Crunching the numbers: accounting software for small businesses

The accounting software market is competitive, says David Prosser – there’ll be an option for you.

932_MW_P36_Small-Bus

Businesses struggle without accounting software

The accounting software market is competitive, says David Prosser there'll be an option for you

For many small and medium-sized enterprises (SMEs), the new year has begun with an accounting headache. On top of tax returns, if your business is registered for VAT and your annual turnover is, or has been at any time, in excess of £85,000, you will probably have had a reminder from HM Revenue & Customs (HMRC) that you must comply with the Making Tax Digital (MTD) rules from 1 April. These rules require businesses to keep records digitally and to submittheir VAT returns using specialist software.

Either way, businesses operating without some form of accounting software are finding life increasingly difficult. If you haven't previously invested in such a package or reviewed your options recently now may be the time to do so. The good news is that competition in this marketplace is fierce, with newer entrants such as Xero and FreeAgent now giving the market leaders Sage and Intuit a real run for their money. Accounting software forSMEs is affordable, easy touse and flexible, with providers making it easy to access more features as your businessgrows and its needs become more sophisticated.

What to look out for

Most software offers the basics, such as invoicing, tracking income and costs, financial reports and customer management. Don't buy software that isn't compatible with HMRC's VAT system; even if you're not currently registered for VAT, you may be in the future and MTD is set to be expanded. Additional features that may be useful to some businesses include inventory management, vendor management and procurement. Take a bit of time to play with vendors' software before you commit, and consider whether you want access to the software from multiple devices and on the go.

Finally, think about how accounting software will link up with any other IT you use in your business. If you use tools such as customer relationship management software, for example, will the accounts package you're considering be compatible with them?

There is no single supplier that offers the best software for any SME, so explore several alternatives. Still, in research published by PC Magazine last year, AccountEdge Pro won top billing, followed by Intuit QuickBooks and FreshBooks.

Lenders left to it

Although the cross-party Treasury Select Committee said last year lending to SMEs should be regulated following scandals including RBS's Global Restructuring Group allegedly pushing small companies into bankruptcy, ministers said this could make it harder for smaller businesses to obtain credit. The impasse leaves SMEs vulnerable to poor treatment at the hands of their banks, though separately the government has agreed to extend the reach of the Financial Ombudsman Service. While this scheme currently only covers a handful of very small businesses, from April SMEs with an annual turnover of up to £6.5m and fewer than 50 employeeswill be able to take complaints about banks and other financial services companies to the independent ombudsman.

SMEs needing credit should consider a range of options. The Business Finance Guide, compiled by the British Business Bank, is a good first port of call for SMEs considering their options. It provides tailored finance recommendations to businesses, sourced from providers of both debt and equity capital ranging from crowdfunding platforms to private-equity firms.

Recommended

Where to get help taking your business online
Small business

Where to get help taking your business online

The pandemic has brought forward the transition to e-commerce, so businesses need to go digital. David Prosser explains the tools available to help ta…
2 Mar 2021
Brexit: a bumpy beginning for small businesses exporting to the EU
Small business

Brexit: a bumpy beginning for small businesses exporting to the EU

Small businesses trading with the EU have struggled since the Uk officially left the EU at the turn of the year. David Prosser outlines the key proble…
12 Feb 2021
More help for small businesses to deal with customers who pay late
Small business

More help for small businesses to deal with customers who pay late

The latest measures to tackle the problem of customer who don't settle their bills on time bode well for small businesses.
3 Feb 2021
How to make sure your business doesn't lose out in lockdown
Small business

How to make sure your business doesn't lose out in lockdown

Money is still available via government schemes to help small companies cope with the latest Covid restrictions. David Prosser outlines what you can g…
16 Jan 2021

Most Popular

A beginner’s guide to bitcoin: what is bitcoin?
Bitcoin

A beginner’s guide to bitcoin: what is bitcoin?

As a completely novel concept for many people, bitcoin can take a little effort to get to grips with. In the first of a short series on the cryptocurr…
1 Mar 2021
What is “yield curve control” and why is it coming to a central bank near you?
Government bonds

What is “yield curve control” and why is it coming to a central bank near you?

Central banks around the world are determined not to let interest rates go up too quickly or by too much – a practice known as “yield curve control”. …
1 Mar 2021
What to watch out for in Budget 2021
Budget

What to watch out for in Budget 2021

In his 2021 Budget, Rishi Sunak will lay out his vision for post-Covid Britain – how to fix the public finances and repay all the pandemic stimulus wi…
2 Mar 2021