Software insiders accept MTD reality check

Long road ahead
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While accountants around the country heaved sighs of relief that Making Tax Digital was being watered down, the software developers who are building the programs to drive the online record-keeping regime had more ambivalent reactions.

Sage, the UK’s biggest accounting software developer, could not conceal a tinge of disappointment in its initial response. Sage UK and Ireland managing director Alan Laing commented: “We know that the UK currently lags behind other nations in terms of digital capability.  The announcements on Making Tax Digital today potentially slow the pace of the Government’s vision for a Digital Britain, a vision which could help the UK capitalise on the huge benefits of technology, just as we have seen in other countries.

“We hope that the Government’s ultimate direction and vision will remain firm, even if the timetable and rollout is moderated.”

Sage’s enthusiasm for the digital tax project can be partly attributed to Sage CEO Stephen Kelly’s previous job. As government chief operating officer until 2014, he was probably sitting around the conference table when the tax transformation idea was first sketched out on the policy whiteboard.

“Stephen [Kelly] and I have spoken a lot to government and customers and industry to digital agenda. This puts government back a step in terms of UK leading the way. We want to make sure businesses are able to take advantage of digital agenda. A lot of businesses are still not using accounting software. Every time that happens, we see that as risk.”

Technical preparedness at HMRC - the BTC view

Rob Ellis, CEO of BTCSoftware, was pleased HMRC had responded to calls for a delay. In his view, a recently released development roadmap suggested an “incredibly ambitious” timetable: “It would have meant HMRC’s initial promise of agents having 12 months of parallel running before the previous mandated go-live for Making Tax Digital for Business in April 2018 was clearly not going to happen.

“I voiced our concerns to HMRC’s digital team and questioned when HMRC was going to come clean about the true timescales for MTD.  It’s really good that we, along with the tax and accounting community and the Treasury Select Committee, have been listened to. Saying that, I am surprised it’s been set back so long, as only recently HMRC had been pushing really hard for a 2018 mandation kick-off.”

Ellis also questioned the government’s announcement that Making Tax Digital will be available on a voluntary basis for the smallest businesses and for other taxes. “The voluntary element is completely out of the blue and begs the question that, when given the choice, will people really move over to digital accounting?” he asked.

Neutral

A more neutral reaction came from Michael Wood at Receipt Bank: “I don’t know of any software developer that needs or is desperate for MTD. I know a lot of accountancy firms were looking for more time to make the changes.

“A change in timetable isn’t a big deal. For those worried about the pace of change, it is a very good deal. From my perspective for British businesses, the key thing is it keeps going. I’ve made the point before - many governments and tax authorities are looking at MTD, saying what a brilliant idea and making their own plans to copy it. An awful lot of small business groups recognise the benefits.”

Use extra time wisely

Mark Purdue, tax product manager at Thomson Reuters, welcomed the end to uncertainty around the MTD timetable. “In our own survey of UK accountants, 80% agreed that an MTD deferral until 2019 should be aligned to the VAT threshold. Today’s news will be well received and the delay will provide more time for the pilot to be widened, and for accountants’ to get prepared.

“To support accountants through the MTD challenge ahead, we made our MTD-compliant software available more than 12 months in advance (of the original 2018 deadline) and urge the accountancy industry to take the opportunity to get up-to-speed with MTD; understand which of their clients will be impacted first; and assess their software supplier for suitability.

“Accountants will now be looking to HMRC to take the lead in terms of letting businesses know about MTD.  To date, there has been no official communication from HMRC to businesses and this need to happen to ensure the message gets through to the wider business community.”

Get digital sooner rather than later

Sion Lewis, CEO of IRIS’s accountancy division, was unsurprised by the announcement but, like Purdue, he encouraged accountants to get digital sooner rather than later. “Don’t let it become out of sight, out of mind - complacency will kick in. It’s best not leaving it to the last minute,” Lewis urged.

The IRIS survey of accountants about Making Tax Digital revealed that many were not ready or felt ready. “Credit to HMRC. They have listened. They listened to that survey - I know for a fact that they’ve read the survey because in one of meetings we discussed how our accountants said, ‘We’re not ready. We don’t know enough about it.’”

But Lewis said the delay wasn’t because HMRC wasn’t ready. Whether Brexit or the snap election was to blame, he thinks political pressure played a part. 

RIS doesn’t expect any further changes to its MTD timeline: “I think some of my competition will be relieved actually that the pace has gone off it but we’re in control of the roadmap. We’ll be good to make all requirements as and when they pop out and we'll take advantage of HMRC’s APIs as much as we can in the period where it is not mandatory.”

