Even the smallest business will benefit from using accounting software rather than spreadsheets or a paper-based system. Not only does it make staying on top your company finances easier, but it also enables you to prepare and submit your tax and VAT returns faster.

But, with so many packages on the market, how do you choose one that’s right for your business?

Essentially all the best accounting software packages are designed to help you manage company expenses and income, send invoices and generate financial reports about your business. However, there are specific features you may want look out for. For instance, do you want a cloud accounting solution or desktop solution?

In 2022, most people will want to choose the best online accounting software as this gives the flexibility to work on your bookkeeping at anytime and from anywhere, making it simpler to run a business remotely. Besides, most desktop accounting software for small business will slowly be phased out eventually.

If you have little accounting knowledge, you will probably prefer a package that is more intuitive, as you won’t want to spend lots of time setting up your system or searching for essential functions.


The best accounting software UK 2022

Automation and cash flow management have been big topics over the last 12 months and not without good reason. Even as a small business these features should be on your top list of must haves. The ability to forecast and predict cash reserves has been crucial to the survival of many SMEs during these pandemic times.

Being able to send recurring invoices and overdue notifications automatically are great time-saving features to help chase down late payment. As is the ability to accept online payments. The same can be said about turning quotes into invoices with just a click or two, though it’s not a feature of all small business accounting software.

Similarly, programs that update information in real time through direct bank feeds will eliminate the need to manually input new information.

Dashboards that collate different metrics are perfect for providing an at-a-glance snapshot of your business finances are also something that you may want to look out for in the package you choose.


Best accounting software for medium-sized business UK

Being able to process ingoing and outgoing payments along with payroll will also make life much easier, while third-party integration will work well for larger businesses that need to connect with POS systems, ecommerce, ERP, CRM, email marketing and Google apps. Again, something that not every package offers.

For manufacturers, an inventory-tracking function enables monitoring of stock levels, while consultants and service providers will want to look for a time-tracking feature to easily record and invoice billable hours.

One function that nearly every business will find useful when choosing the best accounting software package is tax preparation — being able to automatically calculate your tax and submit your statutory returns to HMRC is a great function to look out for.


Which small business accounting software is best for you?

So, which should you go for? Here’s a quick assessment of some of the best small business accounting software.

Xero — Best small business accounting software UK

Xero is the first online accounting platform that became popular with small businesses and with good reason. This is also what we setup for all our new clients here at BrooksCity.

The beauty behind Xero is that no matter what type of business you operate, Xero can adapt to suit your needs and grow with you. This is in part thanks to their integration to more than 800+ third party business apps.

They offer everything you need to get your accounting done and they’re very focused on automation to save you precious admin time. After all, who doesn’t need more time nowadays…

Online invoicing, automatic payments and friendly reminders to unpaid invoices are a breeze to setup. You can connect your bank and reconcile statements in seconds thanks to Xero’s smart matching technology which imports and categorises transactions for you.

View your financial information from anywhere on their mobile app, available on both iOS and Android. Additionally, you can even send invoices and scan receipts to create expenses claims on the go.

If you need help there’s a wide range of support available through community, email, training events and webinars or you can simply ask us.

Free 30-day trial. The standard plan with unlimited invoices starts at £24. Payroll, expenses, projects and CIS scheme are extras on all plans.

Xero accounting software dashboard presented on desktop, tablet and mobile screens.

Quickbooks — Best accounting software for medium-sized business UK

With over 4.5 million customers worldwide, QuickBooks is one of the leaders in the cloud accounting space. You can do it all thanks to their innovative and intuitive platform. For example, you can download and reconcile credit card transactions quickly, organise weekly timesheets and track bank deposits with real-time transaction data.

Users can scan receipt and bills and submit them as proof of expense or share with the stakeholder concerned. It offers customisable templates that can be branded with the business logo and desired fields to generate invoices, bills and reports. Your invoices are also pay-enabled so you accept payments faster directly online and automatically send reminders to those pesky late payers.

Besides being MTD compliant QuickBooks now let’s you spot mistakes on your VAT return before submitting thanks to their SmartScan™ technology. In addition you can now connect to more than 700+ business apps to automate multiple types of workflows.

Payroll is directly integrated and you can set up in minutes. With their advanced payroll you get complete compliances even for complex schemes, CIS, salary sacrifice or even court order deductions and you can automate your entire pay run.

