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The benefits of thinking small(er) when it comes to your MTD ITSA software

25th Oct 2022
Brought to you by
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Coconut’s simple bookkeeping and tax app is specifically designed for sole traders, helping them...
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Sometimes, bigger isn’t always better. When it comes to MTD ITSA, accountants find themselves torn between more established software leaders and the uncertainty of something new. But what if thinking small(er) could lead to big rewards?

Big Great Dane looking at a small Labrador puppy

As the MTD ITSA deadline approaches, practices have to choose a path for transitioning their sole trader and landlord clients into the digital realm. After more than two decades of development, there is a wide range of accounting solutions on the market, built on years of research and millions of pounds of investment. However, there are precious few that are designed with the MTD ITSA audience in mind.

This leaves accountants with a conundrum – whether to move their smaller clients onto the accounting solutions that they use for the rest of their clients, or to look for something new. While moving all your clients to the same platform you use for your limited clients might feel like the simplest choice, there’s a real risk that they won’t solve the unique problems that MTD ITSA brings.

One key point to mention: these are still excellent solutions that are popular for a reason. When it comes to accounting for limited companies, they’ve changed the game. But with size and tenure come certain constraints, and as MTD ITSA rears its head, there are many benefits to thinking new.

1. Finding focus

MTD ITSA is a really big deal, even though it focuses on the smaller end of businesses. Sole traders make up 56% of the UK private sector business population, but for years they’ve been effectively ignored when it comes to leading cloud software.

That’s not a fault of the company necessarily — leading cloud packages are designed for limited and bigger companies. This has been great for those businesses who have already come under the umbrella of existing MTD legislation, but it also means that the attention of leading cloud platforms is split.

In contrast, Coconut is dedicated solely to solving one problem: MTD ITSA and making the smallest businesses compliant, efficient and profitable. When we come up with new ideas, it’s with one goal in mind, and that helps us create more specific, effective and appropriate solutions. 

It’s also inevitable, as with most legislation, that MTD ITSA will evolve and throw up new problems. And when that happens, we have the systems, resources and agility to adapt faster, because that’s our focus. 

2. The innovation problem

There’s a reason market disruptors start small. Coming up with fresh ideas is much easier when you’re working at a smaller scale because of one (overused?) term. Agility. 

Agility refers to how quickly you can change what you’re doing. And for software companies that’s largely dictated by how much existing code you have to update to implement your new feature so as not to break the rest of your system.

The older your platform and the more features, integrations and mergers you’ve added over time, the larger your code base. This means that adding new solutions gets harder, occasionally requiring companies to go back through their entire product and ‘refactor’ thousands of lines of code to make sure everything works properly. In practice, this is phenomenally expensive and time consuming.

Your tactical capabilities dictate what’s possible at a strategic-level and shape your internal thinking. This is the main reason that longstanding software companies are more likely to focus on improving existing features as opposed to building features from the ground up, meaning they won’t be as tailored or innovative when it comes to solving new problems.

3. Skin in the game

As a software customer, growth and scale is a double-edged sword. While your software provider expanding, raising capital and acquiring thousands of customers enables them to invest more in the product, host fancy events and put on lavish advertising campaigns, it also realigns their priorities.

Firstly, it changes the calculation for risk. Especially as a public company, the business becomes most concerned with maintaining what they have rather than seeking true innovation. Secondly, it dilutes the voice of the customer – when you’re one in a million users, and they’re acquiring thousands more customers each day, it’s hard to have a tangible impact on the direction of the company.

The smaller the company, the more likely your voice is to be heard. At Coconut, we’re still imagining new features every day, and our users’ input and feedback plays a huge role in ideation, prioritisation and building. When you opt for small, you can play a role in influencing the development of the software you use, making sure it’s on the right path for you and your clients.

Want to find out more about how Coconut is helping accountants get their clients ready for MTD ITSA and the unique features we’re building? You can jump right in and book a short demo with our team, in which we can show you how both the app and Accountant Platform work, and answer any questions about how to handle MTD ITSA.

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