IT FOR THE SMALL ACCOUNTING PRACTICE: INCLUDING PRACTICE START-UPS BY KEVIN SALTER icaew.com/itfac

IT FOR THE SMALL ACCOUNTING PRACTICE:
INCLUDING PRACTICE START-UPS
BY KEVIN SALTER
business with CONFIDENCE
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ISBN 978-0-85760-629-7
IT FOR THE SMALL ACCOUNTING PRACTICE:
INCLUDING PRACTICE START-UPS
BY KEVIN SALTER
MAKING IT WORK FOR YOU
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Contents
1 INTRODUCTION
03
2 KEY PLANNING ISSUES
04
2.1 The use of IT in practice
04
2.2 Getting started
04
3
HARDWARE
05
3.1 Computers
05
3.2 Displays
05
3.3 Networks or hosted?
06
3.4 Printing, scanning and copying
06
3.5 Mobile devices (tablets)
07
3.6 Back-up hardware
08
4
INTERNET CONNECTIONS AND COMMUNICATIONS
09
5
‘CORE’ BUSINESS SOFTWARE
10
5.1 ‘Office’ software
10
5.2 ‘Best of breed’ or integrated solutions?
11
5.3 Choosing your supplier
11
5.4 Bookkeeping
11
5.5 Accounts production
12
5.6 Personal tax software
12
5.7 Corporation tax
12
5.8 Payroll
13
6
NON-CORE SOFTWARE
14
6.1 Website
14
6.2 Practice management software
14
6.3 Customer relationship management software
14
6.4 Company secretarial software
15
6.5 Document management
15
6.6 Portals and file sharing
16
6.7 Budgeting and forecasting software
16
6.8 Fixed-assets software
16
6.9 Companies Act and other checklists
16
6.10 Reference library
17
6.11 Social media
17
6.12 Mobile phone apps
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IT for the small accounting practice
01
7
OTHER CONSIDERATIONS
18
7.1 Training
18
7.2 Data protection
18
7.3 Security
18
7.4 Licences
19
7.5 IT use policies
19
8
CONCLUSION
20
APPENDIX: Further information resources
21
GLOSSARY OF TERMS
22
ABOUT THE AUTHOR
23
02
IT for the small accounting practice
1 INTRODUCTION
This publication gives you information on the IT we would expect to find in a small
twenty-first-century accounting practice. We will consider hardware, generic office
software, specialist vertical market accountancy software and other software. Some of
these will be ‘absolute essentials’, some are ‘very useful products’ depending on the
aims and services provided by your practice and a few are ‘nice to have’ tools.
The information is aimed mainly at the very small accountancy firm (one to five people)
though you may still benefit from the ideas and explanations if your firm is larger.
If you have left an existing practice to start your own, you will have a distinct advantage
over those moving from industry or other non-practice based environments. You
will almost certainly have had the benefit of using vertical market software (software
specifically designed for accounting practices) and other software so you will be familiar
with the functionality, know to a degree what the products can or cannot do, and
may well also be aware of the hardware that was being used. If you haven’t worked in
practice recently, you may need additional help to address these issues.
For a start-up practice, the early days or pre-starting is the ideal time to implement
systems and procedures without the ‘baggage’ that comes with a long-established
practice where it is harder to make changes. Changing software means getting data
out of one package into another, while changing or upgrading servers or hardware
can lead to disruptions and downtime.
For the new or small practice, one major sea change that you cannot ignore is the ‘cloud’,
which is becoming more and more prevalent in everything we do, and will continue
to be so. So in this guide we will look at various aspects of cloud too. We will not get
embroiled in a debate on the definition of ‘cloud’ applications – we will simply interpret
it as accessing data and services via the internet.
This guide makes reference to some specific products, but the list is not exhaustive, and
there are a range of other other products in the various sectors of the marketplace. Many
of the products named are mentioned in the IT in Practices Survey 2011 produced by the IT
Faculty (see details in the appendix). You should be aware that the survey was conducted
across a broad spectrum of practices and not just start-up or small practices. This guide is
not intended as a recommendation or endorsement of any of the products mentioned.
IT for the small accounting practice
03
2 KEY PLANNING ISSUES
2.1 THE USE OF IT IN PRACTICE
If you have worked in business, or for another practice, IT has always been ’just there’ and
everything has been provided – support, hardware, software, consumables etc. Going it
alone suddenly shifts the burden. But don’t look on IT as a ’necessary evil’; it’s a significant
tool in your armoury for supplying products and services to clients.
Some things you will need to have just to comply with the norm, such as internet and
online services. If you don’t have internet and don’t register for the range of online
services, you won’t be able to perform even the most basic of tasks for a client.
But there are other advantages, and efficient use of IT can result in substantial increases
in productivity.
Properly used, IT can be a significant differentiating factor between firms, and it enables
the IT literate to deliver better products and provide services much more efficiently.
A comprehensive understanding of IT helps the practice move into offering IT consultancy
services to its clients too.
2.2 GETTING STARTED
To help focus your decisions on the IT infrastructure it’s essential that you have an idea
of where your practice is now and where it is likely to be in the future. Before you think
about your IT requirements you need to consider the following points.
•Do you intend to carry on simply as a sole proprietor, or will you, at some stage,
have partners, other employees or any secretarial staff?
•What services do you intend to offer? Will it be specific, eg, tax planning, or will it
be a general accounting practice? Deciding this will help determine at the outset
any specific vertical market software that you will need.
•Do you envisage working only in the office (which could be situated at your home);
will you be visiting clients and working on site at their premises; will you be staying
away and want to work either on the train or in a hotel?
•How will you deliver your end product (whatever that may be) to your clients?
Will it be on paper, electronic, or a combination of both?
•How will you communicate with your clients, staff, partners etc? Telephone, mobile,
Voice over Internet Protocol (VoIP) etc?
•How can you take advantage of social media – Facebook, Twitter, LinkedIn etc?
The ICAEW Practice Support Services offer consultancy to help you formulate your practice
strategy.
04
IT for the small accounting practice
3 HARDWARE
3.1 COMPUTERS
Regrettably, there are no hard and fast rules and unfortunately no easy answers as to what
type of computer is the best solution. However, some of the key issues that will help you
arrive at a decision include:
• Are you likely to be totally office based?
•Are you likely to be predominantly office based but may work occasionally on the
move too?