A Proper timeframe to prepare

The message of not becoming complacent continued from others within the vendor world. Wendy Rowe, UK product director for Wolters Kluwer, explained that although practices have now got a more sensible timeframe to prepare that doesn’t mean that they can relax. “With MTD and GDPR [European general data protection regulation] hitting in May, there’s a lot of work practices still need do and consider about how they're moving into the digital age.”

She added: “Our take is that it doesn't change anything that we’re doing because HMRC has made it clear that the pilot will continue. If anything there will be a stronger drive to get more practices involved in the pilot over the coming months, especially from April next year.” 

Replies

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By Tornado
17th Jul 2017 17:51

"Sage’s enthusiasm for the digital tax project can be partly attributed to Sage CEO Stephen Kelly’s previous job. As government chief operating officer until 2014, he was probably sitting around the conference table when the tax transformation idea was first sketched out on the policy whiteboard."

This seems a bit suspicious to me.

Someone who appears to have been in a position to provide input into the initial stages of the MTD project (before anyone else knew) who then goes on to become CEO of one of the Companies who would gain the most from it.

From the many comments made on AWeb over the last year or so, there are many who felt that the Software Companies were the ones who stood to gain the most from the MTD project, and could never see a reason for mandatory use of commercial software.

One has to seriously question if this is, at least, partly the reason why?

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17th Jul 2017 17:57

I am baffled by these responses, yes they are selling digital services and want accountants to buy more of them, but they don't seem to have got the core message.

Quarterly reporting is dead. Gone. Its not going to happen for the vast majority of business and in particular not for landlords. So that's 95%+ of the market gone.

Officially its in the long grass, but that is where projects are placed which are dead in all but name so as not to look like a U-turn. Its how politicians do things.

MTD in its broader sense continues, but is now just a gentle evolution of pre-populated data in year end returns, which is what it should be, not a sharp shock of the new, plus some sort of tag on to quarterly VAT reporting which given its different data than is used for year end (do software co's understand this?) is likely to get kicked even further into the future once someone actually looks at the specs for this.

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By djn24
to ireallyshouldknowthisbut
20th Jul 2017 10:25

[quote=ireallyshouldknowthisbut]

"Quarterly reporting is dead. Gone. Its not going to happen for the vast majority of business and in particular not for landlords. So that's 95%+ of the market gone.

Officially its in the long grass, but that is where projects are placed which are dead in all but name so as not to look like a U-turn. Its how politicians do things."

Do you really think that MTD will not affect the majority of the small owner managed business? I would be very happy of you were right but I thought that it was just delayed.

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By Eric T
18th Jul 2017 14:23

Software companies upset by government decision not to force businesses to use software designed and sold by said companies.

Well I never. That's a turn up for the books.

Pardon my cynicism - but they would say that, wouldn't they (to paraphrase a lady who was probably in a profession that was possibly more honourable than the the world of software marketing).

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By Tornado
18th Jul 2017 16:06

If HMRC are providing the specifications of MTD compliant software, then all such software should therefore be the same.

Why then are dozens of software developers all spending time and money developing software that is essentially the same as their competitors?

As was mentioned at one of the Select Committee hearings, it seems unbelievable that HMRC are not providing any MTD software as part of this project.

Pure logic says that it would be far better for HMRC to develop a complete suite of MTD software that is fully under their control and does exactly what they want it to. Being cloud based, it means that we could all use the software for free and know that it would be fully up to date all the time in accordance with their requirements.

I know that some would point to the poor record of HMRC as regards software, and that is a legitimate argument, but we are looking here at a suite of software specially commissioned by HMRC and created by the best programmers (which may well be one of the commercial companies)

I know that is is extremely unlikely to happen due to the strength of the software developers and their influence, but ironically this may be one of the key reasons why MTD will fail.

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to Tornado
18th Jul 2017 16:34

Tornado wrote:

If HMRC are providing the specifications of MTD compliant software, then all such software should therefore be the same.

Why? Tax software is not the same, despite it all being compliant with HMRC filing requirements.

Tornado wrote:

Pure logic says that it would be far better for HMRC to develop a complete suite of MTD software that is fully under their control and does exactly what they want it to. Being cloud based, it means that we could all use the software for free and know that it would be fully up to date all the time in accordance with their requirements.

LOL! Seriously? So hands up all those who would happily dump MoneySoft or BrightPay and stick to HMRC PAYE Basic Tools for all payroll tasks? No takers?

HMRC have a very poor record of using contractors to develop their software, but somehow you seem to think that next time it will all be better.

