Tax year: 2026/27 | Last reviewed: 2 October 2026
Many small businesses still run their finances the way they did ten years ago: receipts in a shoebox, invoices in Word and a spreadsheet updated when there is time. It works until it does not. Making Tax Digital now requires digital records for VAT and, from April 2026, for many sole traders and landlords. More importantly, a digital finance function gives you numbers you can actually use.
What a digital finance function looks like
- Cloud accounting software such as Xero at the centre, accessible from anywhere
- Bank feeds pulling every transaction in automatically each day
- Receipt capture with Dext: photograph a receipt or forward an email and it is read, coded and published to Xero
- Online invoicing with payment links, so customers can pay by card or Direct Debit through GoCardless
- Integrated payroll, expenses and stock apps as the business needs them
- Dashboards showing cash, profit and what is owed, updated in real time
The benefits
Less admin
Bank rules and automatic receipt matching remove most manual data entry. Many of our clients spend minutes a week on bookkeeping instead of hours at the end of the quarter.
Better accuracy
Transactions come straight from the bank and suppliers, so there are fewer typing errors, missing invoices or duplicated entries. Reconciling becomes a check rather than a puzzle.
Faster cash
Online invoices with a pay now button and automatic reminders get paid faster. Seeing who owes what at a glance helps you chase before a debt goes stale.
Real-time decisions
Up to date figures mean you can see whether you can afford a hire, how much to set aside for tax and what dividends are available, without waiting for year end accounts. Our management accounts show both numbers every month.
Compliance built in
MTD for VAT and MTD for Income Tax quarterly updates can be filed directly from the software. See our Making Tax Digital service.
Lower costs
Accountants spend less time sorting records, so year end work is quicker and fees can be lower. Your accountant can also see the same live numbers, which makes advice faster.
Making the switch
- Pick a start date, ideally the beginning of a VAT quarter or financial year.
- Bring across opening balances and outstanding invoices from your old system.
- Connect bank feeds and set up bank rules for regular transactions.
- Connect Dext and set your suppliers’ default coding.
- Learn the weekly routine: reconcile, approve receipts, chase debtors.
Our Xero migration service handles the move from Sage, QuickBooks or spreadsheets, and our Xero training gets your team confident quickly. See also common Xero mistakes to avoid.
A real example
Leigh, a plumbing and heating engineer, moved from paper invoices and a mixed personal bank account to digital records and quarterly reviews in one week. Read Leigh’s story.
FAQs
Is Xero suitable for a small business?
Yes. Xero has plans for sole traders through to growing companies, and is MTD-compatible for VAT and Income Tax.
How long does it take to move to Xero?
For most small businesses, between one day and a couple of weeks depending on history and data quality.
Talk it through with Digivolve
As Xero Platinum Partners, we migrate, set up and train businesses across Sussex, then keep the books current for you.
This article is general information based on the rules for the 2026/27 tax year as at October 2026. It is not personal tax advice. Rates and thresholds can change, so please speak to us before acting.