• Could you be working from literally anywhere?
•What is your main method of travelling around? (Important if you need to carry your
hardware.)
•What software do you intend to run? (Some require higher specifications of hardware
than others.)
If you are a sole practitioner and intend to visit clients and work from home, an office
and also on the move, a laptop would be a sensible choice. But there are hundreds to
choose from! It is not possible in this short publication to list all the factors that you need
to consider before parting with your cash. However, it probably needs to be lightweight,
have a decent sized screen (especially if others are looking at it at the same time as you
are) but it shouldn’t be so big that it’s too heavy to carry around. So, consider the screen
resolution, and also look at the battery life.
While at one stage the buzzword was ‘netbooks’, the current buzzword in the laptop
arena is now ‘ultrabook’, also referred to as ultra-portable. These are laptops designed to
compete directly with the highly successful MacBook Air: very lightweight, very thin and
with fast boot-up and resuming from power saving.
If you are totally office based or have any staff that are unlikely to move around, a desktop
PC is likely to be a cheaper (and better) option – decent screen, keyboard and improved
ergonomics – but again you need to consider your immediate needs and think how the
business may develop when making your choice. You could, for instance, use a docking
station for your laptop to access desktop-based equipment when working in the office.
The question that arises more and more is whether you can use an Apple Mac as a
laptop instead of a Windows-based solution. The answer is that it depends on what you
are trying to do, but there is software that can be installed on the Apple Mac which
enables it to run Windows programs. However, in an accountancy business environment
most people will be familiar with Windows-based products, so when time is pressing
and you have lots of other programs to learn and operate, perhaps it’s best to stick with
what you know.
3.2 DISPLAYS
For maximum efficiency and productivity, the use of at least dual screens is now
considered the norm by many in the industry. So when buying a desktop PC you should
ensure that the graphics card supports a minimum of two screens. For adding extra
displays to laptops there are various options: an external monitor can be connected via
a USB to VGA, or USB to HDMI adapter, or it is possible to buy lightweight, flat screen
monitors that plug into the USB port of a computer. These USB monitors may have an
external power supply or alternatively may be powered direct from the USB port.
IT for the small accounting practice
05
3.3 NETWORKS OR HOSTED?
With no staff, secretarial or otherwise, the question of file sharing and multi-user programs
does not arise. However, as soon as you take on employees this issue raises its head.
You need to consider:
• Does the software eg, personal tax, need to be accessed by more than one person?
•Does this access need to be concurrent with other users or will it only be one user
at a time?
• How many people need access to the data?
• Where are the users located? Are they office based or is remote access needed too?
While there are ways of sharing files, the normal means of putting this into practice is
installing a network which generally requires a file server. This file server is a computer
responsible for the central storage and management of data files which can then be
accessed by other computers on the same network. This will usually require ’server
software’ such as Microsoft Small Business Server, but on a very small scale, though
there may be other options such as network attached storage (NAS) devices.
Many start-up businesses are, however, implementing cloud-based software as far as
possible rather than going down the traditional on-premise route. This means that you
won’t need to maintain or support servers in-house. You could choose a total ’hosting’ of
all products, or simply access email on a hosted exchange server; this ensures that all your
emails are backed up and synced. More and more businesses are also choosing to back up
their data to cloud-based services. Those who have implemented cloud-based accounting
packages for their clients are also seeing benefits in the closer collaboration and working
practices that result. The hosting is generally a pay-as-you-go service and you can easily
add or remove users from the system, paying for just those who are using it on a monthly
basis. This has the added advantage of no up-front capital outlay (although if you decide
to install a server, you could probably spread the cost by leasing it over a period of years).
A key point to bear in mind is that the installation, configuration and ongoing
management and maintenance of an internal network and server will generally require
external IT support.
The set up of a new PC, its configuration to run on the network and connect to printers
and the installation of all the application software might previously have taken around
a day to do, but this can now be done in under an hour, all configured by the hosted
software provider.
Revisiting the Apple question posed above – the Mac will work absolutely fine if you are
running all your programs in a hosted environment as you access them via an internet
browser.
The question of remote working but with access to data in the office often arises.
With a hosted system this is very easy to do, logging in from anywhere on any device.
It’s also possible to set up the ability to log into a server, but this is slightly more complex,
although the same basic principles apply.
3.4 PRINTING, SCANNING AND COPYING
While transferring electronic files such as PDF versions of tax returns, accounts etc, is fast,
efficient and ticks the ‘green’ box due to its saving of valuable resources, it is not going to
be practical in all cases. You may even want to print something out yourself, perhaps to
read on the train.
Once again the choices can be bewildering. Should you buy an inkjet printer or a laser
printer, and should it be mono or colour? Should you buy a multifunction device (MFD)
which combines a scanner, photocopier, printer and often fax capabilities into one device,
or should you buy a photocopier which has the capabilities of doubling up as a scanner
and printer too?
Matters to consider in deciding on the hardware in this area are:
•Colour, mono or both – colour can be used to convey information quickly and enhance
presentation output.
• Volume of printing – the number of pages per month.
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IT for the small accounting practice
• Speed of output – printing/scanning/copying – pages per minute.
• Size of output – A4 is likely to be the default but might A3 be required?
• Scanning – what business processes will require the use of scanners?
•Copying – what business processes will require a photocopier facility – or will a scan
and print be sufficient?
•Space availability – what are the dimensions of the device and will it fit on a desk or stand?
• Initial price – not always the key focus but a factor nonetheless.
• Price per page – of output.
• Quality of the output.
If space and budget allow, you could buy a reasonably fast mono laser printer for the
bulk of your printed output, and a multifunction device (capable of printing up to A3
size) for your colour output, photocopying and flatbed scanning needs. Note that inkjet
technology is advancing rapidly, and recent advertisements for one inkjet printer claim
it is faster, has up to 50% lower cost per page and 80% lower energy consumption than
comparable colour lasers. However, be aware that toner costs can be expensive.
A dedicated photocopier with all the functionality of colour printing and scanning is likely
to have much larger capital costs although the consumables costs may be slightly less over
a period of time. Again, this is an option, but you really need to consider many other factors.
