Let’s face it, choosing the best accounting software tools for your business probably isn’t the most exciting task on your to-do list.

However, in the long-term, the right accounting software can ease stress, simplify day-to-day admin, and provide business insights that could otherwise go unnoticed.

Some solopreneurs go without accounting software initially, figuring it’s sufficient to throw together invoices in Microsoft Excel (or even Word). And while this is theoretically possible, it’s a really bad decision.

Furthermore, with Britain’s Making Tax Digital legislation rolling out as we speak, accounting software is no longer optional for most businesses. At the moment, digital accounting is only compulsory for companies registered for VAT. However, it will soon be required for other tax declarations too.

The good news is that even the best accounting tools for small UK businesses don’t require a huge investment. Sold on a “Software As A Service” (SaaS) subscription model, you’re only looking at a small monthly payment. Not that long ago, accounting software was more of an “off the shelf” product, where you’d need to allow for a rather more significant up-front cost.

In this article, we look at the best accounting software for your small business. The benefits of using software like this may well prove more significant than you’d expect. They include knowing at-a-glance who owes you money, and understanding your tax position at all times – not just at the end of the year.

What is the Best Accounting Software For Small Businesses in the UK?

Below we list five products that we consider to be the best accounting software for small businesses in the UK.

Xero is our personal favourite. It offers a notably modern approach to accounting and is a pleasure to use.

However, it’s worth checking out the full list and becoming familiar with the other options too. There may be reasons why another product could prove a better fit for your business.

Often, your choice of accounting software may be swayed by the preference of your accountant. They may push you in the direction of a specific product because they are familiar with it, or perhaps because they earn some commission as a reseller.

Ultimately, however, the basic accounting principles are the same. Any accountant worth their salt should find it easy to understand how to use any of the options on this list. Having organised accounts held in any software package will please accountants more than sending them a pile of shoeboxes full of paperwork once each year!

1. Xero

On the scene since 2006 when the company was founded in New Zealand, Xero is one of the relative newcomers to the accounting software scene. Xero disrupted an industry that was a little tired and set in its ways, and has grown at a meteoric rate. Over 2 million businesses now subscribe to the service.

Xero stands out for having a user-friendly and attractive (yet rather understated) interface. It’s the product of choice for many modern accountancy firms, and also very popular with software developers. This is thanks to a market-leading selection of hundreds of software integrations, making it easy to blend Xero with other systems you use to run your business.

Xero’s feature set is as extensive as any, with lots of bells and whistles, even on the lowest pricing tiers. It is, however, worth comparing the versions carefully. Some features, such as multi-currency support, only come with the top tier.

Key Features

  • Support for unlimited users.
  • Scalable for businesses of all sizes.
  • Easy integration with a vast range of other products.
  • Mobile apps for Apple and Android.

Possible Downsides

  • No telephone support.
  • Payroll only available with a third-party solution.

Pricing

Xero’s pricing starts out rather low, at just £10 per month for the “Starter” package. You’re unlikely to even pay that much to begin with. Xero offers both a free trial and 50% off for the first four months.

“Standard” is £12 per month, and “Premium” is £15. Only the latter includes support for multiple currencies. There are also numerous add-ons, such as payroll, project management and CIS contractor modules, all at an extra monthly cost.

2. QuickBooks

QuickBooks dates back much further than Xero. It’s made by Intuit, a firm that’s been in the accounting game since the early 1980s. There’s been a cloud-based option of QuickBooks, QuickBooks Online, since 2004, which we focus on here.

QuickBooks Online has a modern approach and an attractive central dashboard that provides access to all key features. The learning curve is perhaps a little steeper than that of Xero, especially if you’re somebody whose eyes glaze over when you hear accounting terminology.

QuickBooks offers a separate “Self-Employed” package for sole traders working on a pure self-assessment tax basis. Those registered for VAT or running limited companies have a range of three different packages, each adding additional features.

