Making Tax Digital (MTD) for VAT officially starts on the 1st of April 2019. And for many salon owners, this should signal a major change in their approach to recordkeeping.
But for some, set in their ways and still using pen & paper for their accounting and admin, it could be a painful scramble for compliance.
In this blog post, I’m going to briefly explain MTD, the problems with pen & paper admin, and the ready-made MTD software solutions I recommend for salons.
What is MTD?
Making Tax Digital is a key part of the government’s plans to make tax admin easier, more effective, and more efficient. This will involve digital recordkeeping and the use of cloud-enabled software.
From the horse’s mouth: “Making Tax Digital for VAT requires VAT registered businesses with taxable turnover above the VAT registration threshold to keep records in digital form and file their VAT Returns using software.” To learn more about digital recordkeeping, click here.
There’s no denying: Now’s the time to set down your pen & paper and switch to the cloud.
What’s the Problem with Pen & Paper Admin?
Not only do I specialise in accounting for salons, spas, and clinic owners, but I also own a salon with my wife, Sara. I’ve seen the challenges first-hand, and one of the big ones I’ve encountered time and again is a stubborn refusal to move with the times.
Now, I understand there’s a certain comfort attached to pen & paper. You know how your process works, and you can quickly flip open your notebook or ledger to a particular date and find everything you need.
But the cons of pen & paper far outweigh the pros:
- It’s difficult to search
- It’s at greater risk of being lost or destroyed
- It’s prone to error
- It’s time-consuming
For MTD, this simply won’t do. To be compliant, you MUST keep, maintain and preserve secure digital records. You can view a full list of the records you’re required to keep digitally here.
So, what do I recommend for MTD? In my opinion, there are two pieces of software no salon owner can live without Phorest and Xero.
1. Phorest: Salon Management Software
When we bought our salon, we inherited a salon software which fundamentally lacked the capability we required. After a few years of wrestling with it, we decided to change.
I researched at least five in detail before opting for Phorest. I loved how easy it was to use; it just flowed beautifully, from booking an appointment to selling a product.
Before switching software, we had issues with cancellations and we had no way of reminding customers about upcoming appointments. We also had client cards and paperwork piling up, and stock control was a nightmare.
Phorest helped us overcome these challenges. We can now plan more effectively, track the salon’s performance, and achieve our goals. Our cash flow has also improved thanks to better stock management.
Where paperless salon management is concerned, Phorest helps you kill two birds with one stone. First, it streamlines everything. From appointments to inventory management, it’s all done online and can be accessed from anywhere. And second, it ticks that digital recordkeeping box that keeps you compliant with Making Tax Digital.
2. Xero: Cloud Accounting Software
When I hear about salon owners still recording income and expenses by hand, I can’t help but picture them doing so by candlelight, quill in hand. That’s how behind the curve it is in this day and age!
MTD will force a change for the better, and your financial recordkeeping (and your business) will benefit greatly. It’s time to put down the pen & paper and pick up Xero, the award-winning cloud accounting software.
- You’ll have access to your numbers at your fingertips. Anywhere, any time.
- Your tax recording will be more accurate, with fewer errors or miscalculations.
- The entire process will be faster and more efficient for you, your accountant, and HMRC, saving time for everyone involved.
- The days of stressful last-minute tax returns will be over.
Xero has consulted with HMRC on Making Tax Digital, and their software is fully compliant and ready to use from day one.
And the good news is, it looks like a Phorest Xero integration is coming in 2019!
Making Tax Digital shouldn’t be viewed as yet another HMRC obligation. It’s an opportunity to modernise and streamline your salon. Pen & paper just won’t cut it. Not any more.
While HMRC doesn’t need to see the digital records of each and every client in the MTD compatible software, they do require it to be stored digitally. That’s where Phorest shines, along with its abundance of management and marketing features.
And so long as your accountant is doing their bit correctly, you’ll be fully MTD compliant with Xero.