Another subject very much in vogue is document management and the paperless office
which we shall cover shortly. We have already mentioned multifunction devices that are
capable of scanning, but you may also need a dedicated scanner; it does depend on the
amount of paperwork, both generated internally and coming into the office from external
sources. A scanner may also have bundled with it a full version of Adobe Acrobat Standard,
the popular tool for dealing with PDFs (but we will consider other alternatives later).
However, when considering a scanner, ensure it is ‘TWAIN compatible’ so that it can
communicate with the document management software. (TWAIN is an interface standard
that allows imaging devices such as scanners and digital cameras to communicate with
image processing software.) You will need to consider speed (pages per minute) and the
daily recommended capacity.
If you are on the move, there are portable and personal scanners available, which are
either USB or rechargeable battery powered; this can be a useful additional tool at
relatively low cost.
While mentioning scanners, a practical tip: most document scans are adequate in black
and white; colour scans will require more time to perform the process, produce a much
larger file size and take longer to open up.
If you are sharing devices such as printers or scanners across a network or in a hosted
environment look at buying network-enabled devices in the first instance.
We mentioned fax above as a possible option on a multifunction device. The fax is used
less and less these days and the dedicated fax machine is an aging device that is likely to
become obsolete. It is still useful to have fax capabilities, however, so if you don’t go down
the MFD route, there is software available which enables you to send and receive faxes
straight to the PC. Windows 7 has a Fax and Scan option, and eFax (www.efax.co.uk) is
just one of many online providers.
Smartphones have applications (apps) which enable you to take photographs of documents
and email or upload them and these can, therefore, also serve as a basic copier tool.
3.5 MOBILE DEVICES (TABLETS)
Where do mobile devices fit into the technology cycle? Are tablets, notably the iPad, a
‘proper’ business tool? Once again, it depends on exactly what you are trying to do with
them. They are good for internet access, reading documents, viewing webinars etc, but
not so good if you are developing complex spreadsheets or writing long documents. We
will consider mobile apps later on in the software section of this guide and will highlight
areas where mobile devices can be useful. In reality, they are highly unlikely to replace a
full-screen laptop or PC with powerful desktop software.
IT for the small accounting practice
07
3.6 BACK-UP HARDWARE
Finally, on the hardware side you need to consider devices for backing up data.
Matters to consider here are:
• The volume of data that needs to be backed up.
• Ease of backing up – what happens when you are out of the office frequently?
• Cloud or on-premise back up?
• Automated or manual back up?
If you have just one PC on which all of your data and programs reside, and it is either
lost, stolen or stops working you will have lost everything. From a business continuity
viewpoint, you need to ensure that the data is backed up on a regular basis, without fail,
and not on an ad-hoc basis. This can be time-consuming but it is absolutely critical.
Although less fashionable these days, hardware back-up options include tape drives, be
they external or internal. The tapes may appear to run on a regular basis eg, every night,
but until the acid test of trying to restore data you are never sure they are 100% reliable.
You will need to refresh the tapes every so often as they do not last for ever, and as data
grows in size you will need more tapes. A tape drive can be quite expensive too. Tapes
are also vulnerable to physical damage, and may be destroyed by fire or flood. Taking a
tape off-site is recommended good practice but not such good practice if it’s placed in a
handbag or briefcase which is then stolen from the back seat of the car. We will revisit
this later in 7.3 Security when we consider data protection and encryption.
Data can also be stored on in-house external drives, but depending on how back ups are
configured, you may need more than one such device, and you may have to physically
swap them around, and again take one off-site for added security.
Although not hardware as such, this is an opportune time to include the increasingly
common practice of backing up data to a cloud-based solution, and there are specialist
providers of this service. The data in many cases is automatically backed up as soon as
the PC is connected to the internet. The big advantage here is that data is already off-site.
If your home is also your office, the off-site storage of conventional back-up devices such
as tapes can become a problem.
The hosted ‘cloud’ solution has the advantage that none of your data actually resides on
your own computers (unless you download it for any particular reason). You will, however,
need to check with the hosting provider details such as how they deal with back ups, how
often they do them and how long they are kept. Another option available is for the hosted
data to be backed up on a regular basis to a PC in your own office, which gives added
‘comfort’ that there is data accessible in the event of a disaster.
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IT for the small accounting practice
4 INTERNET CONNECTIONS
AND COMMUNICATIONS
If you go down the hosted route then an internet connection is absolutely essential.
But in reality, could your practice even function at all without access to the internet?
HMRC uses online filing for corporation tax and end-of-year payroll returns, and
VAT returns became online-only in April 2012: these are enough reasons alone to be
connected. Also, you would not have email if you were not connected to the internet.
There are many Internet Service Providers (ISPs), but the quality and service does depend
to a large extent on where you are based and your proximity to the nearest telephone
exchange. Broadband connections are improving all the time and speeds are increasing:
Virgin Media, for example, is offering ‘headline’ speeds of up to 120Mb on its website
at the time of writing (although whether this is achievable will depend on many factors).
You can use the following website to ascertain your nearest exchange and types of
broadband you could receive: www.broadbandchecker.co.uk and you can test the speed
of your current connection at www.speedtest.net.
If you need internet access when you are on the move, there are devices such as the
MiFi device that is available from various providers, for example www.three.co.uk. This
creates a mobile ‘hotspot’ which allows up to five devices to connect simultaneously. The
iPhone also has this functionality. There are many thousands of internet ’hotspots’ around
the country, so an internet connection should never be too far away.
You will also need communications devices ie, telephone systems. If you are on the move
all the time then a mobile telephone may well be all you need. If you have an office and
other staff, mobiles may not be the answer. There are all sorts of functions that can be
made available in telephone systems eg, caller identification, remote working, Outlook
integration, call conferencing and call recording. In many cases you will probably never
use all these features. However, voicemail is probably one that you will need, so that
messages can be left when you are not available.
The biggest choice to make is whether to stick with the traditional copper wire telephones
or go to internet-based services. VoIP – Voice over Internet Protocol – services are gradually
increasing as broadband becomes faster and more reliable. The big advantage of VoIP over
traditional methods is probably cost. VoIP systems are likely to be considerably cheaper
both to install and run, but for business purposes the quality of the calls may still be the
biggest sticking point.
Probably the best-known VoIP service is Skype. This can be run on practically any device
including mobile phones, and allows calls to other Skype users free of charge.
For a small price, there is multi-user videoconferencing, the ability to forward calls to a
landline and an answerphone facility. This product can be extremely useful and many
clients will be using it already, but it is probably not suitable as a sole communication
device in a business environment. Conferencing in this manner is really only suitable for
up to five people.
