Making Tax Digital: Could It Actually Be a Good Thing for Small Businesses?

Why I’m finding that keeping the books up to date is leading to better conversations with business owners.

I’ll admit, Making Tax Digital (MTD) hasn’t exactly been greeted with enthusiasm by every client I’ve spoken to!

More paperwork, new software, additional costs and another HMRC requirement to get your head around. I can completely understand why some small business owners see it as yet another headache.

But having worked with clients through the changes, I’m beginning to see a different side to it.

And surprisingly, some of my clients are too!

It’s changing the conversations we’re having

At Swan Saunders, we already look after the daily or weekly bookkeeping for many of our clients. We’re regularly processing transactions, reconciling bank accounts and keeping their financial records up to date.

For these businesses, MTD hasn’t meant starting from scratch. In many ways, it’s reinforced the importance of something we’ve been doing for years.

But what I’ve found particularly interesting is how regular bookkeeping, MTD and our quarterly financial reviews are beginning to work together.

Instead of having a conversation about what happened in a business six or twelve months ago, we’re increasingly talking about what’s happening right now.

And that makes quite a difference.

There’s more to the numbers than you might think

One of the things I really enjoy about being an accountant is getting to know the people behind the businesses.

I want to understand what they’re trying to achieve, what’s keeping them awake at night and what plans they have for the future.

Having up-to-date financial information makes those conversations so much more useful.

Our quarterly reviews have become an important part of this. Every three months, I get the opportunity to sit down with clients, look at how their businesses are performing and, perhaps more importantly, talk about where they’re heading.

Sometimes we’re discussing cash flow or rising costs. Other times it’s whether they can afford to employ someone, invest in equipment or perhaps take a little more money out of the business themselves.

And occasionally, the conversation goes in a completely different direction!

That’s what I enjoy about working closely with business owners. You never quite know what challenges or opportunities are going to come up.

Some clients are actually enjoying it!

Now, I wouldn’t go as far as saying all my clients have suddenly developed a passion for bookkeeping.

That might be pushing it! 😂

But I am seeing some become much more interested in their finances.

They’re starting to understand what their figures mean, asking more questions and getting a clearer picture of how their businesses are performing.

For some, it’s the first time they’ve really been able to see what’s happening financially throughout the year, rather than waiting for their annual accounts.

And when we sit down for our quarterly reviews, those conversations become much more interesting because they’re beginning to understand the numbers themselves.

I think that’s a really positive development.

But what about the additional cost?

This is probably one of the biggest frustrations surrounding MTD.

For some small businesses, it means paying for software, spending more time on bookkeeping or paying their accountant to do additional work.

And when you’re already dealing with rising costs, that’s not always welcome news.

However, I’ve noticed that some clients who initially saw this as another unwanted expense are beginning to look at it differently.

When keeping their books up to date means they can have regular conversations about profitability, cash flow and future plans, the additional cost starts to feel more like an investment in their business.

Of course, MTD itself doesn’t guarantee any of these benefits. Simply submitting quarterly updates to HMRC won’t automatically make someone a better business owner.

It’s what we do with the information that matters.

I’m taking something positive from it

I certainly don’t think MTD is perfect, and I understand why some business owners are frustrated by the additional responsibilities it brings.

But I do think there’s an opportunity here.

For me, the combination of regular bookkeeping and quarterly reviews means I can spend more time doing the part of my job I enjoy most: talking to clients, understanding their businesses and helping them make decisions.

And for clients, it means having a clearer understanding of their finances and potentially identifying problems before they become serious.

Perhaps the biggest change is that we’re moving away from looking backwards at what happened last year and spending more time thinking about what we can do differently tomorrow.

If MTD encourages more small business owners to take an interest in their finances and have better conversations with their accountants, then surely that’s something positive to come out of it.