What is it? Software hosted on a remote server and accessed via the internet.
Main benefit: No need to invest in expensive infrastructure, reducing up-front costs.
Example packages: Sage One and Quickbooks.
Our best accounting software for small businesses
Discover the benefits of accounting software for small businesses
We look at how accounting software works and why it could be helpful for your business
What is accounting software?
Whether you're just starting your self-employed journey or managing an established small business, staying on top of your finances and tax obligations is essential. In both cases, accounting software can be a valuable tool to help you keep everything under control.
Accounting software is designed to streamline various bookkeeping and accounting tasks for businesses. Key functions include:
Tracking business incomings and outgoings
Drafting financial statements and reports
Preparing and filing tax returns to meet MTD (Making Tax Digital) standards
Most accounting software providers offer a range of products tailored to different business types, sizes, and needs. The best bookkeeping software will also allow you to:
Manage payroll
Create and send invoices
Pay bills
Track stock inventory and suppliers
Provide financial analysis and forecasts
At the high end, enterprise-level accounting software integrates multiple financial tools used across large organisations, with features that extend beyond accounting - such as tools for HR, sales and more.
Do I need accounting software for my business?
Accounting software can have multiple benefits for any business, large or small, which is why 89% of small business owners say it’s an essential component of their operation. Benefits include:
The option to combine multiple business tools in a single platform for a single, holistic view
Save time and effort recording and viewing all income and expenses
Ensure tax returns are compliant and filed on time
Access tools to help forecast and plan for future growth
Number of small business owners that say accounting software is an essential component of their operation[1]
89%
How to choose accounting software for your small business
There are a lot of options when it comes to choosing accounting software, from well-known vendors to solutions targeting specific sectors and businesses. Here’s what you need to know to navigate to the best solution for your business:
Determine the right type of accounting software
Your choice will depend on several factors, including your business size, specific needs, budget, and potentially your industry. For a sole trader with basic accounting requirements, a simple open-source application or an entry-level cloud-based package may be sufficient. However, if your needs are more complex, you’ll need to decide between on-premises accounting software or a cloud-based solution, with each offering different benefits in terms of accessibility, cost, and scalability.
Create a features wish list
Make two lists: one for the essential features you need immediately and another for features you’d like to have in the future. This approach will help you choose accounting software providers offering flexible subscription plans. Look for providers with a basic tier that meets your current needs, but also one that offers the option to add additional features as your business grows and your requirements evolve.
Identify potential providers
Use the links on this page to explore a variety of business accounting software options. Compare their features with your wish list and evaluate if their pricing fits your budget. Additionally, conduct web searches for “accounting software” and include your industry sector to find specialised providers tailored to your specific business needs.
Perform your evaluation
Once you have a list of potential providers, compare their features, pricing and support packages. Look for online reviews of the company (the more recent, the better), and ask the opinion of others too: friends, colleagues, your accountant, and others online. Before committing to any outlay, take out a free trial or request a demo.
Types of accounting software
Cloud-based accounting software
What is it? Software hosted on a remote server and accessed via the internet.
Main benefit: No need to invest in expensive infrastructure, reducing up-front costs.
Example packages: Sage One and Quickbooks.
On-premise accounting software
What is it? Traditional standalone software to be installed on your own hardware.
Main benefit: You retain full control of your data and don’t need an internet connection to access it.
Example packages: Sage 50 Accounting for Windows and Windows Server, and AccountEdge Pro for Macs.
Open source accounting software
What is it? Cloud or on-premises software developed under an open-source licence so the code can be freely examined, used and modified as required.
Main benefit: Costs nothing to install and use.
Example packages: GnuCash is a standalone program for Windows, Mac and Linux, while Akaunting offers both on-premises (completely free) or cloud-hosted (subscription) solutions.
Enterprise accounting software
What is it? Software targeting larger businesses and corporations looking to centralise all their financial and operational processes.
Main benefit: Designed to bring data from different sources and departments to improve interdepartmental communications and provide a central, consistent view of all financial data.
Example package: Acumatica, which counts KFC, Mitsubishi Electric and General Motors among its clients.
ERP accounting software
What is it? ERP (Enterprise Resource Planning) software comprises multiple packages covering multiple financial and operational aspects.
Main benefit: Provides larger businesses with a choice of tools to help across multiple facets of their business. Some packages focus on specific sectors.
Example packages: Microsoft Dynamics 365 for general businesses, and Syspro, which is tailored to manufacturers and distributors.
Types of accounting software
Cloud-based accounting software
On-premise accounting software
What is it? Traditional standalone software to be installed on your own hardware.
Main benefit: You retain full control of your data and don’t need an internet connection to access it.
Example packages: Sage 50 Accounting for Windows and Windows Server, and AccountEdge Pro for Macs.
Open source accounting software
What is it? Cloud or on-premises software developed under an open-source licence so the code can be freely examined, used and modified as required.
Main benefit: Costs nothing to install and use.
Example packages: GnuCash is a standalone program for Windows, Mac and Linux, while Akaunting offers both on-premises (completely free) or cloud-hosted (subscription) solutions.
Enterprise accounting software
What is it? Software targeting larger businesses and corporations looking to centralise all their financial and operational processes.
Main benefit: Designed to bring data from different sources and departments to improve interdepartmental communications and provide a central, consistent view of all financial data.
Example package: Acumatica, which counts KFC, Mitsubishi Electric and General Motors among its clients.