IT for the small accounting practice
09
5 ‘CORE’ BUSINESS SOFTWARE
Deciding what is essential (core) software will depend upon the services that you are
providing. To avoid over-complicating this section we will assume you run a general
practice offering the traditional range of services. Obviously if, for example, you don’t
offer payroll, this bit won’t be relevant.
Let’s start with some critical software that you absolutely must have on all your computers.
There are all sorts of nasty programs around waiting to get into your systems and capture
your keystrokes, your passwords, extract funds from you or even delete all of your data.
So you must install anti-virus software and, just as important, you must keep it up to date.
A new computer may have a trial version of some anti-virus software which will work for a
period of time before you have to pay to continue to receive up-to-date protection, or you
may choose to install one of the free versions that are available such as Microsoft Security
Essentials or AVG anti-virus. Some may come with firewall software too, to protect against
threats from the internet.
There are frequent updates and ’patches’ to both the core computer operating software
such as Microsoft Windows and many other products, so it’s also important that you keep
these up to date.
5.1 ‘OFFICE’ SOFTWARE
Any practice will inevitably need some type of word processing, spreadsheet, presentations
and perhaps database capabilities, although many use the spreadsheet as a ‘database’.
When thinking of word processing, spreadsheets or presentations, inevitably Microsoft
springs to mind in the form of Word, Excel and PowerPoint. These are the accepted
standard products and any other vertical market software that has links to office software
will inevitably link into or use these products, so in reality you probably have little choice
for your main systems.
However, there are alternatives that you could consider for, say, laptops or spare
computers, where Microsoft Office is not already installed. These include free offerings
such as the open source products OpenOffice (www.openoffice.org) and LibreOffice
(www.libreoffice.org). These offer a lot of the functionality of their Microsoft counterparts
and can generally open and save files that have been produced in Word or Excel.
A word of warning, however. The spreadsheet is often the accountant’s ubiquitous tool
for work – used (or misused) for practically anything such as address books, a database
(which it is not) and for producing both letters and much longer reports. It should not
be the only tool in your armoury!
Microsoft Outlook forms part of the Microsoft products that are together badged as
Microsoft Office. However, it does not have to be your email interface, although it is
probably the most widely used. Take care with email attachments as large (20MB plus)
attachments can cause the system to either run very slowly or ‘hang’. You should also be
careful with any personally identifiable information as we shall see later.
Outlook Exchange Server tends to be the software generally used to distribute email to
the various recipients in an office, but as with pretty well anything in the IT world, there
are other options. Emails can be accessed via the web, or can be forwarded to other
devices such as iPhones/smartphones so there is potentially no escape from them!
If you want some or all of your applications to be cloud based rather than running
software on the laptop or desktop, all the Microsoft products are now available in their
cloud offering – Office365 (www.microsoft.com/office365). Microsoft is, however,
relatively late to the table with its cloud offerings; Google has had Google Docs
(https://docs.google.com) available for some considerable time and many of the
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IT for the small accounting practice
products from Google are free to use. Google Docs can convert documents, presentations,
spreadsheets and drawings into the corresponding Google Docs format and can convert
text from PDF and image files to Google documents too.
It is worth pointing out that ‘free’ software may not always be the best choice, as you will
still need to take into account the implementation, training and the functionality available
compared to the paid-for alternatives.
5.2 ‘BEST OF BREED’ OR INTEGRATED SOLUTIONS?
A subject that has been pondered by accounting practices of all shapes and sizes for a
long time is whether to buy all products from the same ‘stable’ or to choose the best
performers in each of the different functional areas. So you may have accounts software
from one supplier, personal tax software from another supplier and corporation tax
software from a third supplier. The advantage of having them all from one supplier is
that there is just one port of call if you need help, and there is possibly just one central
database into which all the others products are integrated. A disadvantage is that not all
products from the single vendor may be of equal quality or standard, or they might not
provide the functionality that you require which is provided by another vendor’s software.
Again, the choice is yours and there is no right or wrong answer.
Try to identify your requirements, differentiating as far as possible between the essential
functions and the nice-to-have-but-not-essential functions. Be as objective as possible –
the claim of any software to be ‘easy to use’ is highly subjective. This is not as easy as it
sounds – far easier if you are coming from a practice environment already having used
various software packages, not so easy when coming from industry or if you have not
used any packages before. How, for example, do you know what your requirements are
for a document management system if you have never even seen one before?
5.3 CHOOSING YOUR SUPPLIER
We have already mentioned the IT in Practices Survey 2011 and this is a good reference
guide to help you identify suppliers in a particular marketplace and get an indication of
what practices think of them.
When you have narrowed down your shortlist of potential suppliers, visit their websites to
look at any case studies that may have been posted, and also obtain from the suppliers the
names of half a dozen or so practices of a similar size to your own that may be prepared to
speak to you and relate their experiences (out of which you might probably only speak to
two or three). Your local district society is an excellent way of making contact with fellow
practitioners to share experiences.
Questions to ask include:
• Why was the software chosen?
• What is the quality of and need for training?
• Were there any problems during implementation and, if so, how were they resolved?
• Would they buy the software again now or would they look elsewhere?
• How would they rate the support received – quality and speed of response?
• Are updates supplied on a regular and timely basis?
• What are major benefits of the system?
• What are the major limitations of the system?
The IT Faculty website has a forum in which you can also ask questions and there are other
similar forums and software discussions elsewhere on the internet.
5.4 BOOKKEEPING
Your practice will need bookkeeping software at least for its own records, and possibly for
client records as well.
Just as Word and Excel are synonymous with word processing and spreadsheets,
Sage is the predominant software in the bookkeeping market; in particular, Sage 50.
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11
According to the IT in Practices Survey 2011 this is most commonly used in practices, although
VT Transaction+ has a significant and growing following among smaller practices and also
comes out very well in performance comparisons.
However, with the rise of ‘cloud’, cloud-based bookkeeping software is seeing tremendous
growth.
There are advantages with cloud-based software in that you and your client can access the
same data from different locations, as long as you have internet connectivity. Cloud-based
software is generally subscription-based with a monthly charge, so there are no upfront
capital commitments. It can also be multi-user at no extra cost, a feature that usually
involves additional expense in traditional desktop-based software.
