Best accounting software for small business: a comparison guide

If you’re self-employed, accounting software can make it much simpler to manage your finances and, when Making Tax Digital is introduced, everyone who has to file a Self Assessment tax return will need to use bookkeeping software that’s compatible with HMRC.

Since there are so many options out there, we’ve written a quick guide to help you pick the one that’s right for your business.

Accounting and bookkeeping software for business

In the past, accounting software was complex and cumbersome, and it was generally more suitable for large enterprises than small businesses. Now, there’s a huge range of accounting software that’s been designed especially for small businesses and self-employed workers, and many of the products are pretty cheap or even completely free.

This type of software is designed to make it easy for you to manage your business finances, helping you with things like bookkeeping, invoicing, inventory and payroll. The product you pick will usually include handy reporting tools as well, so that you can track your cash flow and monitor your profit and loss, for example.

While this software can make your life much easier, it’s currently up to you whether you use it to manage your business accounts. But that’s all set to change under the government’s Making Tax Digital plans, which will begin rolling out next year. Under the plans, you will have to file your tax returns online, using accounting software that can integrate with your new digital tax account.

Accounting software comparison for small businesses

The sheer amount of programs and providers available can make it hard to compare accounting software, let alone choose a package to suit your needs, but we’ve taken a look at some of the best options for your business.

Modern accountancy software tends to be cloud-based, so it will work fine whether you use a Mac or PC, and most of these programs have been developed to be mobile-friendly, so they should work well on any device.

Many of the paid subscription services mentioned below offer a free trial (usually of one month) when you first sign up so you can try it out to see if it suits your needs. However, if you decide to buy, bear in mind that the prices shown usually don’t include VAT.


QuickBooks

QuickBooks is developed by Intuit, one of the very earliest providers of accounting software.

Freelancers can sign up for the basic package that helps you track your self-employed income, while small businesses can use it for things like VAT and payroll. There are lots of reporting and monitoring tools too. Subscription prices start at £6/month, reduced to £2.99/month for the first six months.

Xero

Xero is another big player, and it can also help you with things like invoicing, inventory, payroll, and expense claims.

As well as that, it can import your banking, credit card, and PayPal data, and there’s an app that works on both iPhone and Android. Prices start at £10/month, reduced to £7.50 for the first three months.

Zoho Books

Zoho Books is praised for being very customisable, and it can help you issue invoices, sort expenses, and track inventory, although it doesn’t currently have a payroll feature.

It can also connect to your bank account for real-time updates on cashflow, and integrate with a whole host of other apps. Prices start at £6/month.

FreshBooks

Benefits of FreshBooks include the user-friendly interface and lack of jargon. It’s designed for freelancers and small businesses with basic accounting needs, so it focuses on things like invoicing and expense tracking. It integrates with apps like PayPal and Zendesk.

There’s no pricing information on the UK website, but the US product starts at $15/month.

FreeAgent

Like FreshBooks, FreeAgent is targeted at freelancers and very small businesses, so it focuses on tasks like invoicing, time tracking, and expense management.

You can set invoice reminders and upload pictures of your receipts, and pricing starts at £19/month for sole traders.

Sage One

Sage is a big enterprise software provider, but Sage One is its accountancy offering for small businesses. It can help you with everything you’d expect, like invoicing, cashflow, and payroll.

Pricing for Sage One Accounting starts at £20/month, currently reduced to £10/month for the first three months.

Free accounting software for businesses

There are also several providers offering free accounting software, including GnuCash and Wave Accounting.

GnuCash is open source accounting software, meaning the code behind it is publicly available and can be shared and modified. You can use it to track stock, income, and expenses.

With Wave Accounting, the free software includes invoicing, accounting, and receipt scanning, and then additional services like payroll are pay-as-you-go.

Which accounting software for small business is compatible with Making Tax Digital?

While it’s important to find software that suits the way you like to work, if you need to submit a Self Assessment tax return you also need software that’s compatible with HMRC’s systems.

A number of these software providers are quite cagey about whether or not their software will be compatible. Quickbooks, for example, says you can use it to ‘complete HMRC Self Assessment’, but on closer inspection it simply provides the information and expects you to copy and paste it into the online form HMRC currently use. FreeAgent, on the other hand, has a button that automatically files your tax return for you, but there’s no guarantee it will work if HMRC completely overhaul their own system.

Making Tax Digital is still in its early days, having been put on hold and then brought back onto the agenda recently. It’s likely that many, if not all software providers will make changes to ensure their software works with the new HMRC system.

However, at the moment, it’s hard to know which companies will definitely make changes in order to be compatible (some US based companies, for example, may not think it as important as UK based companies), or how long they will take to make those changes.

If you already use subscription-based accounting software, or want to try it out before Making Tax Digital comes into effect, make sure you check how much notice you need to give to cancel your subscription. That way, if your provider isn’t ready when Making tax Digital starts, you can cancel your subscription in good time to switch to a different provider without having to pay for both simultaneously.

Which accounting software are you keen to try? Tell us in the comments.

Looking for self-employed insurance?

With Simply Business you can build a single self employed insurance policy combining the covers that are relevant to you. Whether it’s public liability insurance, professional indemnity or whatever else you need, we’ll run you a quick quote online, and let you decide if we’re a good fit.

Start your quote