Insanity: Doing the same thing over and over again expecting different results.

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By Tornado
to Tim Vane
18th Jul 2017 17:07

I think you are missing the point.

If our Government want to have the most digitally advanced tax administration system in the World, then they would have to provide the highest quality software in order to achieve that goal.

You cannot have one without the other.

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By Eric T
to Tornado
18th Jul 2017 17:30

One of the problems is that our tax system and underlying code is so complex, that developing advanced IT systems that can handle it is not easy. Witness the problems HMRC are having this year just sorting out the seemingly fairly innocuous changes to the taxation of dividends and bank interest.

The software used to put men on the moon - or to send space probes to the outer reaches of the Solar System, is a doddle compared to writing software that can cope with the multiple variables and unintended consequences that UK taxation seems to create.

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to Tornado
20th Jul 2017 17:15

Tornado wrote:

If our Government want to have the most digitally advanced tax administration system in the World, then they would have to provide the highest quality software in order to achieve that goal. You cannot have one without the other.

I could not disagree more. The govt want the systems that we use to be advanced. They set the rules and the API's that commercial software houses need to comply with. There is no need for the govt itself to write the front-end web-based (cloud) software that interacts with HMRC's back-end systems. Indeed, it is greatly preferable that govt do not even try to do that. History has proven that they are useless at creating good quality software and why waste taxpayers' money developing it, when commercial organisations will do so anyway for the vast majority of users who wouldn't be seen dead using HMRC software. If I had to use HMRC's software for all my tax work, I'd give up the profession immediately, as i'd want to throw my computer out of the window with frustration every five minutes.
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By Tornado
to charliecarne
20th Jul 2017 17:30

It is interesting that you appear to accept that HMRC are OK at writing the back-end software, but are not going to be able to create the front-end software. What is the difference?

Your view just adds to the mystery as to why the front-end has to be commercial software and not created by HMRC as part of an integrated system.

Exactly why are HMRC better at the back-end software than they are at the front-end software?

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to Tornado
20th Jul 2017 17:44

Tornado wrote:

Exactly why are HMRC better at the back-end software than they are at the front-end software?

HMRC are just as terrible at writing back end software. The difference is that WE don't have to use it directly, since we can use proper software which has been well-designed to hide the cracks and make a lemon taste like a strawberry.

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By Tornado
to Tim Vane
20th Jul 2017 18:12

OK, fair enough.

So the solution would be for HMRC to use commercial software for the back-end as well then?

I would have thought that the real solution is for HMRC to concentrate their resources in writing top quality back-end and front-end software and then we would all be happy.

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to Tornado
21st Jul 2017 16:55

Tornado wrote:

So the solution would be for HMRC to use commercial software for the back-end as well then? I would have thought that the real solution is for HMRC to concentrate their resources in writing top quality back-end and front-end software and then we would all be happy.


er....no! As Tim Vane has said, we don't need to interact directly with the back-end, so the most important thing is that the software that we use directly (at the front-end) is well designed, easy to use and provides all of the reports that we need. Any number of commercial suppliers can compete to produce their version of a front-end solution and we can choose which of these to use, based on our preference.

It's like choosing bookkeeping software. I may prefer QBO and you may prefer Xero. Both do essentially the same job and will maintain a correct set of books, but you and I will each value different features and it is that which determines which software choice we each make for the front-end user interface and features.

The same holds true for tax software. So long as the back-end can correctly store all of the data, I don't really care who designs it or how easy it is to use because I'm not using it directly. I choose a commercial partner to "talk" to HMRC's back-end systems and, if that "conversation" is difficult due to HMRC's lousy software, that is a problem for my commercial partner to solve. I just pick whichever partner solves it in the way that is best for me.

As for commercial partners designing the back-end too, how can that possibly make sense? HMRC will almost certainly hire in external software experts to write the code (as I doubt that they have in-house expertise), but it can't be left open to anyone to write, as it needs to be a single system under the control of HMRC, unlike the front-end which can have hundreds of versions, none of which need be controlled by HMRC (they just need to be authorised to interact with HMRC's API).

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18th Jul 2017 16:13

Software developers are in agreement with MTD. Not the small businesses who try to survive the economic conditions.

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18th Jul 2017 19:38

This is a summary of the above posts in comedic spirit:

"This parrot is dead!"

"No it isn't it is just resting."

"It's stone dead."

"No look it just moved."

"That was you pushing the cage."

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to mr. mischief
20th Jul 2017 10:14

Very, very witty. That just about sums MTD up. After the BBC pay info release yesterday and the present state of UK politics, my bags are packed and ready.