Xero is cloud-based software which appears to be have penetrated the bookkeeping
market according to the survey.
5.5 ACCOUNTS PRODUCTION
While accounts production is a core service for many practices, the use of final accounts
production software is not universal. Many accountants still prefer to produce final
accounts in Excel, a product they are familiar with and which incurs none of the ongoing
maintenance costs or the potential learning curves that would be associated with accounts
production software.
How you work out the figures that go into the accounts is a different matter, and this is
where accounts production software has advantages. Depending on the client records, the
trial balance and even all the data can be imported or read directly into the final accounts
software where you can make adjustments. Alternatively any analysis and reanalysis can be
done in the software. Accruals and prepayments can be posted and automatically reversed
in a subsequent period.
Generating the end product, the accounts, is a prime reason for using accounting
software. Make one change eg, to stock, and this change ripples automatically through
the accounts; use a particular code in a limited company set of accounts and the disclosure
requirement is automatically invoked. The accounts will have a consistent and professional
look and feel – it is usually very easy to identify accounts that have been produced in Excel!
You can benefit if your final accounts software links direct to tax products so entries are
driven directly into the tax return sections. With the advent of iXBRL (considered shortly)
many of the accounts software providers now automatically produce accounts in iXBRL
format for filing with HMRC.
As a guide, VT Final Accounts scored very highly in the performance tables and has seen
significant penetration in the marketplace since the last survey four years ago. IRIS is,
however, the market leader in this sector.
5.6 PERSONAL TAX SOFTWARE
If you have a small client base, it may be enough to use the HMRC free online software to
file personal tax returns online. However, as soon as you need to file a partnership return,
you will need commercial software since HMRC does not offer any free software for this.
HMRC provides a list of commercially available software on its website at www.hmrc.gov.
uk/efiling/sa_efiling/soft_dev.htm.
There are many advantages in using tax software; you can enter data when you receive
it during the year, and you can calculate tax liabilities accurately at any time. ‘What if’
scenarios are also possible within seconds.
Some software also provides tracking features which enable you to report, for example,
on tax returns with clients for signature, tax returns still to be filed with HMRC and various
other user-definable reports. Without tax software, you would have to find some other
method of monitoring tax returns.
5.7 CORPORATION TAX
Since 1 April 2011 all companies and organisations have to file their company tax returns
online. Once again, HMRC provides free software, but this has its limitations and does not
cope with all of the scenarios that you may come across. HMRC offers some advice on its
website at: www.hmrc.gov.uk/agents/ct/online-questions.htm#1.
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IT for the small accounting practice
As well as filing the returns online, it is also necessary to file accounts which have been
tagged with an iXBRL code. iXBRL is a way of embedding and displaying accounting and
financial information in an HTML document, the universal language for web browsers.
It allows data to be read intelligently by a computer and also presented in a human
readable form, either on-screen or in printed output.
This tagging may be done by the accounts software, manually, or with specific tagging
software. Whichever route you choose, you must be aware of this filing requirement.
5.8 PAYROLL
Many firms choose to offer a payroll bureau service to clients, processing the regular pay
runs, producing payslips, calculating the statutory deductions and performing the online
filing requirements at the year end. This can be a useful profit centre for your practice.
HMRC once again offers some basic PAYE tools, which its website states are most useful
for employers with up to and including nine employees, after which it recommends
commercial software. HMRC provides a list of software providers at www.hmrc.gov.uk/
efiling/paye/paye_software_forms.htm and some of these are free of charge. In the IT
in Practices Survey 2011, Sage 50 Payroll was, unsurprisingly, market leader, although its
market penetration had dropped considerably in the last four years since the last survey.
In terms of usability and performance, Moneysoft Payroll Manager stood out.
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6 NON-CORE SOFTWARE
In the previous section we identified software that could be classified as core or essential
for your practice. In this section we consider a selection of other software which you might
need to run and develop your practice.
6.1 WEBSITE
This falls into the non-core category as there are some firms that do not have a website.
This may be because they feel that they don’t need to be visible in the marketplace, or
don’t believe that a website at a price they are prepared to pay would add any value.
If you have a website, make it work for you. A ‘static’ website generally doesn’t provide
any incentive for visitors to return in the future, and a website listing your services is
unlikely to differentiate you from any other firm’s list of services.
There are website providers specialising in the accounting market as well as many
hundreds of other website developers.
6.2 PRACTICE MANAGEMENT SOFTWARE
Practice management software is often referred to as time and fees. If you don’t keep
timesheets (and many firms choose not to do so) then you probably don’t need a full
time recording software package. You may have a basic time recording system such
as a sheet in the front of a file on which the work done is noted but this does not require
specialist software. Similarly with fees; if you are just raising invoices then bookkeeping
software with an invoicing function may be more than adequate.
However, you may prefer the traditional timesheet route, and many firms still use
timesheets as a basis for measuring efficiency even though the billing may be on a fixed
fee or value billing basis. Recovery of time booked is one of the key practice indicators
that tends to be measured. Reporting from practice management software is one of the
key reasons for its use, and this may well be the central database around which all other
software is linked. However, in small firms, practice management software is not used
extensively according to the IT in Practices Survey 2011. This is probably due to the factors
of cost and functionality, since a simple spreadsheet can do the bulk of the practice
management function, such as producing a list of clients with a year ended on a certain
date, or those clients where a payroll year-end return is required. The need for such
software tends to arise when full details of all the clients are spread among a number
of staff and partners.
6.3 CUSTOMER RELATIONSHIP MANAGEMENT SOFTWARE
Your relationship with your clients is the lifeblood of your accounting firm. The main
point of customer relationship management (CRM) software is to increase the marketing
effectiveness by targeting specific clients or prospective clients based on certain criteria. In
a nutshell, CRM enables you to do selected mailings to contacts or clients based on userdefined criteria, to record notes on activities with contacts or clients with follow-up actions
where needed, and to ensure that the data is accessible to everyone and easy to use.
The ability to record data probably exists in various packages already, but the key is being
able to tap into that data. Generally the practice management software will contain all
clients (whereas personal tax software will only contain those clients for whom tax returns
are required) and it is probably, therefore, the place from which to drive any CRM queries.
