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MTD ITSA: How to choose software for sole traders

23rd Mar 2022
Brought to you by
Coconut
Coconut’s simple bookkeeping and tax app is specifically designed for sole traders, helping them...
Share this content

Where do you start when it comes to choosing software for your sole trader clients? Below we’ve shared some helpful criteria to check off when you start exploring your sole trader software options.

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With MTD ITSA only a tax year away, many accountancy firms are getting plans in place to take advantage of the opportunity to grow revenue presented by MTD ITSA.

Due to the additional reporting requirements that come with MTD ITSA, more sole traders than ever will require the support of accountants and bookkeepers. 

Herein lies the problem though… what software do you put your sole traders on? Many of them are likely to be used to just sending you a spreadsheet once a year, and in some cases paper records—so for those, cloud accounting software is a bit like using a sledgehammer to crack a nut.

Below, we’ve shared some helpful criteria to check off when you start exploring your sole trader software options.

Sole trader software criteria for MTD ITSA

  1. Ability to support multiple bank feeds, whether business or personal - and a simple way of separating out business transactions caught in a personal bank account or credit card.
  2. A simple way of raising invoices - if this can be done from their phone while on site, they can get paid immediately and improve their cashflow at the same time.
  3. A simple way of tracking income received against invoices - so that they are able to chase any outstanding invoices promptly.
  4. Simple, intuitive expense analysis for tax purposes - the smallest businesses usually pay on invoice, so there is no need to run a purchase ledger. This also avoids the problem of whether payments should be matched against invoices or posted directly to the expense account.
  5. A way to store bills before they get lost - having electronic copies of bills will allow the business to claim more of their costs, even in the event of an HMRC enquiry.
  6. A rough and ready calculation of tax - so the business owner knows how much to set aside, and doesn't get a surprise when tax is due.
  7. A means for you (the accountant) to check in on the quality of the bookkeeping - and add manual adjustments quarterly or annually as required.
  8. A means to add the information required on the non-self-employment pages of the tax return - so that the tax estimate is more meaningful.
  9. No extra functionality that the client won’t use! It overcomplicates things, and usually means paying for features they don't use.

Now's the time to start investigating and choosing the software solutions that you'll want in place for your practice and the different segments of clients that you serve. Getting the right solutions in place ahead of time and at the right price means you'll be in a position to make the most of the opportunities that MTD ITSA will offer.

You can learn more about how to get your practice ready for MTD ITSA in Della Hudson’s guide ‘A sledgehammer to crack a nut?’, which you can download for free at the link below:

Read the guide