Chris Brown

Desktop accounting software has been around almost as long as desktop computers, but small businesses are increasingly looking to cloud-based accounting solutions to manage their bookkeeping, payroll, statutory accounts and annual tax returns.

Cloud-based services offer a Software-as-a-Service (SaaS) business model, where the small business pays a small monthly fee on a recurring basis instead of forking out hundreds or thousands of pounds up front.

With these kinds of accounting software, company’s financial records are securely stored and managed ‘in the cloud’. This means the records can be accessed at any time and from any device (provided it has an internet connection and the correct security credentials are supplied).

Note: Many online accounting platforms also offer apps for smartphones and tablets, making it even easier for small business owners to manage payroll or analyse their balance sheet while on the move.

Best Cloud Accounting Software for Small Business

HMRC’s Making Tax Digital business initiative is brining fundamental changes to the way businesses across the UK manage their tax and accounts in the future. For the 2020/21 financial year, small businesses will be required to invest in digital bookkeeping. Small businesses who keep track of their financial records through Excel or on paper will need to digitalise certain records, such as VAT returns.

Note: Businesses that are VAT-registered, which have a taxable turnover over £85,000, will need to use a compatible accounting software to submit a tax return.

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

At Accounts & Legal, we have a team of small business accountants dedicated to providing fixed-price tax, accounting and business forecasting and planning services that are specifically geared towards supporting the growth of SMEs and sole traders and being HMCR compliant.

The Rise of Cloud Accounting Software

As technology continues to improve the way small business owners do business, small companies will have better access to the tools they need to succeed. Cloud adoption with accounting software also allows small business owners to spend less time on repetitive accounting and financial tasks and more time on growing their business.

As cloud accounting becomes even more popular, additional tools and products are likely to come forward, so small business owners can become even more efficient, have more time to grow their business and make better decisions involving their finances.

This will help put profitability right in the hands of small business owners. Cloud accounting software makes it possible for small business owners to work on bookkeeping anytime and anywhere, providing options to run a business remotely.

Note: Even if you have little accounting knowledge, there are intuitive cloud accounting software, so you can easily set up your accounting and bookkeeping system.

The top accounting and bookkeeping software for UK small businesses

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 online accounting software that’s been designed specifically for small businesses and self-employed workers. Many of these products are affordable or even completely free.

Accounting 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 kind of accounting software you pick will usually include handy reporting tools as well, so that you can track your cash flow and monitor your profit and loss all at one place.

While accounting software can make your life much easier, it has previously been up to you whether you use it to manage your business accounts. However, that’s changing with the government’s Making Tax Digital plans, which began rolling out last year.  

Note: Under Making Tax Digital, small businesses will have to file VAT returns online starting in April 2020, using accounting software that can integrate with your new digital tax account.

Below are the best cloud accounting software for UK small businesses in 2020

Clickentry - Cloud Accounting Software for Small & Medium Businesses

QuickBooks

QuickBooks is developed by Intuit, one of the earliest providers of online accounting software. Freelancers can use the basic package for tracking self-employed income, and small businesses can use it for tasks involving VAT and payroll.

Pros: Through QuickBooks, you can even download and reconcile credit card transactions, in addition to being able to organise weekly timesheets and track bank deposits. There are additional other reporting and monitoring tools too. Cons: Lack of barcode scanning and limitations on the number of users.

Price: Subscription prices start at £12/month and is currently reduced to £5/month for the first six months.

Xero

Xero is another one of the big players in cloud accounting software. Xero can help you in a range of areas, including invoicing, inventory, payroll and expense claims.

Pros: Xero can also can import your banking, credit card and PayPal data, and there’s an app that works on both iPhone and Android. The Xero accounting software has recently launched a handful of new tools and innovative updates, including:

a car mileage tracker for employees

quotes functionality to accurately estimate and quote projects and track profitability

an automated connection between Xero payroll and HMRC.

The Business Snapshot is also being piloted, which offers real-time smart insights with a 30-day view of the health of a business.

Cons: Not many! Though the starter pack has restrictions on the number of transactions which can be done per month.

Price: Pricing for Xero’s cloud accounting software start at £10/month and is reduced to £5 for the first three months.

Zoho Books

Zoho Books is applauded for being an extremely customisable small business accounting software.

Pros: The software can help you issue invoices, sort expenses, and track inventory.

Cons: it doesn’t presently have a payroll feature.

Price: Zoho Books accounting software can connect to your bank account for immediate updates on cash flow, in addition to having the ability to integrate with a wide range of other apps. Prices begin at £6/month.