However, we have already noted that in smaller firms the chances of finding practice
management software are quite slim. Many practitioners will, therefore, rely on Excel or
Outlook as the client management system, or perhaps one of the small business CRM
programs such as ACT, Maximizer or Goldmine.
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IT for the small accounting practice
6.4 COMPANY SECRETARIAL SOFTWARE
You can download most company forms from the Companies House website,
complete them on-screen and file them electronically. Although this can be time
consuming when all the data has to be keyed in, the majority of practices use this web
filing facility. You do need some systems in place to be able to monitor deadlines for
filing accounts to avoid penalties, and also to monitor the due dates for annual returns.
Rather than setting up in-house systems to monitor these dates, you can use this free
service: www.companiesmadesimple.com/cosec. Data can be automatically synchronised
with Companies House information to ensure that it is up to date.
Company secretarial software enables you to deal with the administration associated with
a company secretary’s responsibilities. This will include such items as annual returns and
other Companies House forms, stock transfer forms, share certificates, dividend vouchers
and lists, minutes of AGMs and directors meetings. IRIS Company Secretarial has the
largest share of the market in the IT in Practices Survey 2011.
6.5 DOCUMENT MANAGEMENT
Not many practices use document management software. However, those that have
implemented such systems do reap enormous benefits. These include the ability to free
up physical space (the author, a partner in a six-partner firm, recently removed 25 empty
filing cabinets from his offices), a change to more efficient working methods, the ability
to search across all documents, and no time wasted in searching for files around the office
and filing papers away.
Small practices (and many medium and large practices) tend to use the Windows folder
structure to store files. So this may have a top level of ‘Clients’ and then sub-folders
for each client. Further sub-folders inside the client folder may be for correspondence,
accounts, tax, billing etc, and these may be further subdivided by year.
Is a ‘year’ the tax year, or an accounts year to, say, 30 September, or a calendar year?
There are three alternatives already!
There is a real risk in this structure (I would hazard a guess that most of you have
experienced the issues) of folders being inadvertently dragged and dropped elsewhere,
or inadvertently deleted. It can take some time to track down the new location of the
dragged files or to go to back ups to restore the files to their original locations.
If you are starting a new practice, this is an ideal opportunity and time to implement a
document management system; one of the problems that always needs addressing in
a long-established firm is what to do with the historic records that have been collected
over the years.
The key features of a document management system are the ease with which documents
can be stored into it, the types of documents that can be stored, and the retrieval of those
documents based on search criteria as and when required.
Some systems are pure electronic filing cabinets, while others have workflow features
built into them, enabling for example documents to be passed for action to a certain
person but to another purely for information. As soon as you stop being a sole practitioner
these workflow features will be of benefit.
Invu and Docusoft were the leading brands listed in the IT in Practices Survey 2011.
The whole concept of document management revolves around filing documents in
an electronic format, and, while files can be saved in their ’native’ format eg, Word
documents, Excel documents, Outlook files etc, there are potential problems with
compatibilities between the various versions of these products. To avoid, or at least
reduce, these potential issues, the conversion of files to a portable document format
(PDF) and then saving them to the document management software is frequently
recommended. PDF is a ’universal’ open format which should be capable of being viewed
on practically any device, be it Apple, PC or mobile device as long as it has PDF viewer
software. PDF creation software is therefore required.
We have already mentioned Adobe Acrobat Standard while talking about scanning.
This creates PDF files (as well as having lots of other functionality). The licence for the
product will be to use on one PC only, so you will need to buy additional licences for your
other PCs. Alternatively, there are many other PDF creators and PDF tools available,
IT for the small accounting practice
15
a number of which are free. CutePDF is just one free alternative. In addition, you may
well find that your document management software comes with a PDF creator tool
embedded in it. Office 2007 and Office 2010 also include the functionality to create
PDF files directly from within the software. However, there will be other packages from
which you will want, or need, to create PDF files eg, tax returns from tax software.
6.6 PORTALS AND FILE SHARING
A client portal is an electronic gateway to data that is accessible over the internet via a
web browser. Historically, information such as tax returns would have been transmitted to
end users as attachments to emails. However, tax returns do contain personally identifiable
information which would be of value to certain factions of the community who could use
it for identity theft. To avoid this, one option is to encrypt the data, and the other is to
use a secure portal. Some portals simply allow files to be uploaded, whereas others enable
files to be digitally signed, so that tax returns for instance can be approved directly from
within the portal. A further advantage of the portal is the ability to transfer very large files
such as accounting software back ups, which could bring email systems to a standstill.
The use of portals means that files are transferred instantly, with none of the direct costs
that would be associated with sending them by post. There are savings in stationery, print
consumables, labour and time in assembling the documents, as well as savings in the
postage costs.
In addition to the portals designed specifically for the accounting profession, there
are generic programs which allow file sharing in a similar manner. Probably the best
known of these is Dropbox (www.dropbox.com), with another popular one being
Box (www.box.net).
6.7 BUDGETING AND FORECASTING SOFTWARE
Probably the most common tool used for budgeting and forecasting is the Microsoft
Excel spreadsheet. However, building a very comprehensive and flexible model to handle
all sorts of variables such as cash collection days and sales by product or customer, and
catering for unlimited expense headings, expenses as a percentage of another expense
and so on can be vastly time-consuming. If you then go on to build in cash flows and
balance sheets for as many as five years this can become a mammoth task.
So for anything other than very simple forecasts, specific software is recommended. Use
the internet to research the many products available, or look at other publications from
the ICAEW IT Faculty (see Appendix 1).
6.8 FIXED-ASSETS SOFTWARE
Many bookkeeping packages have integrated fixed-asset registers which automatically
calculate and post depreciation. However, clients frequently treat items as capital
expenditure when they should be written off immediately, and vice versa, so the software
entries are often unreliable. In the accounting practice many firms will use Excel as the
fixed-asset tool, and indeed many firms do not maintain asset registers at all for their
clients. This can present problems with large items that can be identified eg, a car is
sold and it is then necessary to dig out all records to find the acquisition date and cost.
Multi-user, multi-company fixed-assets software is available and this is perfectly adequate
at a very reasonable cost to maintain fixed-assets registers for all clients. Spreadsheets
tend to get very messy, very quickly and are prone to error and can be time-consuming
to create and update.
