Great accountancy has always been a foundational hallmark of successful small businesses, yet it’s cloud accountancy that is showing its true value during a time when so many companies are struggling to survive each and every day.

Whether in times of plenty or in times of paucity, accountants have been an invaluable asset to so many successful businesses of all sizes and across all industries. However, the effect is perhaps most impactful when it comes to small businesses. In normal times, the benefits of accountancy are clear: keeping track of income, cash flow, assets, liabilities, tax and much more. As such, it’s SMEs that often need to keep more of an eye on these numbers than larger counterparts.

However, we’re living in an ‘abnormal’ time right now. The threat of a pandemic and local lockdowns – the effects of which are totally outside of a small business owner’s control – is changing the way that we do business. While some are thriving on the conditions of the pandemic, many are being hampered and even facing the distinct possibility of closure as a result of the measures and effects.

These unusual and chaotic times have led to many small business owners having to examine (and continually re-examine) their financial position on a near-daily basis. However, traditional accountancy doesn’t necessarily make this an easy thing to achieve. As such, we’re now starting to see the true potential and benefit of cloud accounting solutions.

Small business accountancy challenges

Even outside of a pandemic, small businesses face numerous challenges that can be solved by accountancy. Here are some common accountancy issues that SMEs face and how they have been further impacted by the pandemic:

Payroll management

To the non-accountant, payroll is a mess. You have to understand tax codes, pay employees on time, keep records, apply correct deductions and all while managing this against your cash flow. For a small business owner to do on their own, it’s a lot. COVID-19 adds a whole other layer of stress to this process. Paying employees on time becomes more of an issue if business is down and this creates problems for staff morale and motivation levels. Investigating subsidies and how they apply to your financial position is stress-inducing. Proper record-keeping becomes harder as you are trying to keep up with changing governmental and regional legislation regarding pandemic measures.

Cash flow problems

There’s no doubt that cash flow is a major concern for small businesses in the best of times. For many companies, it can be a dance between operational and dysfunctional. It’s thought that well over three-quarters of small businesses don’t have a good grasp of the principles of cash flow. So when business is being hampered, reduced or totally eliminated due to safety precautions resulting from the pandemic, the need for good cash flow management is essential for survival.

Late payments

According to cloud accountancy software provider Xero, small businesses are on average owed £24,871 from late payments and that 78% of all small businesses are owed money at any one point in time. Just as cash flow affects payroll management, late payments affect cash flow. It reduces your ability to loan money and to employ/train new people. At a time when finances are more strained than ever, and with the threat of employees having to call in sick for a week because they were in close proximity of someone who tested positive for COVID-19, that could be catastrophic for your business.

Pandemic problems

There’s no area of SMEs that hasn’t been affected by this pandemic. As well as a huge dose of stress, most businesses have lost money, have faced difficulties with their supply chain, have to abide by seemingly ever-changing restrictions and have to deal with losing regular customers who are vulnerable, shielding or have changed their buying habits since the lockdown. All of these issues impact on the numbers that need to be balanced.

What is cloud accounting?

To many small business owners, these issues can seem absolutely insurmountable and hopeless. As such, there’s a lot of fear right now about the future. That’s even if you have the energy to think about the future as dealing in the present is tiring enough as it is. However, consider the possibility that you needn’t do this alone. Consider the possibility that technology can allow you to better plan your better circumstances and your future. And consider that you don’t need to pay a huge amount of money to get access to such a service. This is where cloud accounting can help.

For those uncertain by what we mean by ‘cloud technology’, this essentially refers to computing services that are accessible over the internet. So when you access something like Gmail, Microsoft OneDrive or Dropbox, these are cloud computing services. They work by utilising servers – often decentralised – where huge amounts of data is stored and is then accessible by individual users, as opposed to information that is stored locally on a single computer. While this may make it seem like everyone will be able to access all of your data, every bit of information is secured via a process called encryption whereby only those who have permission to access certain data can actually access it. It’s safe, secure and it means that you can view your financial records from multiple devices with ease – even on devices were it wasn’t originally saved.

There can be absolutely no doubt that the value of cloud technology has been demonstrated by the COVID-19 pandemic. Many businesses have been able to pivot their day-to-day activities thanks to this tech. Pubs that were otherwise unable to open have been able to sell food via online takeaway hubs that utilise cloud technology; farms that have lost business due to restaurants being closed have used online platforms to sell their produce directly to local consumers. None of this would have been possible or feasible just a decade or two ago, without the power of cloud technology allowing small businesses to better manage their services and finances.

