Want to simplify your small business accounting? Here’s the best software for the job

As any business owner will know, accounting is a headache. It’s often the thing that entrepreneurs least enjoy about running their own company. But it’s a necessary evil and, thankfully, it’s so much easier than it used to be - mainly thanks to modern accounting software.

In years gone by, accounting software was used mainly by large businesses. Then came solutions aimed at smaller businesses, but those that still had reasonably complicated accounting needs. Now, at last, there are cloud-based solutions that make record keeping. accountancy and tax, simple and straightforward even for sole traders and freelancers, or those with one or two employees.

Whatever size of business you run, you’ll benefit from using this software - and it’s often super affordable, or even free!

If you have an only account, they may well provide you with accountancy software as part of the package. Most of these are pretty great and help your accountant keep tabs on your income and expenses in real-time. However, if you’re looking for something separate from this, that can also help you with additional functions, here’s our rundown of the latest options. You can assume these tools all allow you to perform the essential accountancy tasks, such as invoicing, recording payments and expenses and calculating tax liabilities.

GnuCash is a totally free accounting software program that allows you to complete a whole host of financial tasks and is particularly effective at helping you to budget, as a small business owner. GnuCash allows you to run reports, keep accurate records and complete most of the tasks you would need to take care of when running a business. Available to download on PC and MAC.

What they say: “Designed to be easy to use, yet powerful and flexible, GnuCash allows you to track bank accounts, stocks, income and expenses. As quick and intuitive to use as a chequebook register, it is based on professional accounting principles to ensure balanced books and accurate reports.”

Notable features:

• Double-entry accounting
• Stock/bond/mutual fund accounts
• Small-business accounting
• Reports, graphs
• QIF/OFX/HBCI import, transaction matching
• Scheduled transactions
• Financial calculations

Our verdict: This is an impressive, free tool that is especially effective at keeping up with accounting tasks, while its money management tools are a bit more basic. GnuCash’s reporting functions are very advanced, so you can keep a close eye on your financial matters using this software. The look and feel is dated, but, as it’s totally free, this seems like a reasonable area for compromise.

Wave offers an easy-to-use cloud-based software solution for simple accounting needs, perhaps most suited to freelancers and those running very small businesses. The interface is intuitive and the user experience is rated highly. You have to pay extra if you need client payment or payroll tools, so if you are more than just a one-man band, this tool won’t be completely free.

What they say: “Truly understand and manage your income and expenses. Track everything and connect to other Wave products such as payroll, payments, and invoicing. Everything is automated and in one perfect package.”

Notable features:

• Double-entry accounting
• Invoicing and transaction management
• Instant payouts
• Smart interface
• Receipt scanning

Our verdict: This is a great option for very small businesses. It has easy onboarding and users seem to think it’s incredibly straightforward to use. There have been some reports of a lack of detail in the invoices, which can prove problematic to some that need to adapt invoices for different clients. However, overall, this is a great free-to-use tool for basic accounting needs.

FreeAgent is a cloud-based solution, offering all the accountancy tools you need to run a small business. It’s Making Tax Digital-ready, so you can file your VAT returns through the software itself. FreeAgent has great user reviews and customers appreciate the added time management tools available through the software.

What they say: “Run your entire business from anywhere. Snap an expense, fire off an invoice, check your cash flow, stay on top of your tax. Take care of business, anywhere.”

Notable features:

• Stopwatch feature for tracking employee hours
• Strong dashboard information
• Expense and mileage management
• Good contact recording
• Double-entry accounting

Our verdict: FreeAgent focuses on simplifying expenses and invoicing, so it’s great for the limited requirements of a sole trader or freelancer. If you’d like to use an accounting tool that gives you great insights into your financial affairs, which you can use to make strategic decisions, this probably won’t deliver.

Cost: £19/month, with 50% off for the first six months.

QuickBooks is one of the most well-known cloud-based accountancy software solutions on the market. It offers adaptable, tailored packages that work for different types of businesses, which means you will only pay for the services and tools you need.

What they say: “Simple, smart accounting software and expert support – all in one place. From invoices and expenses to VAT, taxes and time tracking, we’ve got you covered.”

Notable features:

• Self Assessment tools
• Digital VAT reporting and payment
• Making Tax Digital tools
• CIS tools for the construction industry
• Sync with bank and credit cards

Our verdict:

A really adaptable option that allows you to opt-in and out of extra features. Smaller businesses can get by on the more basic options, but the option for more reporting, payroll, or complex tax tools are available too.

Cost: From £12/month for the basic package, which just includes tax tools, increasing to £30/month for the comprehensive package. Often discount deals offer up to 75% off for a number of months.

Although Sage has been a big player in business accountancy for decades, they have adapted to offer small and medium-sized businesses cloud-based solutions that meet their specific needs and are easy to use.

What they say: “Stay in control, predict cash flow and save time so your focus stays on what matters most. Perfect for small businesses and sole traders.”

Notable features:

• HR tools
• Cashflow forecasts
• Ability to add users
• Clear employee onboarding
• Making Tax Digital-ready
• Sync with bank
• Help for e-commerce businesses selling to the EU

Our verdict: Sage’s small business software is a good option for those looking for a basic solution, but might disappoint those who are migrating from its other more comprehensive solutions.

Cost: Monthly subscription ranges from £12 to £30, with heavy discounts sometimes available, including up to 6 months free.

Xero’s double entry small business accounting software is tailor-made as a web-based system for small businesses. It is a very simple tool to use and it offers a few functions that its competitors are missing, like managing fixed assets and being highly customisable.

What they say: “Xero is a powerful online accounting software solution. Run things smoothly, keep records tidy, and make compliance a breeze.”

Notable features:

• Customise invoices and quotes
• Manage fixed assets
• Lots of add-ons and third-party connection opportunities
• Making Tax Digital-ready
• Automated bill paying

Our verdict:

Xero is an excellent option for small and growing businesses. This software will scale with you and you won’t need to switch to a more comprehensive system as you grow. Users find it easy to import their information from other systems.

Cost: Plans start at £10/month and increase to £30/month, although the £24/month option should be adequate for most.

In Summary

Although accountancy can be a little intimidating at times, these tools can really have an impact on your working life and the burden you feel as a business owner. Little and often is all it takes to get on top of your finances with these systems. They’re all worth your consideration, alongside others on the market that we haven’t covered above. Just make sure the system and package you choose offers all the functions you need, or you’ll find yourself upgrading and spending more. Happy accounting!