Starting a small business isn’t easy, but I’ve found that many first-time entrepreneurs have the most difficulty managing finance. While Excel may be useful at the start, isn’t really suitable once your business starts to grow. If you are finding it difficult to quickly manage your day-to-day business using Excel, then it’s time to move on.

Today there is a huge range of free and affordable software available for freelancers and small businesses. These programs can help you reduce errors in your calculations, help you understand your business’s financial position at any time and the reports they generate are useful, if not crucial, for budgeting, forecasting and devising growth strategies.

Further, if you run a VAT-registered business with a taxable turnover above the VAT registration threshold (currently £85,000) you are required to keep digital VAT business records and send returns using Making Tax Digital (MTD) - compatible software[1].

But how do you choose the right accounting software for your business?

I have always advised clients to consult their accountants, who may be able to recommend software that works with programs they have, and even help set it up. But what if you don’t have an accountant or someone to advise you? With so many products to choose from, how can you pick the right one?

I have spent some time researching this topic and it wasn’t easy to do! Not only are there many accounting programs to choose from, there are also many review sites and they don’t always agree with each other! Nevertheless, I have learnt a lot from this exercise.

There is a vast amount of good information online.

This is Money, part of the Daily Mail, Mail on Sunday and Metro media group, advises that you take the time to consider what you can afford, as well as what your business needs.

“Most small businesses can make do with basic functions like invoicing, income and expense tracking, financial report generation, and customer management. However, if your business sells more than one product, you'll need a service that tracks your inventory, manages vendors and assists you with purchase ordering. If you operate a service-based company, you'll also need a service to invoice payment.”

You should also consider how easy the software is to use, whether you need a package that can accommodate multi-currency transactions (eg if you purchase in a foreign currency or sell goods or services abroad), whether a cloud-based system is best for you so you can access your financial data and send invoices from anywhere, and whether you should choose a software that can integrate with your CRM or other software.

Financesonline, an independent review platform based in Poland, advises that you take into consideration not only the size but also the type of your business.

“Some businesses like engineering and construction firms require features that enable them to break down costing and estimation by project or other categories. Software development companies also need features to match the development phases specific to launching new products. Likewise, non-profits and fundraising entities need accounting solutions that incorporate reporting requirements specific to them. If your business has a specific need, check for accounting solutions that specialize in your field…. (but) consider other factors like vendor support, integration, and scalability to ensure the industry-specific software is truly superior.”

It also recommends that you “give scalability a serious look. You can never tell if your business needs to expand, along with your financial needs. At the least, the accounting software should let you export data in case you need to get a more robust solution in the future.”

AccountingWeb, the largest independent online community for accounting and finance professionals in the UK, emphasises the importance of user support.

“Pay particular attention to user feedback in that section - it’s one of the differentiating characteristics of products in this field. There’s an old industry adage that says a mediocre product with good support will be better than a technically brilliant tool where you can’t get an answer when you experience a problem. When you test out an accounting program, also try to assess how quickly the support people get back to you when you raise a query.”

The reviews

Following AccountingWeb’s advice, I decided to check out the reviews of the top accounting software for freelancers and small businesses in the UK. I consulted five sites for a mix of expert and user reviews.

AccountingWeb (see above)
Finances Online (see above)
Capterra, an online resource for business software buyers.
The Blueprint, a US-based independent review site owned by The Motley Fool.
Trustpilot, a consumer review website which hosts reviews of businesses worldwide.

One of the problems with review sites is that changes to the software and support are ongoing, so reviews that are older than a few months may not have the latest information. Keep this in mind when you visit them.

If the software you are considering isn’t listed below, these sites also review many others as well.

The software programs listed below are all cloud-based, can be accessed on a mobile (except for Clearbooks), can be used to submit VAT returns to HMRC through MTD and offer free trials. Prices vary depending on the number of features and users, and they seem to change regularly due to updates and promotions so to be sure you have the most up-to-date prices you need to visit the software brand’s website.