When it comes to cloud accountancy, this refers to services that provide tools and storage to keep a company’s books and financial records online. This includes payroll, records, liabilities, assets, invoices, bill management… all of it accessible at any point from any location. Whether it’s in an office, behind a till or at home at night, you can access up-to-date records and give yourself a complete picture of your business at any point with minimal effort from you or your staff. It’s safe, secure, and the most effective way to manage an SME’s finances during these difficult times. All you need is an internet connection and a device that can connect to these platforms. Even smartphones can access this information with just a few swipes.

How cloud accounting helps small businesses

While cloud accounting was fast becoming essential for small businesses at the best of times, it’s undeniable that it has become a game-changer for many during the pandemic. With small business owners feeling the strain and worried about financial security, cloud accounting services provide both owners and their accountants easy access to the company’s financial data. Additionally, with business moving towards tax filings being totally digital with HMRC’s ‘Making Tax Digital’ initiative, there has never been a better time to consider cloud accounting as the alternative to traditional, computing accountancy.

Cloud accounting works by essentially setting up systems that allows the real-time tracking of financial data related to your business. This can be set up so that this data is automatically transferred to your accounts via the cloud. This drastically reduces the amount of manual labour required to keep track of financial records, allowing income and sales data, as well as expenditures, to be up-to-date on a day-to-day, hour-to-hour and even minute-to-minute basis. Additionally, it also reduces the number of mistakes in the data resulting from human input error. Even if a mistake is present, it’s possible to track the error down in just minutes.

As this financial data can be accessed from anywhere, due to it not being saved in just one place, this also allows multiple people to access this information – including selected members of staff and accountants. As we are currently living in a time of social distancing for the foreseeable future, cloud accountancy is a great way to provide cohesion and clarity when it comes to your finances while minimising the amount of emails, phone calls or meetings that need to be sent or made respectively.

In fact, a recent survey of accountants by SmartVault, a cloud-based provider, has shown that accountants who were able to best respond to the pandemic and their clients needs during this time were more likely to be using cloud-based technology. With accountants shouldering a huge amount of the emotional support that small business owners need as a result of fears and worries stoked by the pandemic, it’s essential that your accountant be well-established cloud accountancy specialists so they can give you the best service without distraction from their own pandemic-related problems.

Lastly, it is very important that up-to-date financial data be available for small business owners to consult at speed as this is the type of information that will be required to make an application for any potential government subsidies that could be absolutely vital to keep a business running. The sooner this data can be accessed, the better.

What is the best cloud accountancy service?

The question of what constitutes the best cloud accountancy service really depends upon the size of your business and what your business does. For businesses with just a few employees on their books, it’s worth considering a service specifically tailored to small businesses. One such service is Xero. With over 2 million subscribers worldwide, Xero is considered one of the best options for SMEs on a budget.

With packages starting at just £10/month, Xero offers up a powerful suite of accounting software that receives excellent support – including fully functioning apps for both iOS and Android smartphones. It’s this ease-of-use, as well as the ability to scale up to a £30/month package if more invoicing and billing services are required, that makes Xero such an attractive option.

Getting the most out of Xero with Berley

When it comes to Xero, it’s best to have an accountant there as your cloud accounting sidekick to help you get the most out of the service. Xero is a great tool that can be used by small business owners who are savvy when it comes to finances. However, with an ever-changing landscape to worry about, now is as good a time as any to let a trained professional handle the books. At Berley, we are finding that it is an emotionally charged time for our clients and, as such, our accountancy has become an even more valued service that small business owners can rely on during uncertain times.

As one of Xero’s certified Silver Champion Partners, we help our clients get the most out of their Xero subscription. We provide excellent financial support and advice to our clients so we can extract the most value out of this subscription to help SME owners make the right decisions at the right time. However, if you just need someone to manage the books, handle tax, VAT or make financial year-end preparations, we are also able to provide that service to a high standard too.

We like to think of our clients as our superheroes who are taking financial risks to fulfill their dreams and passions that most people just won’t take. However, it’s true that every great superhero needs the right tools and a good sidekick to be as successful as possible. So if you’re the Batman or Batwoman of your story, think of Xero as your Batmobile and our accountants and bookkeepers as your reliable Robin.

To find out more about how we can support you, simply give us a call on 020 7636 9094, email info@berley.co.uk or get in touch with us via our contact page and we’ll be back in touch as soon as possible.