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By Eric T
to draccserv
20th Jul 2017 10:26

I wonder how much the BBC paid the Python team for writing that sketch (adjusted for inflation, of course)?

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20th Jul 2017 15:44

Indeed - the software developers weep the tears of the crocodile.

What pains me though is that actually MTD is predicated on forcing small businesses - and individuals - NOT to use their accountants, at least in the first instance, but to 'go it alone' and screw things up from the outset.
Its going to be hell on earth for accountants to back out transactions and reset because, for one example, how many micro-businesses really understand capex vs. opex.

Perhaps the software developers now have a chance to reset their thinking and accommodate the fact that accountants are still going to get the annual [perhaps quarterly] carrier bag of tatty receipts for everything from petrol and butties to a new laptop.

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20th Jul 2017 10:43

“Stephen [Kelly] and I have spoken a lot to government and customers and industry to digital agenda. This puts government back a step in terms of UK leading the way. We want to make sure businesses are able to take advantage of digital agenda. A lot of businesses are still not using accounting software. Every time that happens, we see that as risk.”
Risk of what to whom? A lot of businesses deliberately won't use it because it adds nothing to their operations but cost and stress. They can't afford annual "upgrades" for exactly the same software which has only been altered for some functions which are irrelevant to them. And many SME clients who do use it often get frustrated and irritated by the time needed to familiarise themselves with these irrelevant "improvements" which demand the user to accept "new-look" menus and screens.

Time to come down from your clouds IRIS, Sage et al, and get back to the real world of double entry and T-accounts - and take a look at how the SMEs actually operate and the pressures on them from all sides, including NIC, auto-enrolment, employee legislation compliance. The last thing they need is to commit more time and expense to additional reporting to Government, whether or not it makes the UK the world leader of the "digital agenda", whatever that is.

Accounting software, once it copes with the routine of book-keeping, has got nowhere much to go except for changes to accounting standards. My client SMEs could quite happily still use ten year old plus versions of Sage if they hadn't been forced into "upgrading". So the software business constantly needs to re-invent itself but maybe they've now been rumbled? Yes, I know - wishful thinking.

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20th Jul 2017 10:45

I've always believed Sage to be a clumsy, outdated POS and there are way better systems out there.

It all seems highly appropriate - physician, heal thyself!

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By Eric T
20th Jul 2017 10:48

Why the imperative to make the UK the "world leader" in digitising the tax system anyway?

I would be far happier if the UK became a world leader in simplifying the overall tax code.

Make THAT the priority and THEN look at other "improvements" to the system.

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20th Jul 2017 11:16

Interesting.
The UK's biggest software developer couldn't conceal its disappointment at the common sense now shown over the MTD fiasco.
Alan Laing , the M.D.'s correlation is an unfounded generalisation that the UK now lags behind other nations in terms of digital capability. He adds that the pace of the Government's vision for 'Digital Britain' has somewhat slowed . Laing has mastered the art of stating the bloody obvious on this second point. And what a good thing this is. Too much , too soon with MTD has led to its current pathetic and shambolic state of flux.
I also read that Sage's C.E.O.- Stephen Kelly - was previously the Government's Chief Operating Officer at the time of the MTD whim initiation.
Both Laing and Kelly admit to ''speaking a lot'' to government , customers and industry. Laing and Kelly want to make sure that businesses can take advantage of digital agenda. They point out that a LOT of businesses are still not using accounting software . They conclude that EVERY time businesses do not use accounting software , they see that as a risk.
I ask Laing and Kelly to come and speak to my clients and try and get them sweet on MTD and the additional time , administration entailed.
Clearly the only ones to benefit if the whim should evolve are software suppliers and HMRC .
The MTD 'Consultation' promising an easier life for small businesses was just a load of b*llocks.

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to Mr J Andrews
20th Jul 2017 15:35

Well written. Officials and some advisers who are trying to promote M.T.D were in fact looking for their commission and secret deals to enhance their income. They provided articles in Some accountancy journals explaining the benefit of digital reporting. We found out those who provided articles were share holders and promoters of different software companies and never come lean.