Free 30-day trial. The “Simple Start” at £12 per month is great for the self-employed. The “Plus” package at £30 per month offers the best value for small and medium-sized businesses. This includes multi-currency and up to 5 users, project profitability, estimate and quotes, budgets and time tracking.

Quickbooks Online dashboard

Sage Business Cloud Accounting — Easy to use cloud accounting software UK

Previously known as Sage One. It’s best suited to start-ups, small businesses, freelancers or anyone who just needs a simple accounting system with invoice, tax assistance, and profit and loss information. It requires very little accounting knowledge and is fairly easy to use.

There is chat, telephone and email support if you need it. Additional support through the Sage Business Community is also available. As of 2021, they now offer over 100+ integrations with various apps to automate your accounting workflow. Something that was previously lacking.

Free 30-day trial without a credit card. For sole traders and small businesses, standard non discounted plans start £12 per month but there is usually always a promotion going on.

It’s also important to note they are fully Making Tax Digital (VAT), RTI, auto-enrolment, GDPR compliant.

Sage Business Cloud Accounting Dashboard

FreshBooks – Best new UK accounting software for small business

FreshBooks is a major player in the cloud accounting space, and only recently launched in the UK last year. If you’re looking for a fresh take (pun intended) on accounting software, FreshBook may be it.

Best suited for service providers, freelancers and micro-businesses Freshbooks offers a whole suite of tools to help manage your business besides their popular accounts function.

Those looking to centralise their operations within a single app will appreciate their project management, chat, file sharing, estimates and times tracking feature. This makes it very easy to turn your billable hours into an invoice and then proceed to accept payment online, simplifying your workflow.

Besides their productivity suite most will appreciate the clean, modern and user-friendly experience that will make it easy to get started right away as well as over 100+ integrations with various business apps.

They offer both email, phone support, and have a free 30-day trial without a credit card.

Pricing starts £11.00 for the very basic plan that allows you to invoice up to 5 clients only. So most small businesses will want to opt for at least the “Plus” plan to access billing up to 50 clients and handful of useful features.

Unfortunately, you’ll have to dish out an additional £15.00 per month for “Advanced Payments” in order to be able to save and charge clients credit cards, subscription based billing and virtual terminal.

The ability to setup recurring billing to credit cards for service-based businesses, professionals and freelancer is a must-have in our opinion. A feature normally included at no extra cost in other accounting platforms.
FreshBooks UK accounting software dashboard showing a profit report

Free Agent – Best accounting software for self-employed and contractors UK

Geared towards the small business owner, freelancers or contractors without much accounting experience. Easy to use and lets you input as many clients or projects as you need. Multi-user options and time-tracking features make it simple to track remote freelancers who can log in and complete their timesheets.

Invoice creation is straightforward, with payment reminders at set dates after bills fall due. FreeAgent makes it dead simple to stay on top of your taxes. It’s very easy to know how much you own and file directly to HMRC in just a steps.

Their one-click reporting creates a self-assessment summary for income tax and you can even forecast your Corporation Tax ahead of time.

FreeAgent won numerous awards in 2020 at the Accounting Excellence Awards. It was voted Best Small Business Accounting Software, Practioner’s Choice and Best Data & Expense Management Software.

Fully compliant with MTD, RTI, HMRC and GDPR. However, it’s lagging behind when it comes to integrations. So, if you’re running a modern business and want to connect various apps to automate your business and reporting FreeAgent may not be the best choice.

Free 30-day trial. For the first six months, subscriptions start at £9.50 for sole traders and £14.50 a month for limited companies. Regular pricing is £19 and £29 per month respectively but there are discounts if you prepay for a whole year.

Also, if you’re a NatWest, Royal Bank of Scotland or Ulster Bank NI business current account holder, you can get full access to FreeAgent for free, as long as you retain your bank account.

FreeAgent cloud accounting dashboard view

Zoho Books — Excellent Online Bookkeeping Software for Small Business

Zoho Books is a very good online bookkeeping software for solopreneurs and micro-businesses. Especially those working with international customers. They might not have the name recognition of the major players but they make up for it in functionality and compatibility.

