Today there are many different software packages available to businesses and all will essentially provide the information you need to prepare your accounts and tax return. However, there are a number of things that should be considered before launching into what could be a costly and/or time consuming mistake.
This list is by no means exhaustive, but worthwhile, particularly if you are looking for the first time:
Cost is always at the top of the list, especially for new businesses. Some providers have offers to entice new users.
Ease of use – this can present a challenge unless you are prepared to trial all the software that is available, for example:
do you need to use the software on the go via an app? If this is the case, there are often functionality differences between iOS and Android
People often find one piece of software easier to understand than another or maybe they just think that it looks better.
Can the software link to your bank account and automatically upload your transactions (known as a bank feed)?
Functionality – for this you may need to think about the future:
Where do you expect the business to be in say 5-10 years. Will the software allow for growth?
Are you wanting to upload your expenditure receipts directly to the software?
How many invoices are you likely to raise in a month?
Will you need to submit VAT returns and how will the software deal with the areas that are not so common such as the Marginal Rate Scheme?
Will you be able to manage with just a basic package that has a basic set of accounts for analysing income and expenditure?
Are you likely to need custom/industry specific reporting and processes?
Do you need industry specific reporting such as Construction Industry Scheme?
Do you or are you likely to need stock control?
Do you or are you looking to export goods/services?
Are you looking at using multi-currencies?
Do you/will you need to track departments/locations and if so how many?
Do you want the software to process expenses and mileage?
Are you likely to need a payroll function?
Control – many software packages are now ‘cloud’ based, this usually means that you will not have a backup of your software and are therefore reliant on the procedures of the software provider.
There is a requirement to consider GDPR (General Data Protection Regulation). If you record any information in relation to individuals even if it is name and contact details you will need to make sure that this information is as secure as it can be and that it is kept in a location that is acceptable under GDPR rules.
Support – some software only provides email support, whereas others have UK telephone support, even if this is only within normal business hours. This can be important if you do not have an accountant and need an answer quickly, or if you prefer to talk to people rather than email.
Apps – Most ‘cloud’ software providers have add-on’s/apps, these help to adapt the functionality of the software to the needs of the business and usually integrate with the chosen software. Some are free to use, but many have an additional cost.
Add-ons can also vary between packages, so you will need to check that the add-on you chose is available for the software.
Who are the best software providers?
It’s not necessarily which the best, it’s which is most suited to your needs. If there is more than one, then that’s great. There are businesses that may not be able to use the more common software currently on the market and would need to look for a specialist provider.
Below are the most common ones supported by accountants, however, this is not to say that others are not available that would be more suited to your needs.
Xero
Advantages
It’s by far the most popular on the market at this moment in time
It’s has a wide selection of reports available without having to purchase add-ons
It looks modern
Disadvantages
Cost
They do not always act quickly to customer needs
Support is by email.
Quickbooks
Advantages
There are often offers on this software making it more affordable
It has a UK support line
It has more tracking options than some of the other providers
Disadvantages
It is not as modern looking as Xero
Some find it difficult to use
Multi-currency must be set up from the outset.
Freeagent
Advantages
Easy to use
Unlimited users
Great for freelancers
Disadvantages
Limited flexibility for expense allocation
Can be more costly than competitors
Reporting feature are limited
Zoho Books
Advantages
Good for micro businesses
There are lots of apps available
Competitive on price
Good support
Disadvantages
Limited to 5,000 transactions per month
Lack of payroll
Doesn’t have 24 hr phone support
Choosing the best software for your business can be a minefield, however, help is out there should you wish to use it…..
As with everything else on the internet, there will be reviews – spend a little time looking at some of the good and bad posts.
Speak to other businesses that you associate with. If they are not using the same software as you have in mind, ask why they chose that software and what are the advantages and disadvantages in their opinion.
Ask an accountant or bookkeeper, everyone using software will have an opinion. Some accountants will only use specific software, others are more flexible. They may also have access to packages that are not available online.
Why do you need software?
Making Tax Digital (MTD for short).
HMRC requires all VAT registered businesses with a taxable turnover above the VAT threshold to submit returns in a digital format.
Businesses below the threshold will be required to follow the MTD rules for the first VAT return starting on or after April 2022.
If your business is required to or has voluntarily registered for VAT, you will be required to keep digital VAT business records and send returns using MTD-compatible software.
Self-employed businesses and landlords with annual business or property income above £10,000 will need to follow the MTD rules for Income Tax from the next accounting period starting on or after 6 April 2023.
So, you may wish to get ahead of the game and chose your software so that you are familiar with it before you are forced to make a quick decision.
If you have an accountant, they should be your first stop for business advice. If you don’t have an accountant or they can’t help, BuBul has a wide range of experts available. For more advice on the right accounting software package for your business contact our expert* Josephine on LinkedIn.
*We’ve picked experts we know and trust who are good at what they do. All of them will give you at least an extra 30 minutes free advice if you contact them and would then charge their normal prices. They don’t pay to be on BuBul and don’t give us any money from anything they earn as an expert.