Should a small business use accounting software?

Accounting is not always the most exciting thing to think about, but it’s vital for running any business.

When it comes to business finances it’s important to have a system that works for you and keeps your finances organised. This article will talk through why using accounting software may be the best option for you and your business. 

What is accounting software?

Accounting software is software that has been specifically made with the intention of tracking and organising your business finances. Large companies have used accounting software for many years but for small businesses accounting software is a relatively new thing.

There are lots of different types of accounting software and if you’ve worked in a big corporate company you may have heard of things like SAP, Oracle, JD Edwards, etc. These are all types of accounting software that are built for large companies dealing with lots of different scenarios.

In recent years Cloud-based accounting software for smaller businesses has come along and changed up the game. Where smaller businesses generally had to rely on spreadsheets to do their accounts they now had the option of using things like Xero, Quickbooks & FreeAgent.

How do the likes of Xero, FreeAgent & Quickbooks work?

They are all Cloud-based software systems so you can access all of your numbers from any device and have them synced across all devices simultaneously. All of them have a mobile app so you can also access and do your accounting on the go from wherever you are.

They are built to replace spreadsheets and to make bookkeeping and tracking your finances a lot easier. 

You can link your bank account up to the software which enables a direct feed of all the transactions going through your bank. You can then quickly tell the software what the transactions relate to by allocating each line out to an account code (e.g. Sales, subscriptions, Software costs, Computer equipment, etc). 

Most of the software above also uses AI so will learn common transactions and then allocate them for you. E.g. if you are always putting your Canva payment to software costs, the software will learn this and start to suggest as soon as it sees the payment go out.

If you keep up to date with this allocating you can pull reports like a profit & loss with a few clicks of a button. FreeAgent will even help you forecast your tax bill!!!

Can accounting software meet the needs of my business?

For most small businesses one of the softwares mentioned above will meet all of your needs. They all have the ability to do the accounting for sole traders, limited companies and partnerships. 

They can all create invoices and log expenses, assets & bills. 

If there is something additional you need it’s worth looking at the list of integrations for each software as most will integrate into other systems to give you the coverage you need.

But what about the cost?

Accounting software generally comes at a cost. The exception being FreeAgent if you have a certain bank account – more on that next week!

For a standard subscription, you’re looking at between £20 – £30 a month.

What you have to weigh up is the time it’s going to save you and the additional clarity over your numbers it’s going to give you. 

For example, if you manually invoice monthly on a recurring basis and also manually send out chasers – you could set this up to be automatic in accounting software. Also with the AI learning your bank transactions, that’s going to save you a lot of time working through your spreadsheets. 

Finally and most importantly you are a lot less likely to make an error with software – your bank is directly linked and you’re not having to type out numbers. This is not only going to save you time but could also save you money in penalties if you get your tax calculations wrong.

Can I get help setting up my accounting software?

Yes! Firstly all the respective accounting software have lots of training and guides to help you get set up. But also I’ve got step-by-step Xero & FreeAgent courses coming out at the beginning of March that will show you not only how to set up the software but also how to use it regularly & get the most out of it so you are really getting your money’s worth.

I hope this article has helped you understand why accounting software is a great option for your business. If you have any questions or concerns, please don’t hesitate to reach out!