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Why Going Digital in Accounting is so Important?

AccounTax Zone > Blog > General > Why Going Digital in Accounting is so Important?
  • Posted by: AccounTax Zone
digital accounting

If you’re still keeping paper ledger books and journals, then it’s high time to move on to digital accounting.  Just keeping basic spreadsheets is an improvement on paper-based bookkeeping.  Using proper accounting software is an even bigger improvement.  Here are some reasons why going digital in accounting is so important.

You will need to at some point

HMRC has firmly committed to the Making Tax Digital project.  This project aims to ensure that all businesses in the UK keep their tax records on HMRC-approved accounting software.  Making Tax Digital has cross-party backing in the Houses of Parliament.  This means that it is highly unlikely to be abandoned if there is a change of government.

It helps to prevent errors

Anyone with experience in keeping accounts on paper knows how easy it is for errors to creep in.  This is particularly true if they are hand-written (which they often are).  Somebody can just write the wrong figure or misread a figure (even one they wrote) and so the problems start.  Once they start, they may spiral until the next time the books are balanced.

Even regularly balancing books does not guarantee total accuracy.  For example, taking a trial balance will show whether or not there is an equal tally of debits and credits.  It will not, however, show if all transactions have been allocated to the correct accounts.

Spreadsheets have much the same problem as paper books.  You can’t miswrite a number but you can mistype it and/or misread it.  You can also allocate transactions to the wrong accounts.  Proper accounting software, by contrast, will usually check entries in real-time.  It may not be perfect but it is a lot more robust.

Data immediately becomes information

Financial data is used for a lot more than preparing tax returns (and financial statements).  It can play a huge role in business decisions.  The quicker information becomes available to businesses, the quicker they can act on it.  Interpreting data from paper ledgers and journals is a time-consuming and tedious exercise.  It’s also prone to errors.

Interpreting data from spreadsheets can be a vast improvement.  To get the most out of spreadsheets, however, you generally need to be fairly technically competent with the relevant software.  This can be a very useful skill but it’s not directly connected to either accounting or management.

Proper accounting software by contrast is designed to be easy to use.  In particular, it’s designed to make it easy to create meaningful reports from the data you’ve entered.  As a result, it tends to be far more useful when making important decisions.

It keeps your data safe

Paper accounting records are extremely vulnerable both to physical damage and theft.  Spreadsheets are less vulnerable to physical damage and can be password-protected.  They cannot, however, be put under the same sort of access controls as proper accounting packages.

With proper accounting packages, users have logins, and activity is recorded.  This provides a robust audit trail.  Data is easily backed up so your records are protected against human error, environmental damage, and cyberattacks.