Choosing an Accounting Software
Over the years, I’ve used several different accounting softwares and am often asked by business owners ‘what’s the best software’ or ‘which one is easiest’…I’m afraid the answer usually is “it depends”! If you’re considering an accounting software for your business, here are some common questions I’ve been asked about choosing an accounting software.
Do I need to use accounting software?
If you are VAT registered, then yes – under the Making Tax Digital rules, VAT submissions need to be digitally submitted on compatible software, so you need to use a suitably compatible software. If you are not currently VAT-registered, then a spreadsheet is fine. However, MtD is coming for all taxes…see this article on what MtD is and what it will mean for your business.
Are all accounting softwares MtD (Making Tax Digital) Compliant?
Unless the developer wants to go out of business, all of the major accounting softwares will be MtD compliant. I’ve yet to see one that isn’t! If the software was not compliant, it would simply become redundant. Due to VAT for MtD being in place for some time now, all current softwares on the market are MtD for VAT compliant, and will be actively developing upgrades for the changes to this legislation.
Do you recommend any particular accounting software?
Bookkeepers and accountants will usually have a preferred software or two that they use more than others. For me, I use Xero and Quickbooks (and am a Certified Advisor for both). But that doesn’t mean ones like FreeAgent, Zoho, Sage or Kashflow are not just as good or effective – these are simply my preference.
If you are engaging a bookkeeper or accountant to do your bookkeeping, then discuss with them what they prefer to use. I am always happy to spend time with my clients to teach them the software. After all, even if you are engaging my services to do your books, business continuity good practice means that I always ensure my client has access to and the ability to do even the basics in their accounts.
Which software is easiest to use?
That will depend on you! In the final section I talk about taking advantage of free trials when choosing the software – one of the reasons for doing this is to find out which one you find easiest to use.
Should I use a cloud-based or desktop accounting software?
Cloud-based accounting software is the norm nowadays. It means you can access your accounts anywhere with an internet connection, and many have a specific App allowing you to access and manage aspects of your accounts from your smartphone. It also means you can easily share your accounts by creating logins for your bookkeeper, accountant or staff member (and often bespoke the level of access each person has). Desktop applications do still exist, but are normally seen in large enterprises. For small businesses, cloud-based is what I would always recommend.
How much do they cost and are they worth the money?
That will depend on the software and the level of package you choose. For small businesses or sole traders, expect to pay anywhere between £10-20 per month. For companies who have a larger number of transactions, expect to pay £15-30 per month. There may be additional charges for add-ons like Payroll or Expenses. Each platform is open about their fees, with many offer discounts on the first month(s) and free trials.
An accounting software can save you time in data entry, improve the accuracy of your figures, give a more professional appearance for invoices, allow you to quickly view reports and financial information that can help with decision making and forward-planning, provide you with a repository to store your digital receipts and allow you to easily share your accounts with your bookkeeper and/or accountant. Consider all this when looking at the fee.
I’m not happy with / don’t like the software I currently use, can I change accounting software?
Yes, absolutely. It is easier to do this at the end of your financial year – meaning you only need to transfer opening balances to a new software, not migrate over all transactions for the year up to the point you transfer. I would always recommend you change softwares with the help of a bookkeeper or accountant. When changing softwares, bear in mind that you may need to pay for both the new and old software subscriptions for the first couple of months, to give time for your previous years’ books to be finalised.
Prior to cancelling the subscription of your old software, ensure you download all transactions and records. You have a legal requirement to keep your accounting records for specific periods of time, depending on your business structure. (Sole Traders: keep your financial records for 5 years after the tax-filing deadline. For Ltd Companies, you need to keep your records longer – 6 years from the end of the financial year. If, during that year, you purchased an asset you expect to last longer than the 6 year time period, you need to keep those records for the lifespan of that asset).
OK, I’m ready to move to an accounting software…what next?
If you use a bookkeeper or accountant, speak to them to find out what they use/prefer to use AND ask if they are willing to show you the ropes of the software you choose.
No bookkeeper or accountant? Take some time to research the softwares available. Watch YouTube videos and tutorials (most have excellent and free training videos and webinars you can watch), and see which you like the look, feel and language of – there can be slight language/jargon differences between the softwares. Find one that has language you are comfortable with.
Take advantage of the free trials. You don’t have to set up your full business each time you use a free trial – but I’d recommend selecting at least 2 softwares (or 3 if you have the time), and running them for 2-3 weeks. Enter the basics of your company, opening bank balances and a few customers/suppliers and try out entering sales and purchase invoices, bank transactions etc to really get a feel for them. Some softwares also have Demo or Sample companies that you can go into and play with.
Ensure to select the correct ‘business type’ package in the software – often the softwares have different options for Sole Traders and Limited Companies. The difference is not just in the price, but in the layout of the reporting and chart of accounts within the software itself. If you are a sole trader and you move to being a Ltd Company, you will need separate software accounts for each as they businesses are two separate entities.
Choose the level of package that works for your business right now. Most have levels of fees that relate to the size of your business. But don’t worry if that changes. If your business grows, or recedes, you will be able to upgrade/downgrade the package as required.
