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Coconut’s simple bookkeeping and tax app is specifically designed for sole traders, helping them...
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How to have 'that' ITSA chat with Sole Traders

25th Apr 2022
Brought to you by
Coconut
Coconut’s simple bookkeeping and tax app is specifically designed for sole traders, helping them...
Share this content

MTD ITSA has seen a mixed reception among accountants and businesses, to say the least. However, now that ITSA is a certainty for the 4.2m taxpayers with income from business or property income over £10,000, including landlords and sole traders, it’s time to find a way to have the conversation. Especially since they now make up 59% of the UK business population.

Woman on phone making notes
Karolina Grabowska - Pexels

Moving to digital record keeping and tax calculation on a quarterly basis will be a change in how most sole traders operate. At least at first, this will involve some additional workload and a new set of Self Assessment deadlines—and the only way to deal with this is by working with, not against, your clients. While clients are usually against any development that requires extra work or changing their ingrained habits, the only way to deliver ITSA profitably and punctually requires bringing them onside.

Here are four ways you can frame your conversations with your sole trader and landlord clients around issues they really care about, to turn them into partners, rather than blockers, in your move to ITSA.

1. No more tax surprises

Working as a sole trader can be a volatile endeavour. Not only were they the worst hit by the pandemic, but 30% had to use their own personal cash to keep their business afloat. 

With less spare cash floating around, it’s more important than ever to have a clear view of upcoming costs and obligations. While a good quarter can leave a sole trader feeling temporarily flush, it’s little benefit if that’s all gone by the time the tax bill comes in. 

Quarterly reporting and summaries offer the chance to track tax obligations in real-time, so sole traders and landlords can put cash aside throughout the year, rather than scrambling at the end of year deadline. While this will require a new approach to logging expenses and income, it has the potential to drastically reduce the stress involved—as well as helping even out annual cash flow management.

2. Finally, track actual business performance

As a sole trader, you’re the sales, marketing, customer service and admin team all in one. With so many things on your plate, keeping track of your overall performance can easily drop down the to-do list. This is especially tricky when all your transactions run through a single personal bank account, as is the case for three quarters of self-employed workers.

While the UK economy goes through a volatile period of fluctuating costs, raw materials shortages, and soaring bills, sole traders need more visibility to actually understand their cash flow and costs. With granular visibility into income and outgoing capital, sole traders can accurately benchmark their prices, customer choice, and billing cadence to ensure their cash flow is sustainable.

3. A value-driven relationship

Building profitable relationships with sole trader clients is always a challenge—given the low willingness to pay. They also don’t want, or can’t afford, to pay for sophisticated software features that they may never use. But by choosing a software solution that aligns with their needs, accountants can minimise the manual work on their own side while actually providing more support to sole traders and landlords.

A great example is bookkeeping. Working with an end-of-year bag of paper invoices chews up hours of accountants time, while client-side work often requires serious manual review to catch errors and basic mistakes. But by using a solution based around the specific, basic needs of sole traders, you can train your clients to do their own data entry in a consistent way that saves you—and them—time.

This frees you up to give their business advice, based on up-to-date, complete information, rather than just being a chasing voice at the end of the phone. The goal, as Della Hudson explains in our new guide to ITSA for sole traders, is to ‘get the clients to do 80% of the work to save our time, and then we can charge a higher rate for the small amount of work where they do need us.’

4. Digital efficiency

For sole traders, bookkeeping and accounting is usually a combination of meeting the bare minimum to be compliant while avoiding putting too much time or money into the process. That’s because many of them operate without efficient systems to manage their business affairs. The move to digital, however, will drag them into the present and make online tools an unavoidable part of their business. 

While some will complain, this is also the biggest chance in years to change their habits and help them get some value from their bookkeeping. Moving to digital billing and expense management closes the gap between incurring an expense or issuing an invoice and paying, or getting paid. That means fewer lost receipts, less time waiting for income, and more clarity when it comes to managing an unruly bank statement.

The right tools for the job

The final part of any conversation like this with your client is likely to be ‘How much will this cost me?’

It’s a fair question—the majority of accounting packages are thoroughly overloaded with features that sole traders and landlords just don’t need...so why would they pay for them?

That’s where Coconut comes in. We're an accounting and tax tool that’s built specifically for sole traders and their accountants. It offers an intuitive app for sole trader clients, and a straightforward web portal for accountants and bookkeepers.

With the right software solution, you can simplify the move to MTD ITSA while retaining and growing profitable relationships with your sole trader clients. 

Find out more about how to get your practice ready for MTD ITSA in Della Hudson’s guide ‘A sledgehammer to crack a nut?’.

Download for free