Farming businesses are now becoming more technology focused and embracing the internet, with over 85% of farms now having either wired or wireless internet access, compared to less than 30% 15 years ago.
In the last couple of years there has been a rapid increase in the popularity of cloud based software, mainly due to the advantages it can offer to all businesses; being time efficiency, accessibility, security and the ability to utilise real time information.
What is the ‘Cloud’?
The Cloud is a platform that stores data and information which is accessible anytime, anywhere from any device.
There is the opportunity for famers to use the Cloud as part of their everyday record keeping, ensuring all aspects of their financial records are totally up to date and providing them with the real time information they require to run their business successfully.
Cloud accounting is giving farming businesses the opportunity to produce up to date management information, as data will be available in real time, meaning monthly or quarterly management accounts can be produced on a timely basis and add-on applications will enable businesses to create cash flow forecasts and budgets, which are vital if businesses are looking to expand and require further funding from lenders.
The advantages of using Cloud based software:
Cost- upfront costs are reduced. There is no initial purchase cost for the software, but instead a monthly subscription cost. As accountancy and taxation rules and regulations change, the software will be automatically updated, at no additional cost.
Access- just having one computer, with only one user being able to access the information will be a thing of the past. Multiple users can access the information from smart phones and tablets, which will allow you to be connected to all your financial affairs at any time, in any place.
Time- bank transactions can be fed into the system daily, so this frees up time that would have previously been spent entering each transaction.
Real time information- Whilst many farmers and farming businesses use traditional accounting packages, the data is not always up to date. The main disadvantage of traditional software is that key advisors do not have access to financial information that could be used to advise businesses and add real value.
The cloud means information is completely up to date and gives farmers the ability to concentrate on other aspects of the business, without feeling like you are tied to the farm office.
Relationships with advisors- your accountant will be able to access the data throughout the year, and advise on how to record transactions and also enter the year end journals on to the software directly, ensuring all data is up to date and relevant. You will also have up to date information to provide to consultants and bank managers throughout the year.
With up to date meaningful financial information key business decisions can be made on a timely basis; this changes accountant/client relationships from being purely based on compliance, and allows better collaboration with other professional advisers.
Farming businesses are increasingly looking at more and more ways of diversifying their businesses to boost income and increase profitability; this will mean a change in the way sales are invoiced. Cloud software will allow quotes and emails to be sent whilst out and about, direct from an app. This will mean invoices can easily be sent as soon as work is complete, rather than once a month, which will in turn ensure payments are received swiftly and thus improving cash flow.
The cloud and Making Tax Digital (MTD)
Making Tax Digital is looming, and despite the uncertainty following the general election, MTD is still expected to roll out from April 2018. Farming businesses with a turnover above the VAT threshold will need to submit quarterly returns going forward, and moving manual or excel records to a cloud based software will ensure farming businesses are prepared and equipped for this change.
Lisa Oliver is an Associate Director with Hazlewoods LLP