6.9 COMPANIES ACT AND OTHER CHECKLISTS
While final account software will produce accounts in the layouts required by the
Companies Act, many of the disclosures will be based on the account codes used in
the software, and there will inevitably be some text entries required which cannot be
completed from the financial accounts information. A paper-based disclosure checklist
probably requires photocopying each time you use it and there will be sections and
pages that are not required. A computer-based checklist will allow the user to tailor the
checklist to highlight only those disclosures that are required for the entity. There is also
the ability to roll forward the information to a subsequent year, saving time and effort.
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IT for the small accounting practice
6.10 REFERENCE LIBRARY
You will need reference materials, be they related to income tax, VAT, tax tables or
accounting matters. Hardback books have been the standard method of delivery for many
years, or perhaps a looseleaf book with regular updates which requires the removal of
out-of-date pages and insertion of new pages – a time-consuming task. Providers of such
reference tools now offer a web-based product which will always be up to date and readily
available wherever you happen to be.
6.11 SOCIAL MEDIA
If you ask anyone at the present time to name some social media tools, they are likely to
mention Twitter, Facebook and LinkedIn. Social media gives you the opportunity to keep
in touch with potential clients, contacts and competitors, to monitor industry trends and
even recruit new team members. You can use social media to gain exposure for your firm.
Facebook tends to be more of a personal social media interaction tool, though businesses
are increasingly beginning to use it. LinkedIn is a method of building a contacts database.
Twitter is a networking tool, where messages with a maximum length of 140 characters
are posted; people interested in what you have to say become your ‘followers’. If you do
not want to post, there are various Twitter accounts that you may like to follow, and a few
suggestions are listed in the appendix.
6.12 MOBILE PHONE APPS
In this software section we should also include applications (apps in short) which run on
mobile devices such as the iPhone, iPad or Android phones and tablets. Many such apps
are free of charge or are available very cheaply. In the Apple Store there is a business
category and a finance category, in which you will find many potentially useful apps for
download. These include things such as tax tables, salary calculators and checkers, tax
tips, ‘what if’ scenarios for business profits and mobile device access to other products
mentioned in this guide such as Sage 50 and Xero.
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7 OTHER CONSIDERATIONS
7.1 TRAINING
Having the best or most highly recommended software in your practice is of little use if
your staff or partners don’t know how to work with it. In the same way that clients require
training in the use of accounting software packages that you may recommend and install
for them, you should also consider your investment in training for any of the packages
that you choose to install for your own practice. While there is both a time and monetary
cost, you should consider the return on investment. The training should cover areas such
as good IT practice, as well as the specific software packages. Do not overlook training in
‘office’ packages too – word processing, spreadsheets and even email. A lack of training
in any of these areas can result in huge inefficiencies and also have the potential for error,
especially in the case of spreadsheets.
In many cases the software houses will be ‘selling’ you training as an add-on cost.
They can offer it in a variety of ways:
•in a ‘live’ environment (which allows interaction and the ability to ask for clarification
if needed), which could be at their premises or on site at your own office;
• remotely via web-based presentations;
• via web-based videos or videos delivered on a CD; or
• via a series of helpsheets which again may be downloadable from the web as required.
Ensure you explore the alternatives when considering packages.
The ECDL foundation (www.ecdl.com/) offers courses for anyone who wants to
become competent in the use of a computer and common applications, including word
processing, databases, presentations and IT security to name just a few. These courses
provide a certification of proficiency when passing the tests.
You can also opt for more specific tailored training for your specific financial needs.
There are several specialists in this field that provide such training.
7.2 DATA PROTECTION
Most accountancy firms need to register with the Information Commissioner’s Office
(ICO), under the Data Protection Act 1998 (DPA), as soon as they start practising. Firms
face prosecution if they don’t sign up. ICAEW provides guidance at www.icaew.com/en/
members/practice-resources/practice-management/practice-regulation/data-protection.
This area should not be underestimated but space precludes a more detailed discussion
in this publication.
7.3 SECURITY
We considered security earlier in the guide when we discussed back ups to external
devices, and anti-virus software. There are, however, a number of other security
considerations. For instance, it might seem obvious, but a password should be required
to access your computers, and you should also ensure that the passcode locks (four-digit
codes) are enabled on your iPhone, iPad, etc. Make sure that passwords are not placed
on paper sticky notes on the screens of your computers!
Any of your software applications should also have passwords in place.
We hear horror stories in the press of lost or stolen laptops containing sensitive data.
Losing such data is bad enough but to have someone else access it is even worse.
As already discussed, if you are using a laptop to access data from a hosted solution
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IT for the small accounting practice
then the data does not actually reside on the laptop. However, if you do have data on
the laptop you should ensure that it is held in an encrypted folder or partition.
Other high-risk areas are mobile storage devices such as USB pen drives, SD Cards, pocketsized hard disks, and even iPhones and iPods. The amount of data that these devices can
hold is now very significant, and the drives are getting smaller and smaller all the time.
These are easily lost, misplaced, stolen or inadvertently left plugged in to a PC perhaps at
a client’s premises. Again, these should be encrypted or should have some other form of
security. Some devices for instance have a numeric keypad which requires a pass code to
be entered before they can be used.
7.4 LICENCES
Some software will no longer function, or may operate in read-only mode, if there is no
valid licence in place. This will not always be the case, and it goes without saying that you
should ensure you have licences for all software applications used and for all users of those
applications.
7.5 IT USE POLICIES
As soon as you take on any staff it is advisable to put in place an acceptable use policy;
a set of rules which relate to the approved use of your firm’s IT and information systems.
This should cover areas such as:
• security of equipment taken out of the office;
• use of unauthorised software applications;
• use of social media;
• use/abuse of internet access;
• mail communications;
• file downloads;
• private use of IT equipment;
• preventing unauthorised access to the firm’s IT systems; and
• consequences of misuse or abuse of systems (warnings/dismissal etc).
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8 CONCLUSION
There is nowhere to hide … IT is everywhere and will continue to evolve in all processes.
Clients will expect to be able to deal electronically with their accountants and advisers,
more so as the generations brought up in the connected world start out in business or
require tax advice.
As we have identified along the way, there are no easy answers and no right or wrong
ways of doing things, but certain ways of doing things are more efficient than others.
The use of IT can certainly lead to efficiencies, and you are likely to find software out there
in the marketplace which will help in all areas. We have only highlighted in this guide the
main areas of practice use, but we hope that we have at least given you some ‘pointers’
and food for thought.
