With the end of the financial year, accountants working with farming clients are presented with unique challenges, particularly when it comes to gathering data. In this article, we’ll explore the upcoming changes regarding Making Tax Digital (MTD) and MTD for Income Tax Self Assessment (ITSA), and its impact on accounting firms working with farming clients, as well as what other firms are doing to mitigate some of the pain points when gathering data.
The pain points for accountants
As you know, farming clients – with the need to collect a multitude of additional data (livestock numbers, crops on hand) – present a unique challenge when it comes to efficiently completing your end of year financials. Incomplete information and 'finger in the air' assumption on valuations is commonplace. Add to this the complexity on tax rules for farm expenses, repairs and improvements and so often accounting for farming clients is akin more to a dark art than a standardised business process.
Streamlining end of year workflows
Data collection at year end is one of the main challenges for firms with farming clients. Data may be received by the firm in many different formats (or even just written on a piece of paper), and if this data isn’t returned on time, it can have huge implications on workload. The data required is wide ranging, from pure financial information like income and expenses, and changes in assets and liabilities as well as farm production data including livestock numbers, crops on hand and in store, inputs in store etc.
Many firms are telling us that the current year end accounting preparations will be further strained by the MTD and MTD for ITSA, with an increased number of agri clients being mandated to use accounting software. A streamlined, firm-wide process will be essential for managing clients, requesting and collecting data and then reconciling accounts, preparing tax returns and then finally getting reports into the hands of clients. This is aside from any opportunities to add extra value to farming clients, in relation to advisory and forecasting, and supplying insights and benchmarking.
A smarter solution is here
Many accounting firms are telling us their need to start planning early for MTD ITSA. Specifically, firms are looking at what the future will look like when they'll have a need to deal more regularly with clients to collect the additional information they need for ITSA compliance. Although firms are seeing this as an opportunity to increase hours per client – and therefore billing per client, it comes with a concern about the perceived value received in return. With more timely data available more frequently it gives the opportunity to enable use of the data for more frequent agri-specific value-add reports that could not only increase the stickability of an accountants service but also help justify the inevitable increase in billing to these same clients.
Using Figured & Xero within the accounting firm enables practices to overcome these main pain points. Figured is the home of the farm production data (such as livestock and crop values), reporting and forecasting. Xero is the home of invoice and bill management, bank reconciliation, and submission of tax returns. Using both platforms in conjunction with each provides a whole host of benefits to help accountants set their farmers up for success:
- Data gathering – Figured enables accounting practices to collect and store the main farm production data required for end of year purposes (i.e. on farm inventory of inputs, as well as livestock and crop production quantities and values)
- Farm record keeping – it’s fair to say farm records come in all shapes and sizes. Figured helps the accounting practice by having one common structure for farm data collection, which makes the process more streamlined and easier to manage for all involved parties.
- Tax submissions – once the accountant is happy with the farm valuations, these can be posted back to Xero, keeping both systems balanced and in sync. Accountants are then able to manage the tax submission process within Xero.
- Communication with farming clients – reports can be scheduled to be sent at key timings, as well as enabling them to be sent in the format the farming client would want. Some may want to login online to view their key reports, others would want print out. This can all be managed within Figured.
To hear more about how Figured could help you and your farming clients please get in touch with us here or visit www.figured.com.
*The views expressed are the author’s and not ICAEW’s.