The Complete Guide to Eliminating Bag Day from Your Accounting Practice

Every Monday morning, the ritual begins. UK accounting practitioners across the country brace themselves as clients arrive with carrier bags, shoeboxes, and crumpled envelopes stuffed with months' worth of unsorted receipts. This dreaded "bag day" scenario has become so commonplace that accountants joke about clients presenting them with shoeboxes full of receipts when it's time for tax returns, yet it represents one of the most inefficient and frustrating aspects of modern accounting practice.

The problem isn't just the time spent sorting through faded, crumpled receipts. Processing receipts manually is time consuming, inefficient and tedious, driving up clients' bills, lowering margins and reducing firms' ability to scale client volumes. With Making Tax Digital requirements tightening and client expectations rising, UK accountants need a fundamental shift away from this outdated approach.

Why Bag Day Persists in UK Accounting Practices

The Scale of the Problem

The shoebox mentality runs deeper than simple procrastination. Business owners often store receipts in carrier bags, shoeboxes, spare drawers, or even glove compartments of vans, with no sorting system whatsoever. One bookkeeping firm recently processed 699 sales invoices and 451 purchase receipts that a client uploaded to receipt capture software in just 2 days. This is a stark example of how quickly things can spiral out of control.

The Hidden Costs

Beyond the obvious time drain, bag day creates cascading problems:

Client Relationships Suffer: Accountants experience the frustrating "herding cats" aspect of chasing clients for missing receipts, which is particularly aggravating for professionals who thrive on organisation.

Revenue Impact: Poor record keeping means missing out on reclaimable VAT and paying too much tax, directly affecting client outcomes and satisfaction.

Compliance Risks: When audited by HMRC, businesses must provide source documentation quickly and easily. That's time better spent on revenue generating activities rather than fishing through boxes of receipts.

Scalability Issues: Manual receipt processing prevents firms from taking on more clients or offering higher value advisory services.

Current Receipt Capture Solutions: Progress with Pain Points

Dext (Formerly Receipt Bank)

Dext has established itself as a leading receipt capture platform, boasting over 700,000 customers worldwide and claiming 99.9% accuracy in data extraction using AI and OCR technology. The platform allows users to capture receipts via mobile app, email, or drag and drop, automatically extracting supplier details, amounts, and dates.

Dext's Limitations:

Pricing Complexity: Monthly plans for small to medium businesses range from £27 to £80+ per month, while accounting firms face costs from £235 to £850 per month. For many UK practices, this represents a significant ongoing expense.

Incomplete Solution: Dext Prepare is not a full accounting system and requires integration with separate accounting software like QuickBooks or Xero, creating additional complexity and potential integration issues.

User Experience Issues: Reviews highlight ongoing problems. Users report that "sometimes despite support documentation, the use of the app and the process itself is not very straightforward" and "it doesn't always extract information from receipts correctly".

Technical Glitches: Users have reported bugs where selecting Client A in the software incorrectly records Client C instead, creating serious data integrity concerns.

Hubdoc

Hubdoc, now owned by Xero, offers receipt capture and document management integrated directly with Xero accounting software. It's included free with most Xero subscriptions, making it an attractive option for cost conscious practices.

Hubdoc's Limitations:

Feature Gaps: Recent reviews highlight reliability issues and feature gaps, with Hubdoc rated only 3.5 stars in the Xero Appstore compared to competitors.

Storage Constraints: One of the biggest drawbacks is limited document storage capacity, with additional fees required for higher document volumes.

Limited Automation: Hubdoc doesn't read receipts to determine which card was used and automatically allocate receipts to specific employees, requiring manual intervention for multi user scenarios.

Processing Issues: Users report that "it can sometimes be slow processing images and can fail", creating workflow bottlenecks.

Basic Functionality: While free for Xero users, Hubdoc lacks advanced features and is best suited only for very basic needs.

Making Tax Digital: The Urgency Factor

The implementation of Making Tax Digital for Income Tax (MTD IT) adds unprecedented urgency to solving the receipt capture problem. From April 2026, sole traders and landlords with combined business receipts over £50,000 must maintain digital records and submit quarterly reports to HMRC.

