the past was simply a box of his bank statements in order, paying in books filled in fully, and chequebook stubs fully completed. They always arrived 4 months after his year-end, so by the time we got around to discussing these figures, they were out of date.
When we had this conversation, Saint had recently conducted a review of the cloud accounting providers at this time, and as a firm, we had selected Xero to be the one we would recommend if asked. I thought to myself, we have the opportunity to try this now for real.
A Chance for Change
I said to him, yes, we can help, but we would have to change how we processed his transactions. I explained that we would use this new cloud accounting technology to assist with him this. He said, “that’s great but I don’t want to pay any more fees.” I said they would have to be an increase, but it would be sensible to reflect the increased work.
So we set-up Xero and obtained a direct feed of his bank account transactions. He never processed a transaction, although he said he would, so we had to do the processing for him.
The first couple of quarters were a pain as we were back and forth identifying transactions and getting him to use a debit card for payments rather than cheques – to a point where we simply gave him a quick call to go through a couple of transactions we could identify directly from the bank feed to allocate the correct code.
A Bit More Back and Forth
During these phone calls, I said to him “you’ve had a good start to the year, but you’ll have a hefty tax bill if this continues.”
“Really?” he said, “how much?”
I told him if this continued he would have this figure to pay, and when he would have to pay it by.
After a few curses, he asked “what can I do about it?”
We talked through his options. Increasing his salary was considered. “I would have to pay too much tax on that if I increase, and I would only spend it down the pub!” he said.
He eventually decided that he would make a regular pension contribution for his retirement, and he would transfer 20% of his profit each quarter into a deposit account to cover his tax bill. And then in quarter 4 of his financial year, he would consider making a top-up to his pension if he was having a better-than-expected year.
A Happy Ending
I now no longer get the phone calls each time David has a tax bill to pay. He has the money set aside to cover it, and he knows that he has done all that he can to minimise the amounts.
He does still ring me when his bill is due for payment, as he likes to keep us on our toes. But a quick reminder of what we do for him, that he’s not stressing that his regulatory reporting will be completed on time (so he can enjoy his Friday night in the pub), and that he now has provision in place for his retirement, which he has saved corporation tax on, is met by a “I know, I know. I just need to have grumble at something.”
So today we’re bringing this new way of working to you all, with the aim of showing you the available possibilities. Our speakers and exhibitors have been carefully selected to raise your awareness and to show that there is a different way of doing all of this.
In Summary: Overcoming Barriers with Making Tax Digital
We have all attended events, read articles or had thoughts on improving our business, but are worried about the status quo being damaged. So we introduce barriers to implementing change.
However, like David, there is a change coming: Making Tax Digital – MTD for short. And this change is not going to target a specific industry; it is going to impact all VAT-registered business owners.
This change is being introduced from April next year, and the reality of Making Tax Digital is that you and I are now going to have to prepare our accounting records digitally to be able to submit a digital VAT return. Here at Saint, we think this new initiative should have been named Making Accounts Digital, as it makes it easier to explain this change. However, with an acronym of ‘MAD’, this would not have lasted the first press release!
So, an action point from today is to make sure your business is ready for MTD.
This disruptor removes the status quo and removes the barriers to change as, unless you are already doing so, you are going to have to change and bring your accounting function into the very heart of your business.
Your record keeping can longer be an afterthought. Use this precious data to enable you to gain a greater understanding to your business; to understand how your cash flow varies over time; why, at certain times of the year, you are at the limit of your funding facilities; and once you become aware of the issue, then you can look at ways to alleviate it.
From your digital accounts, you now have information, and with relevant information, you can make informed decisions. But with a multitude of information at your fingertips, what details should you be looking at and using?
This is where your Trusted Advisor comes the fore
Who is your Trusted Advisor?
Studies have shown that most business owners see the accountant as their Trusted Advisor.
In the age of automation and artificial intelligence, this advisor becomes even more important. Some will ask why, and I would reply that we are human. We understand that not all the decisions we make are simply ‘yes’ or ‘no’. There are other factors in play, such as our own hopes and fears, which result in decisions that are grey.
At this moment time, the machines will not be able to cope with the answer “it depends”, and from my experience, people still like dealing with people.
As I said earlier in my talk, as a practice we have heavily invested in Xero and have recently become a Platinum Partner.
So, let me welcome to the stage Ashleigh Lambert from Xero, who will share her knowledge of Xero and the importance of the connections between people, and how their technology cements these relationships.