How to choose the right accounting software for your small business (2024)

These days, doing your bookkeeping no longer means having to use spreadsheets or even do calculations on paper. Now, there’s a range of small business accounting software that makes managing your finances much quicker and more straightforward.

Here, we explain what accounting software does, what to consider before you buy, and how to pick the most suitable option for your business.

And with the help of our Enterprise Nation community of business owners and advisers, we identify some of the best accounting software packages currently available.

What is accounting software?

Accounting software is a type of software you use to manage your finances and keep track of your business's financial transactions. It can help with tasks such as:

• invoicing

• payroll

• budgeting

• preparing taxes and tax returns

• profit and loss accounts and balance sheets

• expenses

Using accounting software lets you save time and reduces the risk of you making mistakes in your financial records.

Many accounting software options are cloud-based, which means you can access your financial data from anywhere with an internet connection.

What does accounting software do?

Accounting software makes it easy for your business to stay on top of its finances.

The best programs turn all the time-consuming manual aspects of bookkeeping into quick, automated processes. For example, you can use the software to:

• run financial reports on your cash flow, turnover and profit and loss

• calculate business taxes (such as corporation tax, VAT and national insurance) and file your returns to HMRC

• manage payroll

• prepare end-of-year accounts

• generate invoices

Because most packages are built as cloud accounting software, you can access them through your web browser or smartphone app, from anywhere.

And what's more, many offer free trials, so you can try them out before you settle on a suitable option for your business.

What's the difference between accounting software for enterprise and software for small business?

Accounting software for enterprise is designed to handle a large number of transactions involving several different business departments, and complex reporting requirements.

It often integrates with other enterprise systems, such as software used for customer relationship management, inventory management and HR.

Small business accounting software, on the other hand, tends to be simpler and more user-friendly, as it's catering to businesses with more straightforward financial needs.

It may offer features like invoicing, expense tracking and basic financial reports. It's usually cheaper and easier to implement, making it a better fit for smaller organisations with limited budgets.

What should I consider before buying accounting software?

Before you begin looking at bookkeeping software, first examine your business. Understanding exactly what you need will help you choose an appropriate package, so consider the following.

What you need the software to do

Rather than do your accounting and bookkeeping manually, you can use accounting software to:

• automate repetitive tasks

• get financial data in real time

• simplify processes for tasks like invoicing and financial reporting

• share information with accountants and financial advisers

• keep to the law

You'll find that you save time, lessen the number of errors, get valuable real-time financial insight and can work more easily with accountants or financial advisers.

What type of business you run

Do you need a comprehensive record of your stock? Do you need to forecast sales every quarter? Do you know which of your product lines are selling best?

Understanding your business's requirements will help you to choose the right accounting software package.

Examples

• Retail store

  • Track sales: Automatically record transactions and update stock levels.

  • Generate invoices: Quickly create and send professional invoices to customers.

• Freelance designer

  • Manage expenses: Easily categorise and monitor business expenses.

  • Track time: Log hours worked on different projects so you can bill clients accurately.

• Restaurant

  • Payroll: Calculate wages and taxes and create payslips for employees.

  • Produce profit and loss statements: Generate financial reports to monitor profit margins and control costs.

Your budget

Beyond introductory free trials, you should expect to pay a fee for the package you choose. This will likely include an upfront cost and then a monthly fee, which may vary depending on the size of your business or the number of people you want to have access to the software.

Here's a rough example of what you'll likely pay for the most well-known accounting software packages on the market right now:

• Basic packages: Priced at £5 to £15 per month. Help with basic invoicing, expense tracking and simple reports.

• Standard packages: Priced at £15 to £30 per month. Same basic features, alongside functionality for invoicing, bank reconciliation and financial reporting.

• Advanced packages: Priced at £30 to £50 (or more) per month. Added features include advanced reporting, inventory management, multi-currency support and payroll.

It’s worth getting advice from your accountant or IT support service so you know how much you might need to spend.

