Best accounting software for small business: a comparison guide

In this fast-moving world of digitisation, you do not need to spend each year on upgraded versions of online accounting software while choosing the best accounting software.

Instead, you need to pay a monthly charge which provides you with an all-access pass to the data.

In addition, the introduction of Making Tax Digital (MTD) by HMRC in April 2019 makes it important than ever for businesses to consider using accounting software.

In the market, there is a list full of online accounting software available for all type and size of business makes it hard for you to choose one.

So, let’s have a look at some of the best accounting software for small business to help you make a decision.

This blog post is divided into the following sections

Benefits of accounting software for small business
Best accounting software
Intuit QuickBooks
Zoho Books
Sage 50cloud
How to choose small business accounting software?
Final Thought

Benefits of accounting software for small business

The latest accounting software is a long way from the complicated interfaces and clunky spreadsheets of prior days.

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Today’s accounting software includes a variety of time-saving and intelligent features that leave you free to focus on growing your small business rather than grappling with balance sheets such as.

● Accounting software automates the time-consuming elements of small business accounting and offers access from anywhere, anytime.
● You can link your bank account to accounting software for up-to-date financial reconciliation.
● By using smartphone apps, you can manage your small business accounts on the go.
● Generate reports – such as cash flow, monthly P&L and customer profitability – to projecting corporation tax and detailing your VAT position.
● Automate business filing, including payroll & online tax filing with HMRC, including payroll, VAT, CIS returns.
● An accountant can log onto the software from their computer to help you prepare your end-of-year accounts as the software is cloud-based.
● Credit control & invoicing is automated with invoices generated and emailed to customers, and you will receive email notifications when invoices are overdue.

Best accounting software

1. Xero
Xero is the cloud-based online accounting software that can easily be accessed from all types of devices with an active internet connection.

Xero is built on the double-entry accounting framework, and its accounting features enables small businesses to view their transactions, cash flow and account details from anywhere.

Bank transactions are imported by Xero accounting software.

You can keep track of spending and stay on top of bills due to the online bill payment feature and improving relationships with the suppliers that provide business services.

Xero allows businesses to manage personal expenses with the mobile review and approval process of each of the receipts.

It offers integration with over 600 systems, including Receipt Bank, Curve, Vend etc., through its add-on and also updates the software on a regular basis.

Prices start at £10/month that sometimes reduced for the first few months. This package gives you the ability to submit MTD compliant VAT returns to the HMRC.

2.  Intuit QuickBooks
QuickBooks is another best online accounting software for small business.

Just as with other accounting tools, Quickbooks comes up with an attractive dashboard that puts key data, including income (split into open, overdue & paid in the last 30 days), expenses and profit – loss on the screen as you log in to the software.

Quickbooks also offers true double-entry accounting with strong accounts charts, ample reports, as well as customisable payroll support, invoices, inventory capabilities, multiple currencies, with over 400 integrations.

Subscription prices start at £8/month (for the Self Assessment package) – prices are sometimes reduced for the first 6 months.

Prices start at £12/month for small businesses and VAT-registered companies who want to use the accounting and VAT features.

3.  Zoho Books
Zoho Books is another software which provides a variety of financial tools like online accounting software for small business.

Zoho Books tool has flexibility, usability, and depth in standard bookkeeping areas, including sales and purchases,  inventory management, time and project tracking.

Zoho allows small businesses to streamline their back-office functions and manage all the financial activities from a single hub which allows businesses to access unrestricted payments from any locations, receiving timely payment requests, reminders on recurrent bills and even the auto-charge options.

With Zoho Books, small businesses can adjust the finance management to their project structure and manage all tasks from any device.

Zoho Books can connect to your bank account for real-time cash flow updates.

Prices of Zoho Books start at £6/month.

4.  FreshBooks
FreshBooks is the go-to online accounting solution for businesses of all shape and sizes.

FreshBooks comes up with a user-friendly interface and a lack of jargon.

