The news that FreeAgent is to become part of the Royal Bank of Scotland Group sent shockwaves through the freelance/contractor market this week. But rival accounting software developer MyDigital Accounts is looking on the bright side of the deal.
At the Accountex Summit North last week, MyDigital Accounts CEO John Whelan told AccountingWEB that he did see himself competing with a big, listed company like FreeAgent. Instead the regulatory tide was turning against personal services companies (PSCs) more towards the umbrella model. “And we think we can win there,” he said.
More than 10 years ago Whelan identified PSCs as a lucrative niche and set up an accountancy firm to explore the opportunities in this market. After building up a client base of 5,000, he developed the MyDigital Accounts bookkeeping package for contractors and sold on his practice to concentrate on the software side.
MyDigital Accounts includes features that tailor specifically for contractors, such as built-in IR35 and supervision, direction, control (SDC) tests. It is also able to compute expenses within the umbrella company regime.
To make life easier for contractors and their accountants, the software imports bank transactions, and if necessary can convert these into journal entries.
“There’s not much call for sophisticated invoicing in contractor market,” said Whelan. “Sometimes they don’t bother raising invoices, so the software can auto-raise a sales invoice based on bank receipts. It can feed that to the VAT return, which it auto completes and submits.”
The accountant can get the same view as their contractor clients in MyDigital Accounts, but the latter also have access to a mobile calculator that helps them answer the perennial question. “What can I draw from the company?”
The public sector IR35 rules introduced last year caused an explosion in the umbrella market, Whelan explained: “Thousands of limited companies have gone into the umbrella market. Ordinary practitioners who looked after public sector clients have lost them because they didn’t have a place to put them.”
He’s betting that on payroll rules will come into force for employers and contractors in the private sector from April 2019. “We’ve already got around 2,500 umbrella firms, and there will be another significant increase in the payroll market,” said Whelan.
“The gig economy is pushing people towards umbrellas. If they’re temps working through agencies, recruiters will want an intermediary. Umbrellas have a racy history, but there’s a turnaround happening where they’re becoming more respectable. We think we can win the race for umbrellas.”
About John Stokdyk
John Stokdyk is the global editor of AccountingWEB UK and AccountingWEB.com.