Our client was using spreadsheets, which involved time-consuming manual data entry. Accounting tasks were put aside and then completed in a rush. This inevitably led to mistakes.
The business had a lot of transactions in foreign currencies, which were converted using excel formulae. Quite often an incorrect exchange rate was used, which led to understatement/overstatement of sales and forex (foreign exchange) gain/loss.
As a VAT registered tech business, MOSS returns have to be submitted for sales made to EU based customers. As this was completed manually, sometimes the client applied the wrong VAT rate in error, which we spotted when reviewing their VAT returns.
All in all, this resulted in frustration and wasted precious time.
We recognised the issues and had a chat with the client, explaining that using a software (such as Xero) would save them time and would help eliminate common mistakes (eg wrong Forex rates and incorrect use of VAT rates). Xero eliminates these errors by converting any foreign transactions into home currency automatically and pulling MOSS and standard VAT returns together for the businesses automatically.
As the business is growing, it also means that our client will soon need to be registered for MTD (Making Tax Digital). Xero delivers another benefit as the standard VAT returns will be submitted to HRMC with one click.
Our client now keeps books up to date (and knows more about the financial position of the business), forex mistakes are eliminated, standard VAT returns and MOSS returns are pulled together by Xero. This has resulted in saving our client time and money. We are spending less time reviewing VAT returns and so our fees are lower.
Our client also commented that learning Xero was quite easy for someone who isn’t trained in accounting. With help from Xero’s training videos and the searchable Xero Central providing step by step instructions on tasks, our client had all the support they needed to move from manual spreadsheets to cloud accounting. We have a very happy client with more time to focus on their business.