Small business accounting was once ruled by stacks of paper, spreadsheets and receipts, but thanks to accounting software, there’s no longer any need to manually tot up incoming payments, outgoing payments, invoices, petty cash and other finances.
The once-arduous manual accounting process has been usurped by business accounting software. Not only does business accounting software ensure the accurate and robust record of financial accounts and statements, but it also centralises accounting data, allowing businesses to access it from anywhere with an internet connection.
Businesses can access powerful reports and insights into their business finances whilst managing invoices, bills, payroll and tax compliance from within the same platform.
Business accounting software performs all the major bookkeeping and accounting tasks required of businesses:
- Records single-entry and double-entry transactions
- Request payments and invoices
- Categorise payments and record expenses
- Pay bills
- Record loans and debt
- Payroll management
- Track and record business expenses and capital allowances
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Why Use Business Accounting Software?
For businesses of all sizes, keeping accurate financial books and accounts of a certain standard is required by law in the UK. Smaller businesses can use simpler single-entry accounting, or ‘cash basis’, whereas SMBs and enterprise-sized businesses will have to use traditional double-entry accounting.
Regardless of what level of accounting complexity a business demands, accountancy software can help.
Software-powered small business accounting systems provide visibility of the business’s financial situation, enabling them to monitor cash flow, revenue and profit/loss. Accounting software is generally intuitive and easy to use - it covers all the basics whilst allowing businesses of all sizes to tap into financial analysis, projection and reporting features.
Moreover, as HMRC progresses towards Making Tax Digital, setting up a software accounting system now ensures that a business is ready for submitting VAT and other tax returns.
The Best Software for Small Business Accounting
There are a handful of excellent small business accounting software providers that are suitable for small business accounting in the UK. The following options are already part of HMRC’s Making Tax Digital scheme and are thus fully HMRC-compliant.
Xero
Xero is probably one of the most well-known digital accountancy platforms in the world. It has a whole host of excellent features kitted out for the self-employed, start-ups and small businesses ranging all the way up to larger enterprise-level organisations.
Xero provides the following features:
- Connect to bank accounts and payment providers to stream all financial information to one place
- Categorise and sort payments
- Claim expenses and allowances
- Organise payroll
- Send and receive invoices and bill payments
- Over 160 currencies supported
- Generate professional reports
- Analyse accounts and finances within one smart dashboard
- Collaborate with others and forward accounts for auditing
Xero currently offers 3 membership tiers ranging from the Starter tier at just £10 a month to Standard tier at £24 a month and Premium tier at £30 a month.
QuickBooks
QuickBooks was developed by Intuit, which was one of the first entrants to the accounting software market. This Making Tax Digital-compliant cloud-based accounting platform has all the main bases covered, allowing businesses to manage their accounts, expenses, payroll, VAT and tax. It also allows businesses to draw up professional reports and analyses. It connects to many other business apps and payment providers and is scalable as a business grows.
Quickbooks contains the following features:
- Connect to various bank accounts and payment providers to stream payments directly to the app
- Organise and sort payments
- Calculate VAT and other tax
- Payroll management
- Collect and send invoices
- Track time
- Powerful dashboard for instant insight into accounts
- Track expenses and mileage
- Scan receipts
- Stock and inventory management (Plus tier only).
Quickbooks’ Simple Start package is just £6 per month, rising to £10 for Essentials and £15 for Plus which contains plenty of extra advanced features like inventory management.
FreshBooks
The aptly named FreshBooks is indeed designed to be clean, simple and straightforward. It’s targeted at the self-employed and small businesses but does scale up reasonably well for SMBs with employees.
With a simple, jargon-free interface with all the usual accounting and financial tools businesses have come to expect, FreshBooks doesn’t skimp out on much. One feature it does lack is inventory management. FreshBooks is HMRC-compliant and can be used to submit VAT as part of HMRC’s MTD scheme.
FreshBooks offers the following features:
- Connect bank accounts and payment providers for centralised accounting
- Track time and project costs
- Organise bills
- Payroll management
- Draw up professional reports
- Track expenses
- File VAT and other tax returns
- Mobile app included
- Analyse balances and statements for insight
Currently, FreshBooks offers a budget Lite package of just £5.50 a month, rising to £9.50 for the Standard package and £15.00 for Premium. It’s simple, cost-effective and is probably best suited to smaller businesses and freelancers.
Sage Accounting
Sage Accounting is relatively new but it offers powerful features that target businesses who require payroll services. Aside from sophisticated payroll software that some accountancy software lacks, Sage Accounting covers all the bases as far as accounting, tax compliance, reporting and project tracking is concerned. It’s fully HMRC-compliant.
Sage Accounting provides the following features:
- Connect accounts and payment providers to the platform
- Create, send and receive invoices
- Track project costs
- Financial projections and analysis
- Excellent payroll management software
- Scan receipts (with AutoEntry, which costs extra).
- Account for VAT
- Send and manage quotes
- Inventory management
Sage Accounting ranges from £12 monthly for the Start tier to £24 for Standard and £30 for Plus. AutoEntry, an advanced invoice, document and receipt scanning app, costs an extra £9 per month.
Honourable Mentions
Some honourable mentions here include Free Agent, Zoho Books and Kashoo. For those who just need a professional invoicing solution, Invoicely may do the trick.
Summary: The Best Software for Small Business Accounting
As tax in the UK progresses away from traditional paper accounting, there’s never been a better time to move bookkeeping processes to the digital realms. The service of accounting software is probably an inevitability.
Small business accounting software really does make accounting quicker and more efficient, and it isn’t expensive either. The main competitors are closely matched here - it’s difficult to go wrong with either Xero, QuickBooks, Freshbooks or Sage.