Higher Scores

Quickfile, a UK based company with 20,000 UK subscribers, is free for small businesses and only costs £45 + VAT per year for more advanced features. There is no payroll feature but it does link to the Payroll Site. Only Capterra and Trustpilot had reviews for Quickfile, but these were excellent with Capterra awarding 5/5 and Trustpilot’s 647 user reviews of 85% excellent and 0% bad (the rest in-between). The software is reportedly easy to use and good for non-accountants. I would definitely check this one out.
Freeagent is a UK based company that focusses on microbusinesses with less than 10 employees. It was bought by the Bank of Scotland in 2018 and there are over 80,000 subscribers in the UK. In 2018 Freeagent won the Accounting Excellence Awards, Small Business Accounting Software of the Year. Its features are limited, but it includes payroll and its users are pretty happy. All the review sites gave satisfactory reviews, and Trustpilot’s 452 reviews were 76% excellent and 3% bad (the rest in between).

Middle Scores

Sage Business Cloud Accounting is part of the Sage Group, a multinational enterprise software company with headquarters in the UK. There are over 200,000 UK subscribers, and over 6 million worldwide. All the review sites were pretty positive, and Trustpilot’s 5,644 user reviews were 82% excellent and 7% bad (the rest in-between). With chat, telephone, email and community support, users appear to be happy with customer service.
Quickbooks Online is a US-based company with 2.55 million subscribers worldwide and 100,000 users in the UK (at March 2017[2]). The review sites are all positive, as are UK user reviews, but US reviews are often poor. This may be because, according to AccountingWeb, “investments in AI and fintech tend to be implemented and tested in North America first before they become available to the rest of the world.” Trustpilot’s 2291 reviews are 79% excellent and 9% bad (the rest in-between).
Clearbooks is a UK based small business (turnover in 2019 £1.3 million) developed for the UK market. There are over 11,000 small business subscribers and hundreds of accountants throughout the UK using Clear Books[3]. The software is best for UK users, is reasonably priced and offers good support, including free telephone support. It can’t be accessed on a mobile and I’m not sure it has the resources to keep up with the larger competitors, but it still has a lot to offer UK small businesses. Trustpilot reviews were 55% excellent, 5% bad from 168 reviews, .

Lower Scores

I was surprised that Xero’s user reviews were lower than others. A New Zealand based company, Xero has 463,000 subscriptions in the UK (May 2019[4]) and over 2 million worldwide. It won Financial Software Provider at the 2019 FD Excellence Awards and Cloud Product of the Year at the 2019 National Technology Awards. The Blueprint gave its lowest score - 7.4/10 (with support at 5/10) - and Trustpilot’s user reviews were 51% excellent but 13% bad (the rest in-between) based on 1801 reviews. The main problem is less than satisfactory customer support. Before buying, you should speak to your accountant and if you don’t have an accountant, you may want to consider software that offers better customer support.
The lowest scoring software was Kashflow, a UK based company with 58,000 UK subscribers and a £6.7m operating loss for 2018 (Companies House). AccountingWeb and Capterra gave Kashflow lower scores than the other brands and of the 56 user reviews on Trustpilot 12% were excellent but 76% were bad (the rest in-between). It may be right for your business but before you buy, I recommend you compare it with other brands that have better reviews.

So what should you do if you need to purchase accounting software?

To choose the right accounting software for your business, you need to decide what your requirements and priorities are. Then you need to do your research.

I chose the software programs above because they are widely used in the UK, are cloud-based, can be accessed on a mobile[5], can be used to submit VAT returns to HMRC through MTD and offer free trials, which I believe are all essential features.

But you also need to consider your own accounting skills as well as the software’s user friendliness and interface; whether the VAT module is suitable; whether there is multi-currency capability; the types of reports available; whether it can integrate with your ecommerce software, link to your bank account or even your personal annual tax return; whether there is a payroll module or can easily link with one; if the invoice templates are suitable for your business; if you sell products, whether there is a stock module; the number of users and different permission levels available. Scalability may be important if you intend to grow your business, and of course, good customer service is crucial.

Finally, test out a few of your preferred programmes using the free trials available. Of course, if you have an accountant, they can help you decide.