So to summarise:
•Consider hiring a consultant to help formulate a plan.
• Set a budget (or match to selections if there are no restrictions).
• List any strategic requirements you are aware of already.
• Select software based on services being offered, predicted client types/needs:
– list requirements;
– get demonstrations;
– put together a shortlist; and
– speak to other practitioners who use the shortlisted products.
• Select method of delivery by potential business constraints:
– budget/cash flow, if applicable;
– self-efficiency level and own technical knowledge; and
– location – constantly moving around/no office.
•Select hardware based on current (and future) software needs and method of delivery
eg:
– netbook for cloud;
– laptop for moving around; and
– desktop for office based.
•Select a good security product, including anti-virus software, and install as soon as
hardware arrives!
•Formulate plan, set timetable, review, then action.
Good luck!
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IT for the small accounting practice
APPENDIX: FURTHER INFORMATION
RESOURCES
Publications
The IT Faculty has a range of publications and the list grows every year. They are available
at www.icaew.com/en/products/information-technology-publications.
IT in Practices Survey 2011 (December 2011), London: ICAEW.
Accounts production software guide (January 2011), London: ICAEW.
Document management software guide (April 2009), London: ICAEW.
Forecasting and budgeting software guide (April 2012), second edition, London: ICAEW.
Making the most of social media – a practical guide for your business (September 2011),
London: ICAEW.
Online accounting software guide (October 2010), London: ICAEW.
ICAEW and IT Faculty resources
Essential checklist for practice start-ups – www.icaew.com/en/members/practice-resources/
practice-management/setting-up-a-practice
ICAEW Accredited Products Scheme – www.icaew.com/en/members/offers-discountsand-services/business-offers-discounts-services/information-technology/icaew-accreditedsoftware
ICAEW free helplines – www.icaew.com/en/members/advisory-helplines-and-Services
ICAEW IT offers – buying printers and supplies
www.icaew.com/en/members/offers-discounts-and-services/business-offers-discountsservices/information-technology
ICAEW local practitioner groups – www.icaew.com/en/members/local-support-andservices/local-groups-and-societies
ICAEW Practice Support Services – www.icaew.com/en/members/practice-resources/
practice-management/practice-support-services/practice-consultancy
IT Systems-Compliance Review – www.icaew.com/en/members/advisory-helplines-andservices/~/media/Files/Helpsheets/practice/it-systems-compliance-review-pas4-hs10.ashx
ICAEW Excel Community – www.icaew.com/excel
ICAEW IT Faculty Blog – www.ion.icaew.com/itcounts
ICAEW IT Faculty Forum – www.ion.icaew.com/itcountsforum
Twitter
Some suggestions on accounts to follow:
@ICAEW_Excel
@ICAEW_ITFaculty
@ICAEW
@ciotnews
@ACCAnews
@AccountingWEBuk
@accountancyage
IT for the small accounting practice
21
GLOSSARY OF TERMS
Android – A Linux-based operating system for mobile devices such as smartphones and
tablet computers.
Application (app) – Computer software designed to help the user to perform specific
tasks. In the mobile world an app usually refers to a piece of software developed by a
third party that has been designed for use on a specific phone or device and which can
be downloaded to the device for a small fee.
Back up – A back up, or the process of backing up, involves making copies of data which
may subsequently be used to restore the original in the event of a data loss.
Business continuity – The activity performed to ensure that critical business functions will
be available to customers, suppliers, regulators, and other entities that must have access
to those functions.
Cloud computing – Essentially pay-as-you-go IT, with the IT capabilities provided as
a service to businesses and procured via the internet from public cloud providers, or
supplied within larger organisations as private clouds by internal IT departments.
HDMI – High-Definition Multimedia Interface – an audio/visual interface for transferring
data to a PC monitor (see also VGA below).
Hosted solution/service – Typically refers to the running of applications on a server
accessible by the internet, as opposed to in-house servers.
Internet Service Provider (ISP) – An organisation that provides access to the internet.
iXBRL – (Inline XBRL) is a development of XBRL in which the XBRL metadata is embedded
in a document eg, a published report and accounts that can be read both by a computer
and the human eye.
MFD (Multifunction Device) – An office machine which incorporates the functionality
of multiple devices in one eg, printer, scanner, photocopier, fax.
Open source – Not to be confused with free software, this is computer software that is
available in source code form: the source code and certain other rights normally reserved
for copyright holders are provided under an open source licence that permits users to
study, change, improve and at times also to distribute the software.
Patch – A piece of software designed to fix a specific problem, or to update a computer
program or its supporting data.
PDF – A file format used to represent documents in a manner independent of application
software, hardware and operating systems.
Portal – A tool providing third-party access to data, documents and information, typically
via a web interface.
Secure Digital (SD) card – A memory card for use in portable devices such as cameras
and smartphones.
USB – An industry standard that defines the cables, connectors and communication
protocols between computers and electronic devices.
USB pen drive – A small, portable flash memory card that connects via a USB port to a
PC and functions as a portable hard drive.
Video Graphics Array (VGA) – This is a display standard and is one way of connecting
a PC to a monitor (see also HDMI above).
VoIP – Voice over Internet Protocol – the set of facilities for managing the delivery of voice
communications and multimedia sessions over the internet.
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IT for the small accounting practice
ABOUT THE AUTHOR
Kevin Salter FCA CTA (Fellow) is an ICAEW Chartered Accountant and chartered tax
adviser; a partner in six-partner practice, Glover Stanbury & Co based in North Devon.
He is a director of GS Financial Services Ltd which runs alongside the practice.
He is also managing director of BBS Computing Ltd, the business’s IT arm (which produces
software and provides IT consultancy advice to accountants around the country) and IT
director of 2020 Innovations Ltd, a network of over 1,200 accounting firms.
Kevin sits on the committee of the ICAEW Faculty of Information Technology and is an
evaluator for the ICAEW Accredited Products scheme. He writes a weekly blog on the
ICAEW IT Faculty website and wrote the IT Faculty publication on document management.
He is also the South West Society of Chartered Accountants Practice Society representative.
Kevin was awarded ‘Best Chartered Accountant in practice’ at the 2006 ICAEW South
West Regional awards and was also shortlisted again in 2007.
IT for the small accounting practice
23
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© ICAEW 2012 TECPLN11377 07/2012