Best Online Accounting Tools for Small Businesses

Long gone are the days of keeping paper accounting records, wading through mountains of receipts, and losing sleep over chasing an unpaid invoice. Even if you are a secret spreadsheet lover, modern accounting platforms and tools provide many more benefits to your business than just keeping track of numbers. They can help you see how your business is growing and they allow you to make sound business decisions. Providers such as Xero and Quickbooks are giving small business owners an easy-to-use and flexible platform for managing their business accounts, all at a budget-friendly monthly cost. 

Why use accounting software?

If you're used to a paper-based accounting system, you may be wondering why you should switch to online accounting software. After all, if something's not broken, why fix it? Right?

Save time

• Online accounting platforms can simplify your entire bookkeeping process, and even completely automate some tasks, leaving you more time to work on other things.
• Reconciliations, VAT returns and management accounts can be done a lot quicker. 
• Most software packages support online banking and online tax filing.
• Some packages also offer payroll modules.

Get real-time business information

• If your accounting package links with your bank account, you can see your balance or how much tax you owe.
• You can easily generate reports and financial statements such as P&L and balance sheets, or view performance against your budget with a click of a button.

Pay and get paid quicker

• Most online accounting platforms enable you to send automated reminder letters to late payers.
• Allow employees to access the software to submit expense claims or payslips.

Access anywhere

• Many applications are now cloud-based, which will allow you to access your records from anywhere where you have an internet connection. 
• With cloud-based software you don’t need to purchase software licenses or servers which can be expensive.
• Records won’t be on the premises, so in the case of a fire, flood, or natural disaster, your data will be safe. 

Choosing the right accounting software for you

There are many benefits to switching to a cloud-based accountancy system. But which do you choose? Life as business owner is often a juggling act of important decisions that need to be made. And when it comes to choosing an accounting package that suits your specific business needs, there are so many available that it can be tricky to assess which will work best for you. 

Before diving headfirst into demos with different software providers, it's important to consider the following:

1. Keep in mind the size and complexity of your business operation as this is likely to determine which software features are most appropriate for your business. Most software providers offer a range of packages to suit the needs of small and simple business set-ups and also larger, more complex businesses.
2. Your industry will also have a part to play. You may need a specialized software package that is designed to help businesses in your niche. 

Once you've shortlisted the most appropriate software providers for your business. You should make the following considerations:

Does it offer additional features that could benefit you?

First and foremost, does it offer all the features you need and could it streamline other parts of your business too. For example, if you're moving to a new accounting package and they offer a payroll solution too, would it be beneficial to move both into one solution? Accounts packages that offer a payroll module will calculate wages, statutory deductions such as PAYE and National Insurance contributions as well as assisting with auto-enrolment pensions.

Can it scale with your business?

If you're just starting out or running a rapidly growing business, it's important to think about whether the software provider offers what you'll need in the long run and what the associated costs are likely to be. Some software providers offer upgrades or bolt-on modules that you can purchase to assist in things which may not be needed initially, but will become necessary later. So, it's worth checking whether they'll be able to offer features that may support your growth and at what expense. 

Will you need training?

Depending on your knowledge and who will be using the software, you may need training. This can be pretty costly but tends to be cheaper in the long-run than the trial and error method. So when comparing packages ensure you review this cost as it's likely to vary between software provider.

How much is it going to cost?

The pricing of accounting packages can vary quite significantly, however it should be relative to the size and complexity of your business. Often, accounting software providers will offer a monthly subscription price or a slightly cheaper option which ties you in for a year or two. The monthly option may allow you to cancel at any time, but will cost more on a monthly basis. The annual option will more than likely save you some money in the long run, but also bear in mind that paying upfront may put a strain on your cash flow. If you need more specialized software, this can be more expensive, and you should be prepared to pay a premium for this. 

Best Online Accounting Software

Most cloud-based accounting providers offer free trials, so if you are still not sure, you can easily try the software before making a final decision. Below are some popular packages and their main features.

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• Crunch is an accounting platform that creates packages based on the individual needs of your business, whether you're a sole trader, limited company, contractor or freelancer.
• Crunch is structured slightly differently to the other platforms on this list, with innovative accounting software paired with ongoing support through a team of account managers and accounting experts.
• Provides more than just accounting software and great support - Crunch also provides access to or help with small business insurance, self-employed mortgages, and investments and pensions.
• Free access to Crunch Chorus - a community for the self-employed, featuring jargon-free business guides, software and templates, exclusive discounts and more.

Try Crunch Now

Disclaimer: Fleximize is partnered with Crunch Accounting. Fleximize Members get an exclusive discount on Sole Trader and Limited Company plans with Crunch. Find out more here.