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20th Jul 2017 11:16

Interesting.
The UK's biggest software developer couldn't conceal its disappointment at the common sense now shown over the MTD fiasco.
Alan Laing , the M.D.'s correlation is an unfounded generalisation that the UK now lags behind other nations in terms of digital capability. He adds that the pace of the Government's vision for 'Digital Britain' has somewhat slowed . Laing has mastered the art of stating the bloody obvious on this second point. And what a good thing this is. Too much , too soon with MTD has led to its current pathetic and shambolic state of flux.
I also read that Sage's C.E.O.- Stephen Kelly - was previously the Government's Chief Operating Officer at the time of the MTD whim initiation.
Both Laing and Kelly admit to ''speaking a lot'' to government , customers and industry. Laing and Kelly want to make sure that businesses can take advantage of digital agenda. They point out that a LOT of businesses are still not using accounting software . They conclude that EVERY time businesses do not use accounting software , they see that as a risk.
I ask Laing and Kelly to come and speak to my clients and try and get them sweet on MTD and the additional time , administration entailed.
Clearly the only ones to benefit if the whim should evolve are software suppliers and HMRC .
The MTD 'Consultation' promising an easier life for small businesses was just a load of b*llocks.

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By Brinner
20th Jul 2017 11:46

What a great post by leahjane @10.43.
Absolutely spot on. Agree totally with the sentiments expressed.
I hope the view that quarterly reporting is dead is correct as I think we all agree this is utterly pointless and serves no purpose whatsoever.

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20th Jul 2017 12:05

Lets pray that this ill conceived idea is consigned to the bin forever. It is absolutely pointless and will achieve nothing for the government and just create pointless extra work for the self employed. A vote loser if I ever saw one

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By Tornado
to tiercel55
20th Jul 2017 13:21

"A vote loser if I ever saw one"

Spot on.

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20th Jul 2017 12:09

Should make it compulsory for all HMRC involved in MTD to be able to do book keeping and understand all tax law, after all this is what they expect "John the Plumber" to do.

Got mint condition Frank Woods Business Accounting Volumes 1 & 2 books if they want to borrow that for the book keeping part. Sure they can get all the tax law themselves.

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to North East Accountant
24th Jul 2017 21:14

North East Accountant wrote:

Should make it compulsory for all HMRC involved in MTD to be able to do book keeping and understand all tax law, after all this is what they expect "John the Plumber" to do.

Got mint condition Frank Woods Business Accounting Volumes 1 & 2 books if they want to borrow that for the book keeping part. Sure they can get all the tax law themselves.


Arguably the best books - never let me down.
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By Eric T
20th Jul 2017 12:29

I'm a Spicer and Pegler man myself.

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to Eric T
24th Jul 2017 09:11

If you were Eric I then you could take some credit for the parrot joke.

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By Eric T
20th Jul 2017 12:29

I'm a Spicer and Pegler man myself.

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to Eric T
24th Jul 2017 09:12

If you were Eric I you could take some credit for the parrot joke.

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24th Jul 2017 12:10

Is cloud-based accounting software any good?

I get the fact that the software suppliers have to offer a cloud-based accounting product. They are being forced down that line by the government and it's crazy MTD obsession.

My issue is very simple - is their new software any good, when compared with the old stuff? I have tried a few offerings, and am not overly impressed.

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25th Jul 2017 05:58

Neil,

I am glad someone else has come on here to voice concerns about Cloud-based software. See my numerous posts on the Cloud products I have used, as a result of client decisions before I got them as clients:

1. Some have very dodgy balance sheets, no doubt the MTD write-offs will not make things better.

2. Large and material imbalances which include big differences between the bank balance in the product compared to the statement, and multiple mispostings when you dig into this.

3. Lack of compatibility with UK law, for example Director's loan transactions stuffed within "Drawings", "Dividends", the supplier ledger and even in one case the customer ledger!

4. Slowness. I am in the Lake District. Round here it is not uncommon to get under 3Mbps compared to 38Mbps you have paid for, last week for example I had 3 days where download speed averaged under 1.

That's just the start of my concerns about this stuff!

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26th Jul 2017 11:39

The worst feature of Cloud products like QBO, Xero is in my view the slick but spivvy advertising.

Business owners buy the product and start making postings willy nilly. After 6 to 12 months the ones with any sort of a clue start to wonder why the Cloud bank balance bears no relation to the bank statement, and also how can they make so many phone calls chasing debts only to be told - and later confirm - that "We have already paid this."

This is the stage at which I enter the fray. Before this Cloud nonsense, no way would this type of client just buy accounting software and start clicking and posting.

I have in fact started quoting HIGHER fees to all prospects on the Cloud who cannot assure me that their Cloud bank balance equals the bank statement. I just can't be bothered with more composts to sift through.

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to mr. mischief
26th Jul 2017 12:50

mr. mischief wrote:

The worst feature of Cloud products like QBO, Xero is in my view the slick but spivvy advertising.


I thought that was its best bit; downhill from there.
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