Desktop accounting software has been around almost as long as desktop computers, but small businesses are increasingly looking to cloud-based accounting solutions to manage their bookkeeping, payroll, statutory accounts and annual tax returns.
Not only do cloud-based services offer a Software-as-a-Service (SaaS) business model, where the small business pays a small monthly fee on a recurring basis instead of forking out hundreds or thousands of pounds up front, but the company’s financial records are also securely stored and managed ‘in the cloud’, meaning they can be accessed at any time and from any device (provided it has an internet connection and the correct security credentials are supplied).
If you’re self-employed, accounting software can make it much simpler to manage your finances and, when Making Tax Digital is introduced, everyone who has to file a Self Assessment tax return will need to use bookkeeping software that’s compatible with HMRC.
At Accounts and Legal we have a team of small business accountants dedicated to providing fixed-price tax, accounting and business forecasting and planning services that are specifically geared towards supporting the growth of SMEs and sole traders.
Get in touch with our team to discuss your requirements, or get a no-obligation quote for our services now using our accounting quote tool.
In the past, accounting software was complex and cumbersome, and it was generally more suitable for large enterprises than small businesses.
Now, there’s a huge range of accounting software that’s been designed especially for small businesses and self-employed workers, and many of the products are pretty cheap or even completely free.
This type of software is designed to make it easy for you to manage your business finances, helping you with things like bookkeeping, invoicing, inventory and payroll.
The product you pick will usually include handy reporting tools as well, so that you can track your cash flow and monitor your profit and loss, for example.
While this software can make your life much easier, it’s currently up to you whether you use it to manage your business accounts. But that’s all set to change under the government’s Making Tax Digital plans, which will begin rolling out next year.
Under the plans, you will have to file your tax returns online, using accounting software that can integrate with your new digital tax account.
QuickBooks is developed by Intuit, one of the very earliest providers of accounting software.
Freelancers can sign up for the basic package that helps you track your self-employed income, while small businesses can use it for things like VAT and payroll.
There are lots of reporting and monitoring tools too. Subscription prices start at £6/month, reduced to £2.99/month for the first six months.
Xero is another big player, and it can also help you with things like invoicing, inventory, payroll, and expense claims.
As well as that, it can import your banking, credit card, and PayPal data, and there’s an app that works on both iPhone and Android.
Prices start at £10/month, reduced to £7.50 for the first three months.
Zoho Books is praised for being very customisable, and it can help you issue invoices, sort expenses, and track inventory, although it doesn’t currently have a payroll feature.
It can also connect to your bank account for real-time updates on cash flow, and integrate with a whole host of other apps. Prices start at £6/month.
Benefits of FreshBooks include the user-friendly interface and lack of jargon.
It’s designed for freelancers and small businesses with basic accounting needs, so it focuses on things like invoicing and expense tracking. It integrates with apps like PayPal and Zendesk.
There’s no pricing information on the UK website, but the US product starts at just over £10/month.
Like FreshBooks, FreeAgent is targeted at freelancers and very small businesses, so it focuses on tasks like invoicing, time tracking, and expense management.
You can set invoice reminders and upload pictures of your receipts, and pricing starts at £19/month for sole traders with 50% off for the first six months.
Plus, if you’re a Simply Business customer, you can get a 15% lifetime discount. .
Sage is a big enterprise software provider, but Sage One is its accountancy offering for small businesses. It can help you with everything you’d expect, like invoicing, cash flow, and payroll.
Pricing for Sage One Accounting starts at £20/month, currently reduced to £10/month for the first three months.
There are also several providers offering free accounting software, including GnuCash and Wave Accounting.
GnuCash is open source accounting software, meaning the code behind it is publicly available and can be shared and modified. You can use it to track stock, income, and expenses.
With Wave Accounting, the free software includes invoicing, accounting, and receipt scanning, and then additional services like payroll are pay-as-you-go.
While it’s important to find software that suits the way you like to work, if you need to submit a Self Assessment tax return you also need software that’s compatible with HMRC’s systems.
A number of these software providers are quite cagey about whether or not their software will be compatible.
Quickbooks, for example, says you can use it to "complete HMRC Self Assessment", but on closer inspection it simply provides the information and expects you to copy and paste it into the online form HMRC currently use.
FreeAgent, on the other hand, has a button that automatically files your tax return for you, but there’s no guarantee it will work if HMRC completely overhaul their own system.
Making Tax Digital, and in particular, Making Tax Digital for VAT, should be an urgent priority for SMEs as compliance with rules for the latter effective from April 1st, 2019.
As one of few Platinum Partners of Xero in the UK, we've seen the effect it can have when used properly. With proper implementation and strategic processes in place, it’s not just cloud accounting software, it’s a whole new way for our team to work with you, guide you and give you the valuable advice you need to push your business forward.
Need to get your business ready for Making Tax Digital? Our team are certified to help make the process a smooth one and get the very best from your new software. Get in touch to further discuss how our expertise can get help your business realise its full potential.