Key Features

  • Fully compliant with HMRC and Making Tax Digital.
  • Additional features like stock management and time tracking included on some plans.
  • Telephone support on almost all plans.
  • Integrated cash-flow planning.

Possible Downsides

  • Top tier plan is expensive.
  • Reporting quite basic.
  • Web interface can be glitchy sometimes.

Pricing

Like many firms providing accounting software tools, QuickBooks offers an enticing introductory offer. At the time of writing you get 50% off for the first six months of your subscription.

At full price, QuickBooks Online costs from just £8 per month (plus VAT), for the sole-trader version. “Simple Start,” “Essentials” and “Plus” cost £12, £20 and £30 per month respectively.

Pleasingly, you do get multi-currency support on the middle tier. However, the stock management and time tracking functions only come on the £30 per month option, which is notably above average in price.

3. Sage

Sage is probably the most recognised old hand and big name in accounting software. But things have moved on significantly since the days when the software came in a huge box and accounts staff carried backups around on floppy disks.

Sage now offers cloud-based accounting, with packages specifically intended to compete with new pretenders to the throne. Although some might say Sage was slow to catch up with the move to online accounts, the company now offers an intuitive and modern package.

Sage is still the preference of plenty of accountancy firms, with many accountants having decades of experience using Sage software. You can add payroll support to every package, and there are modern touches like receipt scanning via a mobile app.

Key Features

  • Strong support options with both live chat and a UK based call centre for telephone support.
  • Direct Making Tax Digital VAT submissions.
  • Strong inventory management (top tier only).
  • A favourite with many accountants.

Bad Points

  • A more dated user experience compared to some more modern products.
  • Performance can be sluggish.

Pricing

Sage is another company with an introductory 50% off offer. The company’s offering is less generous than Xero or Quickbooks, with the half-off saving only lasting three months.

Once you graduate to full price, you pay £12, £24 or £30 + VAT per month for the three tiered packages. The entry-level “Start” option will be adequate for plenty of solopreneurs, but “Standard” adds several features including cashflow forecasting, CIS reports and support for more than one user.

Multi-currency support only comes with “Plus,” which also includes Sage’s strong inventory management functionality.

4. FreeAgent

FreeAgent launched in 2007 and has built up an enthusiastic userbase since then. It’s well reviewed and has won various awards, including Small Business Accounting Software of the Year, from AccountingExcellence.

FreeAgent has a particularly attractive user interface and a modern mobile app. It’s easy to learn and use, and does certain things differently. Instead of offering pricing tiers based on features, the cost depends on whether you are a sole trader, partnership or limited company.

FreeAgent also has an “unlimited everything” policy, covering system users, active projects and clients. Some systems instead limit these things on the lower priced packages.

There’s a 30-day free trial, and at the time of writing FreeAgent offers the most generous introductory offer.

Key Features

  • Built-in functionality for time tracking, expenses and estimates.
  • Co-Pilot service, to find and work with suitable accountants.
  • Integrated payroll.
  • UK-based tech support.

Possible Downsides

  • Expensive for sole traders and smaller businesses once reduced price period ends.
  • Weak reporting.
  • Payroll functionality confusing to use.

Pricing

With the most generous introductory offer here, you can grab FreeAgent at half price for the first six months. After that, you pay £19+VAT per month as a sole trader, £24+VAT as a partnership, and £29 per month as a limited company.

Attractive though this “single tier” pricing appears, it does seem a little unfair on solopreneurs. Once you move to paying full price, you may pay significantly more for FreeAgent than for alternative products.

5. ClearBooks

ClearBooks is another product that sets out to put ease of use front and centre. The company has a fantastic online reputation and is renowned for high quality, personalised support.

ClearBooks hails from the UK, so was always built with UK accounting and tax practices in mind. It’s fully set up for UK-specific initiatives like Making Tax Digital and the Construction Industry Scheme.