Accounting software can be more affordable than you think and can often scale up as your business grows, giving you complete flexibility.

Liaising with your accountant

Most businesses use an accountancy service of some sort. These experts are ideally placed to recommend the type of software that will be right for your business and that’s compatible with their own systems.

You might also want to talk to your IT consultant (if you have one). They will be able to give you advice on hosting, backups and access.

How do I assess what accounting software I need for my small business?

Once you know what you need your new software to do, you can then consider your options and identify which suits your business best.

If you know you’re ready for an accounting system, take the time to determine your needs, do your research and try out the packages that seem to suit you best.

Talk to your accountants and other business advisers, get recommendations and make sure you choose something that can grow with your business.

Free trials

These allow you to:

• test out the user interface

• see how the package integrates with any other software you use

• get a feel for whether the program meets your needs

When you sign up to a free trial, it may not give you access to the full range of functionality. However, you should have enough access to be able to make an informed decision about whether the software is right for you.

Independent reviews

Online reviews and features can be very useful in giving you a clearer idea of what the software is like to run on a day-to-day basis.

It's also worth asking your business peers for recommendations. They may even be able to help with an introduction to the system provider.

Remote access

Does the software allow you and your advisers to access the system remotely? Most of today’s software does, but it’s worth checking, if that feature is high up on your ‘essential’ list.

Big names or niche providers?

Well-known software packages may come with a higher price tag, but you’re also paying for the company’s experience and a proven and reliable service.

A niche or smaller provider may well be cheaper, and might offer more personal service, but make sure you know what would happen if that business folded. You need to be able to protect your financial data at all times.

Software support

Getting used to new bookkeeping software can take a while. Because this is handling your business finances, you must be absolutely sure you understand how it works and how you use it.

When deciding on a package and provider, look for:

• initial training

• ongoing support

• information on upgrades

• how you can scale up the system so it grows with your business

Best accounting software for small business

With most bookkeeping software packages, you can do all the things we discuss above (for example, run reports, calculate taxes, manage payroll and so on).

So looking at the best of what’s currently available, what options do you have?

Sage Accounting

A cloud-based solution for any small to medium-sized business. Its automated bookkeeping, real-time insights, cash-flow forecasting and wide range of other tools make financial management simple, allowing you to focus on growing your business.

• Features

• Pricing

Xero

Ideal for small businesses that want easy-to-use cloud accounting software.

With its simple dashboard, the software lets you track and manage expenses, create and configure reports, do straightforward budgeting tasks and send invoices. And by integrating with third-party software, Xero allows you to manage your company payroll and collect online payments.

• Features

• Pricing

FreshBooks

Popular cloud accounting software that’s designed with small business owners in mind. It comes with a wide range of features, including expense tracking and business reports. But it’s with invoicing that the software excels, with tools to send, receive, print and pay invoices and collect customers’ payments.

Built to be used by people without accounting or bookkeeping knowledge, FreshBooks has a clear and easy-to-navigate interface. It integrates with a whole host of third-party services such as PayPal, Mailchimp, WordPress and more.

• Features

• Pricing

QuickBooks Online

Generally considered the most widely used accounting software by small businesses and their accountants. The software is hosted in the cloud, providing access via a web browser or the dedicated smartphone app.

QuickBooks is packed with lots of accountancy features – invoices and expenses, tax tools, payments, reports and estimates. And beyond the basic plans, the more advanced subscriptions offer services for managing bills, setting up automated workflows, inventory tracking and more.

• Features

• Pricing

KashFlow

An online accounting service designed for small companies. Accessible through a web browser or the free mobile app, the software creates estimates, invoices and quotes, automates tax returns and provides tools for credit control so you have a clear understanding of what money you’re owed.

• Features

• Pricing

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Relevant resources

• Lunch and Learn: The benefits of cloud accounting

• How to smartly use cloud accounting apps

• Is it time to switch to cloud accounting software?