Key MTD Requirements

Digital Record Keeping: Taxpayers must maintain digital accounting records in software or spreadsheets, as maintaining paper records will no longer meet legislative requirements.

Quarterly Reporting: Quarterly reporting deadlines are the 7th of the month after each quarter end, requiring consistent, up to date data throughout the year.

Real Time Compliance: HMRC encourages records to be kept as close to real time as possible, making bag day approaches fundamentally incompatible with future requirements.

Expanding Scope

The MTD net will widen rapidly: the threshold reduces to £30,000 from April 2027, affecting an estimated 970,000 additional individuals. This means most UK accounting practices will need robust digital receipt capture solutions within the next few years.

The Next Generation Solution: Beyond Traditional Receipt Capture

While Dext and Hubdoc represent improvements over manual processing, they still leave significant gaps in the modern accounting workflow. What UK accountants need is a next generation automation layer that sits on top of existing accounting systems, unifies data, performs hourly syncing, extracts emails and documents with OCR, uses AI agents to maintain bookkeeping completeness, and gives accountants and clients a conversational interface to their accounting profile.

Intelligent Data Unification

Unlike traditional receipt capture tools that simply extract data, advanced automation platforms connect all financial touchpoints. This means automatically pulling in bank feeds, email receipts, supplier invoices, and expense reports into a unified system that maintains consistency across all accounting records.

AI Powered Completeness Checking

Current solutions capture data but don't ensure completeness. Next generation systems use AI agents to continuously monitor for missing transactions, duplicate entries, and categorisation errors, proactively maintaining the integrity of accounting records rather than simply processing documents as they arrive.

Hourly Data Synchronisation

While traditional tools update periodically, modern automation platforms sync data hourly across all connected systems. This ensures that accountants and clients always have access to the most current financial picture, enabling real time advisory services and eliminating the delay between transaction and recording.

Conversational Interface

Perhaps most importantly, advanced platforms provide natural language interfaces that allow both accountants and clients to query their financial data conversationally. Instead of navigating complex software interfaces, users can simply ask "What were my travel expenses last quarter?" or "Show me all unreconciled transactions" and receive instant, accurate responses.

Implementing a Bag Day Elimination Strategy

Phase 1: Client Education and Onboarding

Start by identifying clients who will be affected by MTD requirements. HMRC will write to qualifying businesses after they submit their 2024/25 tax returns, but proactive firms can identify candidates now based on income levels.

Phase 2: Technology Integration

Choose automation tools that integrate seamlessly with your existing accounting software stack. The best solutions require minimal setup time and immediately begin improving data quality and workflow efficiency.

Phase 3: Process Transformation

Move from reactive, year end receipt processing to proactive, continuous monitoring. This shift enables higher value advisory services while ensuring MTD compliance from day one.

Phase 4: Client Value Enhancement

With automated receipt capture and processing, practitioners can offer real time financial insights, proactive tax planning, and strategic business advice. These are services that command premium pricing and strengthen client relationships.

Measuring Success: Key Performance Indicators

Track the impact of eliminating bag day through specific metrics:

• Time savings per client per month (target: 5+ hours based on industry benchmarks)
• Client satisfaction scores for record keeping processes
• MTD compliance readiness percentage across your client base
• Advisory service revenue as a percentage of total fees
• Error rates in financial reporting and VAT submissions

Looking Forward: The Future of Accounting Practice

Eliminating bag day represents more than just operational efficiency. It's a fundamental shift toward modern accounting practice. Firms that embrace comprehensive automation will find themselves better positioned to:

• Offer premium advisory services
• Scale operations without proportional staff increases
• Attract and retain clients who value modern, efficient processes
• Comply with evolving regulatory requirements
• Build more profitable, sustainable practices

The traditional shoebox and spreadsheet approach belongs in the past. With MTD requirements looming and client expectations rising, UK accounting practices have a clear choice: evolve their receipt capture and processing capabilities now, or face increasing pressure from both regulators and competitors who have already made the transition.

The technology exists today to eliminate bag day forever. The question isn't whether to make the change, but how quickly you can implement it across your practice.

Want to explore smarter automation for accountants? Discover how AI can transform your practice and eliminate the endless receipt sorting. Join our waiting list to get early access to tools that understand your clients, your workflows, and your day, giving you more time for the work that truly matters.