Pricing for ClearBooks is simple, with just two tiers. However, it’s worth noting that most small businesses will need the more expensive one. The cheaper “Small” tier does not provide the Making Tax Digital functionality.

Key Features

  • An attractive user experience.
  • A specific tool to help with director dividends.
  • Payroll available separately.
  • Good document templates.

Bad Points

  • A rather basic mobile app that only handles receipts so far.
  • Not many integrations available.

Pricing

ClearBooks costs £10 per month for the “Small” package, and £22 per month for “Large.” The latter adds multi-currency support, as well as functionality for CIS and Making Tax Digital.

As with all the other products here, there’s a half-price introductory offer. In this case, you get the lower pricing for three months.

Why use Accounting Software?

As we eluded to in the introduction, small businesses can – theoretically – manage without accounting software.

However, companies that try to do everything manually store up big problems for themselves in the long term.

The Making Tax Digital initiative now means that businesses use accounting software to electronically submit VAT returns. There are also plans to extend this to cover corporation tax, although they have been delayed. MTD means that compliant software is now a must for many businesses. All the products here are compliant.

Putting aside the fact that getting accounting software may be a must for you anyway, there are various other reasons why it’s a really wise idea:

  • Knowing where you stand at every point in the year – and not just when your accountant has prepared your books.
  • Having access to reports that lay bare how your business is going.
  • Having the ability to quickly issue consistent and accurate invoices.
  • Always understanding your future tax liabilities, instead of saving up for a shock at the end of each year.

It’s surprising how many small businesses limp along without these abilities. Well configured and well managed accounting software can be truly transformative, and help you work on your business and well as in it.

How Much does Accounting Software Cost?

As most small business accounting software in sold on a subscription basis, it’s not an expensive commitment. However, there’s still some notable variation in the prices here.

The best accounting software tools start at about £8 per month. You may need to spend a little more, especially if you work in multiple currencies, which tends to push you towards the more “premium” prices.

What is Cloud Accounting Software?

Cloud accounting software stores your data online, rather than on a local computer or server. This reflects the general move towards cloud-based software, with everything from office applications to databases commonly “in the cloud” nowadays.

Storing data in the cloud has myriad benefits, not least easy accessibility from anywhere. There’s no need to send backup files to your accountant to work on – you can simply give them access. You also needn’t worry about things getting out of sync if you have more than one person working on the financial side of your business.

What is the Best Accounting Software for Mac?

The best accounting software for Mac is Xero. As it’s fully cloud-based you see the same interface regardless of the browser you use to access it.

Furthermore, those who enjoy the “Apple way” of doing things will appreciate Xero’s clean and modern user experience. Other providers are certainly catching up when it comes to user experience, but some, such as Sage, still have a feel that leans more towards their Windows roots.

What is the Best Accounting Software for Self-Employed People?

QuickBooks Online is a particularly good choice for self-employed sole traders. The self-employed package costs just £8 per month, and half that for the initial six months.

The fact that this version of QuickBooks is specifically aimed at those who only need worry about self-assessment means that the feature set is simplified. This certainly eases the learning curve.

However, you should be aware that there’s no VAT support in this version. Sole traders above the VAT threshold will need a more fully-fledged package.

What are the Disadvantages of Accounting Software?

The only real disadvantage of accounting software is the inevitable learning curve. In reality, this applies – to some extent – regardless of which solution you choose.

Ultimately, this doesn’t really come down to the software itself. It’s more about learning the basic accounting principles, and knowing how to categorise (reconcile) transactions.

It can make good sense to request some specific training and guidance from your accountant. They will (hopefully) know how your business works better than any software support department, and be able to help you set up and use the correct accounts and categories.

One other small downside is reconciling the transactions themselves. This is a job you’ll need to make a little time for every week or two. Getting into this habit is a much better practice than sorting through a mass of paperwork once each year!