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• There is no need to sign into a contract with this package - you simply pay between £6 and £25 per month and you can cancel at any time. The price you’ll pay depends on how advanced you want the software to be and how many users you need.
• There is a mobile app which enables you to manage your business finances on the go.
• The software is simple to use and has built-in tutorials and guidance.
• You can assess the state of the business at any time using the report functionality.
• Quickbooks can integrate with other software, such as Microsoft Excel.
• It also allows you to customize invoices (such as adding your own logo), spreadsheets, charts etc. 

• You can link your bank account, meaning transactions will be downloaded automatically. Quickbooks can match these transactions to your sales and expenses. There is also a reconciliation tool to make this quick and simple.
• The software makes it easy to stay on top of expenses by tracking mileage and allowing you to take pictures of receipts, store them and put them into tax categories.
• You can see at a glance what is due on your next VAT return on a real time dashboard. You can also submit directly to HMRC.
• The payroll module sends your RTI information directly to HMRC, calculates statutory deductions, assesses your workforce for auto-enrolment pensions, allows you to email payslips, generate P45s and P60s, and process statutory payments such as SSP and maternity pay.
• Manage CIS deductions.

Try Intuit Quickbooks

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• Costs between £10 and £27.50 per month. Xero charges extra for the payroll and projects modules on top (based on number of employees/users).
• Dashboard shows key information in real time, such as cash in your bank account and outstanding invoices.
• Allows you to create personalized invoices using templates and logos.
  
• Helps you with your credit control by sending automatic reminders to customers.
• Create invoices online and email them as a PDF.
• Can connect to your bank account, import transactions and then reconcile them. There is also a code suggestion function which speeds up the reconciliation process.
  
• Offers a mobile app, enabling you to invoice, manage expenses, and reconcile bank transactions on the go.
  
• Can integrate with a large number of other applications – such as inventory management, invoicing and time tracking software.
  

• Allows you to accept PayPal payments/Apple pay.
• You can record your fixed assets, manage depreciation and disposals.
• Expenses module allows you to reimburse employees for business costs by allowing them access to Xero to submit photos of receipts and attach to expense claims.
• Invite your accountant to access the data to share files in real time.
• Reporting dashboards to help you identify your best-selling and most profitable products, inventory reporting to keep track of quantity and value, and other customizable reports.
• Payroll module available to help you deal with pensions, RTI submissions, tracking employee hours, managing annual leave and processing of pay.
• You can file your VAT returns directly through Xero. It also works with the different schemes (standard, flat rate etc).

Check out Xero

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• Costs between £20 and £125 per month for one user (price depends on required features - essential, standard and professional plans available).
• Payroll and HR software are separate but can be integrated.
• Integrates with various applications such as Microsoft 365, Sage Pay and credit control software.
• Can connect to your bank accounts to enable importation and tracking of transactions.
• Create invoices and get paid via credit card with the ‘pay now’ feature.
• Enable your accountant to login so that they can access your data securely.
• Mobile app that allows you to create simple invoices and quotes on the go.
• Has a VAT module to make filing returns easier.

Find out More

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• Costs between £7 and £19 per month plus VAT. The starter package is suitable for very small sole traders as only up to 10 invoices can be created. The top subscription package includes payroll modules for up to 5 employees.
• Links directly to HMRC for VAT filings. Has a real time VAT liability to you can keep track of how much you owe.
• Allows you to customize invoices and set up auto reminders. Allows customers to pay via PayPal, WorldPay, credit/debit cards and direct debit.
• Create quotes and estimates.
• Allows you to work remotely from your phone using a mobile app.
• Payroll function is HMRC accredited allowing you to submit RTI information, and has the ability to deal with auto enrolment pensions.
• There is an employee self-service so that they can access payslips online.
• Easy-to-use reporting systems.

Get Started with Kashflow

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• Costs from £10 to £21.50 per month, but if you sign up for 1-2 years, you may be eligible for a discount.
• Allows you to customize invoices, set up auto-reminders to customers, and schedule recurring invoices.
• Allows customers to make direct debit payments, PayPal, and WorldPay.
  
• Can file VAT returns directly to HMRC. Also has a comparison tool to see if you would save by switching to the flat rate scheme.
• Does CIS calculations.
• Allows imports of transactions from your bank account and automatically reconciles them for you.
• You can make transfers from one bank account to another using ClearBooks (as long as the accounts are linked).
• There is a dividend tool which creates a pre-populated template that can be issued for personal tax returns. ClearBooks also allows you to issue, transfer or buy back shares from each shareholder.
• Auto-depreciation of assets based on rules you have set.
• A number of applications can be connected to ClearBooks such as Companies House, PayPal, GoCardless, payroll software, Mailchimp and more.

Try ClearBooks

Remember!

Using accounting software will generally make bookkeeping and accounting easier but you’ll still need a certain amount of financial literacy to get the most out of it. You may not want a sophisticated accounts package if you don’t understand how to use it. Or if you already have an accountant and just want somewhere to record transactions, a simpler package may be best for you. Speak to representatives of each provider before you commit to a platform, and only sign up for what your business needs.