It is designed for freelancers and small businesses with basic accounting needs that focus on things such as invoicing and expense tracking.

FreshBooks integrates with apps such as PayPal & Zendesk.

FreshBooks starts at £11/month for its ‘Lite’ package.

5.  Sage 50cloud
Sage 50c is one of the best online accounting software for small business that has been primarily designed for desktop use.

With this software, small businesses can easily view their financial reports from their smartphone, laptop, or tablet anytime.

Being cloud-based, Sage 50c comes with automated offsite back-ups.

Small business can also undo data entry errors by restoring data from the cloud as of date.

The basic plan of this software costs £20/month or £240 annually and enables small businesses to manage cash flow, income expenses and payments, along with secure cloud access and backups. 

Are you a small business owner? Do you think you need an accountant – confused!! No worries, check our blog post, “Do I need an accountant for my small business” to clear the confusion.

How to choose small business accounting software?

It might be confusing to sign up for your first accounting software; that’s why it pays to test a few packages before deciding on one.

You will be using your chosen small business accounting software for several years, so you need to ensure you are making the correct investment.

You should check that the accounting software meets your business requirements not only now but also in future.

Generate a requirements checklist to make sure it can handle your day-to-day business accounts.

Set up several trial accounts or sign up for a free version and add sample data – such as customers, income and expenses, assets – to test how easy to use.

The checklist for choosing the best accounting software for your small business can include,

Business type 
Each accounting software option may be more suited to a certain type of business.

In case you are planning to increase staff numbers, you can look for integrated payroll with automatic payslip creation and PAYE filing.

If your small business handles lots of stock, you can look for accounting software that integrates into the inventory system.

For more sales-led small businesses, CRM tools for keeping records of customers and leads are useful.

Number of users 
If you are a sole trader and your business accounts are simple and less complicated, you can go for accounting software that is easy to use.

In case you will need to give access to others, it is worth involving them also in the selection process.

Let’s say if you have an accountant, ask them what business accounting software are best for your particular business needs.

Day-to-day bookkeeping
Make sure that you can easily access the features such as the nominal ledger, which brings together income, expenses, liabilities and assets.

That is usually shown as the dashboard, and provide quick access to customer details, invoices, suppliers balance sheet, purchase ledger and sales.

Check how easily the software can link to your business bank account for reconciliation, whether it supports VAT, PAYE, and end-of-year accounts filing with the HMRC.

If you have business overseas, make sure it handles currency conversion.

VAT support
A business must register for VAT once its turnover exceeds £85,000 in the 12-month period; it is essential your small business accounting software can handle complex VAT legislation.

You should check the software can automatically file the VAT returns with HMRC and handle both invoice and cash accounting for the VAT.

For small businesses, it is crucial that the accounting software supports Flat Rate VAT, including any more complex VAT legislation and exemptions particular to your small business.

Reporting requirements
The ability to swiftly and automatically generate reports on the financial health of your small business is a vital feature to look at in accounting software.

Look at the type of reports and number it can generate, including the formats such as PDF or Excel.

As a minimum, ensure the business accounting software can produce the monthly P&L plus a year-to-date P&L with a forecast for the corporation tax.

Make sure your accounting software can produce a monthly balance sheet and also identify creditors and debtors over 30, 60 and 90-day periods to keep on top of all the liabilities and outstanding invoices to aid the cash flow.

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Final thought

In summary, having the best accounting software for your small business can actually transform your working life. With less time spent on a task like data entry, you have more time for tasks you like the most about small-business ownership, whether that is getting to know customers or making products you are proud of.

Experlu Editorial Team
The editorial team at Experlu is comprised of seasoned financial professionals dedicated to providing high-quality content on accounting and finance. With a wealth of experience and diverse expertise, the team produces insightful articles that have established the Experlu blog as the UK's leading financial and accounting resource. The team includes accountants, auditors, and business advisors who stay updated with the latest industry developments. Their commitment to excellence ensures that Experlu remains a trusted source of information, helping readers stay informed about audit, business, finance, and tax matters.