Which online accounting software is best?

Which online accounting software is best?

The sheer range of accounting software on the market these days is amazing but, as is the Alchemy way, we like to cut through the fog and give a clear answer.

So, here it is:

  • If you’re an individual working as a freelancer, contractor or operating a one-person SME, FreeAgent is best.
  • But if your business is bigger, with employees and substantial turnover, we’d recommend Xero.

But why?

It’s advice based on experience, and on the fact that we use each package day in day out, but let’s dig a bit into the detail.

The advantages of FreeAgent

FreeAgent was launched back in 2007 and designed specifically for contractors and freelancers. It’s a British product through and through and was acquired by the Royal Bank of Scotland in 2018.

It’s now used by all sorts of businesses, of various sizes, but remains at its best as an easy-to-use, to-the-point solution for the needs of the smallest businesses.

What makes it stand out isn’t that it does everything but that it does a few things really well. Instead of an overwhelming set of features and an overfacing array of menus and buttons, it keeps things simple.

If you’re, say, a freelance creative, it can handle:

  • invoice and estimate generation and monitoring
  • expenses and receipt recording and tracking
  • integrated timesheets
  • HMRC self-assessment returns from within the app
  • VAT return generation and filing
  • corporation tax forecasting
  • project costs and profitability monitoring.

All of that is wrapped up in a really clear dashboard where you can see all the key information at a glance.

It also integrates with online banking and is brilliant at automatically matching bank transactions with scanned or uploaded invoices.

Crucially, it’s dead easy to use, too. We can usually get someone working confidently with FreeAgent with an hour’s training on the phone or in person.

Where Xero excels

Xero has had a real buzz around it since its launch in New Zealand in 2006, and people who love it really love it.

It’s better for slightly larger businesses and those that are growing. And with a fuller features set, not to mention all sorts of specialist add-ons and plugins, it can be customised to work for any type of business in any sector.

It also integrates easily with other software, such as the similarly excellent expenses tracker ReceiptBank.

It does everything FreeAgent does, like invoicing and VAT returns, but with some more sophisticated additional features, such as inventory management and sales quote generation.

One particularly clever thing about the quotes function is that once a potential client has agreed the price and signed up, you can quickly generate an invoice straight from the quote, saving a job and reducing the room for human error.

The downside is that Xero does take a bit more setting up and can be a bit overwhelming at first. Fortunately, between the free 24/7 online support, and the help Alchemy offers its clients with installation and customisation, that shouldn’t put you off.

Other options

There are lots of other options out there but rather than go through each package giving pros and cons, here’s some advice on how you can go about assessing which will work best for you and your business.

First, before you start looking at websites and dazzling video presentations, take some time to think about what you need from your accounting software.

Rather than jumping straight to software features, start by focusing on the outcome you need to meet your business goals.

For example, you might come up with a list including things like this:

  • access accounts out of the office
  • improve chasing of late payments
  • handle payroll for temporary staff

Then add to your list any specific technical features you are certain you need. If your office runs entirely on Apple computers and iPads, for example, you’ll want to strike off the list any software that only works on Windows PCs or Android.

You might also want to think about your payment preferences – do you want to pay for a piece of software on the basis of a one-off fee or are you happy to pay an ongoing subscription?

The former is how things used to be done and does keep things neat and tidy, but you’ll generally have a bigger initial outlay and might end up having to pay for an upgrade every year or two.

Subscriptions, on the other hand, tend to come with regular software updates and a constant flow of new features, plus support, while also spreading the cost.

With your list of requirements at hand, you should then start looking at the packages on offer, skipping the marketing blurb where possible to focus on the features – what do they actually do?

When it comes to putting together a shortlist of cloud accounting software to consider, start with those you’ve heard of, which will probably be big names and global firms.

Then ask for recommendations in your network, whether that’s on LinkedIn or via any groups you might be a member of. The chances are that if lots of other people in your business sector are using a particular piece of cloud software, it’ll be worth proper consideration.

Finally, and this is obvious really, have a quick Google for things like ‘cloud accounting software late payments’ to see what catches your eye.

When you’ve got a list, look carefully at each one and put ticks against your list of requirements – can it do what you want, at the right price, on the right platform?

Dump any that can’t and give a score to the others. Then, belt and braces, check online reviews of those on your shortlist.

A word of warning on reviews: try to stick to reputable sources, such as the big accountancy publications, rather than dodgy, little-known websites; and watch out for ‘advertorials’ – content sponsored by software vendors that look like reviews but are really adverts.

Making Tax Digital

If you’re not using cloud accounting software already, you shouldn’t put it off. Making Tax Digital, the Government’s scheme to get British businesses recording and reporting their finances online, has started rolling out.

From April this year, VAT-registered businesses with a turnover above the VAT threshold of £85,000 have been obliged to keep digital accounts and file returns using software.

Before too long (there’s no date confirmed) digital returns for income and corporation tax will be made compulsory too.

Get in touch for help with cloud accounting.

The post Which online accounting software is best? appeared first on Alchemy Accountancy.