What makes it such a great value besides their pricing is the entire ecosystem. Instead of having to connect third party apps, Zoho has over 40 companion cloud apps that cover most business functions. If you also need a CRM, project management app, collaborations tools like chat and online bookings or even a BI solution, Zoho has you covered.

Everything you need to do your accounting online is included in the basic package. Bank reconciliation, custom invoices, online payments, receipt scanning, projects, timesheets, more than 20 reports and workflow automation come standard which is rare for entry level cloud bookkeeping packages. They are also MTD compliant by the way, so you can file VAT returns automatically.

The only downside, is that there is no integrated payroll, corporation tax estimate or directors statement, which can be a deal breaker for some larger companies with employees. If you can get past that, you’ll enjoy their clean and modern interface and fantastic support.

Pricing starts at £6/month for two users. You can get two months free if you pay yearly instead.

Zoho Books UK Dashboard

Clearbooks — Simple cloud accounting software for small business UK

Offers simplified accounting to small businesses. In 2014, it won Best Cloud Accounting Software Suite in the UK Cloud Awards.

Very UK-centric, a major plus for many. Generally considered intuitive and simple to use, it has a nice layout and a good selection of features. It has lagged behind the leading players in terms of UI, the user interface is not as modern and it also lacks any outside integrations.

However it still offers everything necessary to do your accounts correctly and complies with HMRC and MTD. If you don’t want to be distracted by any bells and whistles this is worth looking into.

Free 30-day trial. Monthly plans start at just £10 a month. Unfortunately you will have to opt for the large plan at £22 a month if you want MTD VAT reporting.

Clearbook simple accounting software dashboard

Kashflow — Good accounting software for small business

Kashflow has a clear dashboard that includes a business health check score.  Billing is fast and quotes can be turned into invoices with just one click.

There are no limits to the number of invoices you send and new customers, suppliers and transactions can be added as needed. Good for submitting VAT returns and there is secure integration with payment card processors like SagePay and Barclaycard. Unfortunately like ClearBooks, it doesn’t offer any integrations to outside apps.

Free 14-day trial. There is a £8 per month starter option. Small businesses plans start £15 per month for larger businesses requiring more functionality.

Kashflow accounting solution dashboard

Best free accounting software for small business UK

If you are a small business, you could also consider one of the free cloud-based solutions such as Bokio. Their service may be basic, but it could suit if you have minimal transactions.

Pandle — Best free cloud accounting software

If your needs are still limited but want something with more features as your grow, Pandle may be a viable option for your business. They offer a free forever plan which has unlimited everything except for more advanced features like banks feeds, receipt upload, cash flow forecasts and others which are part of a paid plan for £5 + VAT per month. They are also MTD compliant.

Pandle simple online bookkeeping


General Data Protection Regulation (GDPR) and Brexit Update

On 25 May 2018, the EU’s General Data Protection Regulation (GDPR) came into effect.. Under this new set of rules, businesses face increased obligations in how they process, manage and store personal information.

Even with the coming of Brexit the UK has agreed that GDPR will be absorbed into UK domestic law as part of the withdrawal agreement. What will happen is that you will see GDPR and the existing Data Protection Act of 2018 working together on privacy cases. Once the UK leaves the EU it still have to abide by the same standards.

Most major accounting platforms have already demonstrated their compliances. But because you are dealing with sensitive information such as customer personal data it’s important that the package you choose adheres to the GDPR standards in order to avoid hefty fines.


Making Tax Digital

Having an accounting software package in place will be increasingly important as the government has now rolled out it’s Making Tax Digital (MTD) initiative. This is aimed at making the UK tax system more effective and taxpayer-friendly. It will enable HMRC to use information they already have or can get elsewhere, for instance from an employer, bank or another government department.

This should make interacting with HMRC less complicated, as well as leading to fewer errors overpayment. If you’re confused about MTD, read our post on the most frequently asked questions about Making Tax Digital.


Choosing the best accounting software for your business

As some platforms may suit you better than others, the only way to be sure what might work for you is to take advantage of the free trials on offer. Select two or three packages, try them and find out what’s right for you.

Before you commit to any one package, you may also want to talk to your accountant. They know your business, so will be well-placed to offer advice on accounting software that best meet your needs.

If you’re looking for an accountant in London to help you sort things out, BrooksCity can help. For more information you can contact us or request a quote directly here.