ERP accounting software
What is it? ERP (Enterprise Resource Planning) software comprises multiple packages covering multiple financial and operational aspects.
Main benefit: Provides larger businesses with a choice of tools to help across multiple facets of their business. Some packages focus on specific sectors.
Example packages: Microsoft Dynamics 365 for general businesses, and Syspro, which is tailored to manufacturers and distributors.
Accounting software features to look for
Which online accounts software for your small business you choose ultimately depends on what you need from it. Look for the following key features:
Accounting
Look for packages that can link to your business bank account to automate transactional recordings, display your current cash flow and simplify statement reconciliation. They should also offer tools to help you prepare and file all tax returns.
Billing/invoicing
Good software can help balance both incomings and outgoings, from receipt management, invoice generation and automatic reminders to managing expenses and bills.
Payroll
If your business employs other people, check for packages that can help you manage them efficiently, from processing wages (including all deductions) to calculating benefits and generating payslips.
Stock management
If your business handles goods, examine options that can help track your inventory levels. A good package can monitor stock levels and provide alerts when stock runs low in real time, manage products more efficiently, and track their movements.
Reporting
A good package will offer a range of financial reports, from simple statements and key reports like cash flow and balance sheets to more complex tools handling budgeting and forecasting. The latter may require upgrading to a higher subscription tier.
CRM
If your business is customer-focused, look for a package that helps you manage customer relationships, track down new leads and obtain payments from existing ones. If it isn’t directly supported, can the software be integrated with another CRM service, such as Method.
How much does accounting software cost?
The price of the accounting software itself can be as low as zero with some on-premises open-source accounting packages, while cloud subscriptions vary from provider to provider and depend on your business size and the package you choose. For example:
QuickBooks offers five separate tiers for sole traders and small businesses, with prices ranging from £10-115 per month
Sage One’s three packages range from £18-103 per month
Typically, the entry-level package is squarely aimed at sole traders and freelancers, and may not include support for VAT-registered businesses. Which tier you choose depends on the features you need and the number of licences you require.
On-premises software can be offered completely for free (open-source) or occasionally purchased outright, but it’s increasingly likely you’ll be charged an ongoing fee, such as:
An annual service agreement such as that offered by AccountEdge (from £300 per year)
A monthly subscription like that from Sage 50 (from £103 per month)
Note, that while these costs are higher than cloud-based packages, they usually offer a wider range of features and – in the case of AccountEdge – have no restrictions on the number of licensed users.
Prices rise even higher for enterprise options – here, they can run into the many hundreds or even thousands of pounds per month per user for the likes of Microsoft Dynamics 365, reflecting the size of the target business and features on offer. Note: all quoted prices exclude VAT.
Beware of hidden costs
Remember, these costs merely cover the basic package itself. When budgeting, you should consider these extras:
Installation, deployment and ongoing maintenance of on-premises and open-source software
Cost of training to use the product
Add-ons: QuickBooks charges a small sum per month for additional payroll features, for example.
Number of users
Support – lower packages may offer online support only; expect to pay more for phone support
Pros and cons
Pros
Saves time and money by automating data entry tasks like bookkeeping
Provides a single, holistic view of your business finances for greater accuracy
Offers real-time reporting, analysing and forecasting
Some packages help bring related tasks like payroll and inventory management together
Can usually be scaled up or down quickly and easily
Cons
Cloud-based software requires internet access
On-premises software can be costly to obtain and deploy on-site
Can come with a steep learning curve – particularly for non-accountants
Security of private and confidential data – whether in the cloud or on-premises
Pricing can be confusing, with costs easily inflated by add-ons
Do I need to hire an accountant?
Although accounting software may provide all you need to manage relatively simple business finances, the larger and more complex your business is, the more compelling the argument for hiring a qualified accountant. Reasons to consider hiring one include:
Offloading time-consuming duties like bookkeeping, payroll and invoicing
Learning which accounting method is best for your small business
Ensuring accounts remain accurate and compliant
Timely filing of tax returns, avoiding potential fines
Today’s accountants do more than simply number-crunch too – with 83% of UK small business owners saying their accountant or bookkeeper helped limit the impact of high inflation last seen in 2022 through expert advice and guidance, helping save those businesses an average of around £28,000 a year.
UK small business owners said their accountant helped limit the impact of peak inflation seen in 2022[2]
83%
FAQs
What features should I prioritise when choosing accounting software?
The features you should prioritise when choosing accounting software are its core tools covering bookkeeping, billing, invoicing, and reporting. Once you’ve evaluated these, move on to other features your business might require, such as payroll or project management tools.
Can I use Excel for bookkeeping?
Yes, you can use Excel for bookkeeping. You’ll find many websites offering a selection of templates, but remember that the more complex your business needs, the less suitable Excel is as a substitute to a dedicated accounting software, which eliminates the need for multiple spreadsheets and minimises potential errors.
Does a sole trader need accounting software?
A sole trader needs accounting software only if they are registered for VAT to meet the UK’s MTD (Making Tax Digital) requirements for taxation. Those not registered will not be required to use accounting software until April 2026, according to the Gov.UK website.
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References
1. Data from Intuit: As reported in Insider, accounting software can have multiple benefits for any business, large or small, which is why 89% of small business owners say it’s an essential component of their operation
2. Data from Intuit: 83% of UK small business owners said that their accountant or bookkeeper helped limit the impact of inflation in 2022 through expert advice and guidance, helping save those businesses an average of around £28,000 a year.