Factors to Consider When Choosing Accounting Software

User Friendliness

As discussed above, accounting software has a learning curve, but it gets much shallower if you choose software that’s intuitive and guides you by the hand.

Xero does this particularly well, with lots of short but useful videos that help you understand all of the functionality. In fairness to the other products, good “tool tips” and guidance messages as you hover over different menus and features are common to most of the products in this list.

Pricing

Most cloud-based accounting software has a low monthly headline price, but more variation can emerge as you work your way up the pricing tiers and need extra features.

It’s also definitely worth comparing the ongoing prices, and not being swayed too much by the introductory offers. While it’s certainly nice to save half the price for a certain number of months, the chances are you’ll be using the software for years to come. As such, an extra £10 per month does add up.

There are certainly some nuances in pricing that can make a notable difference. Where in the pricing tiers multiple currency support appears is probably the most significant.

Data Privacy

Accountancy software firms take their responsibilities seriously and understand the implications of storing companies’ financial data in the cloud.

Once again, Xero is particularly strong here, with rock solid data centres under 24/7 surveillance.

Customer Support

If using accounting software is new to you, you’re likely to have questions as you go. Some of these you can probably direct to your accountant, but it’s not realistic to expect them to act as a full-time technical support department!

As such, it’s wise to pay attention to your chosen company’s reputation for fast and helpful support. It’s something we’ve been sure to take account of in our assessment of the service providers here.

A UK-based call centre is certainly a plus when you’re talking about UK-specific things like VAT and Making Tax Digital. It’s also sensible to think about whether you have a preference for telephone support, because not every provider offers it.

Multi-Currency Transactions

In the modern business world, plenty of British companies do business outside of the UK. However, don’t assume that every accounting package is equipped for this. It’s rarely included in any of the entry-level offerings.

Adding in multiple currencies actually means a substantial level of extra complication, especially since currency exchange rates change constantly. If you do business in multiple currencies, you’ll definitely want some clarity around how this is handled.

Even if you don’t work in multiple currencies now, it’s worth seeing what extra costs you could face if you start to in the future.

Integration with Other Business Software

If you run a simple consultancy business and issue just a few invoices each month, your accounting needs may be quite simple.

But how about if you take online card transactions, work with PayPal, or have a Point of Sale system for your business? Presumably you won’t want to duplicate work and create lots of manual accounting entries?

That’s where integrations come in.

All the accounting software here offers some level of integration with other packages, but how much varies significantly.

Integration plays a significant part in our recommendation of Xero. No other package here offers as many integrations “out of the box.” If you need to link lots of different systems, native integration could save you from having to implement clumsy workarounds.

Reporting

The range and quality of reports you can pull from your accounting software is definitely something to think about. Sometimes the right choice of reports can give you insights into your business performance that you wouldn’t otherwise have:

For example:

  • Who always pays late?
  • Which of your clients is spending the most?
  • What are your seasonal income patterns?

It’s not exaggerating to say that people who don’t use accounting software (or learn to take full advantage of it) can completely miss out on these insights.

Some level of reporting is included with all of the options here. However, if you have specific needs, it’s sensible to spend some time checking you can easily access (or create) the reports you need.

What your Accountant is Familiar With

As we’ve said above, accountants often favour one particular accounting software package.

It’s certainly worth consulting your accountant and seeing what they recommend. However, it’s unlikely they will object to you using any of the systems mentioned here. All of them could reasonably be considered “industry standard.”

Conclusion

Accounting software may not be tremendously exciting, but it becomes a faithful and indispensable companion to your business.

With free trials and introductory offers, you may wish to try more than one package before making a decision. But once you do, it’s likely you will continue to use the software for the full lifetime of your business. The providers know this, and that’s why they hand out such generous introductory offers!

Once your accounting system is “bedded in,” you’ll likely be constantly referring to it, and checking data online or via an app. You’ll spend plenty of time with your accounting software, so make sure you make the right choice.

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