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Accounting Software for Sole Traders

Any self-employed person who runs their own business knows that balancing everything from marketing to accounting is a great deal to manage. However, the workload of crunching numbers almost becomes a doddle when you enlist the help from accounting software. While you’re focusing on the day-to-day business tasks, accounting software for sole traders can save you hours of your time doing the bookkeeping jobs for you.

Here, I outline the key elements of self-employed accounting software, what to look for when finding the right provider for your business and explore some of the most popular companies along with their features.

1. What is accounting software?

Accounting software is an online, cloud-based tool that allows you to manage and keep track of all your business financials in real-time. From invoices and taxes to payments and reports, this type of software will process it all. Different types of software will do a range of functions, and it will depend on the type of package you invest in. Furthermore, all your financial data is stored in the cloud and you can access it from anywhere, provided you’re on the internet.

2. Why use accounting software for your business?

There are countless benefits for using accounting software but here are just a few good reasons why you should integrate it into your business financials.

  • Limits human error: having all your financial data computerised means there is less risk than manually writing figures on a spreadsheet.
  • Saves time: once you have entered the relevant information, the software uses it for many functions in relation to financial reporting which means no one in your business has to enter the data manually.
  • Better security: you can restrict the number of users who have access to your financial data via the cloud. Plus, data is less likely to end up in the wrong hands.
  • Saves money: although you pay a monthly/yearly fee, generally it is more cost-effective than paper-based accounting.
  • Real-time access: you can view and use all your accounting information; for example, transactions, late invoice payments, etc, all in one place, as and when they change.

Furthermore, with Making Tax Digital coming into play, accounting software for sole traders will be obligatory for businesses to use to store digital records for their accounting and taxes.

3. What does accounting software do?

Essentially, this type of software digitally performs all the accounting tasks for you. It can also help to get paid quicker by automating all bookkeeping tasks. It will process all the financial systems of a business and its core projects include:

  • Manages your accounts: links with your business bank account, online payments and expenditures to make reconciliation easier.
  • Billing and invoicing: customised invoices are available for you to send and keep track of. You’ll also know if an invoice is late or unpaid and send out reminders accordingly using an invoice management system.
  • Track sales: using the information from your bills and invoices, software can track and update all your stock and customer records. It will also automate an invoice from an order.
  • Manage payroll: it can manage all your payroll accounts for things such as wages, expenses and bonuses.
  • Monitor cash flow: check outstanding payments from clients and to suppliers and view performance against budget by producing forecasts.
  • Generate reports: software can generate all financial reports, such as profit and loss, and tax or VAT management.

4. Popular Accounting Software platforms

Popular accounting software providers mostly offer similar functions and features. Choosing one, however, will depend on the needs of your business. Although not exhaustive, here’s a lowdown on some of the most popular ones on the market.

4.1 Freshbooks:

Pricing: offers 3 pricing plans which cater for small businesses and includes a free trial.
Features: recurring billing, sends estimates, real-time reports, track spending, unlimited invoices, accepts online payments and time tracking for work on projects.
Best for: client-based businesses, for example, those that charge an hourly rate.

4.2 Xero:

Pricing: 3 pricing plans available from Xero with a 30-day free trial. However, lower tier plans have strict usage limits.
Key features: invoicing, quotes, reconcile bank transactions, captures bills/receipts, send VAT returns, links to payment processors, inventory tracking and creates reports.
Best for: comprehensive features with its basic plan and easy-to-use interface.
Bad for: customer support can be difficult to contact.

4.3 Crunch:

Pricing: offers different plans according to whether you’re a sole trader, limited company or small business owner, but also provides free basic plans.
Key features: their web interface has various functions that come under the headings of: Sales, Expenses, Banking, Pay Yourself, Company Tax (Corporation and VAT), Accountancy and Self-Assessment. annual accounts health check and unlimited support
Good for: offer free for life online bookkeeping system for freelancers and small businesses.
Bad for: if you want to use this for its payroll function, it can end up more expensive than other providers.

4.4 QuickBooks:

Pricing: has 4 different pricing plans to choose from, depending on the functions your business needs.
Key features: tax planning, mobile mileage tracking, record keeping, invoicing and inventory management, detailed reporting, live chat, hundreds of 3rd party integrations and a mobile app.
Good for: comprehensive features for freelancers and sole traders.
Bad for: monthly plans are more expensive than their competitors with limited features according to the different plans.

4.5 Wave:

Pricing: Free! But you can pay extra for add-ons such as payroll and payment features.
Key features: invoice management (recurring billing, tracking and reminders), double-entry accounting, multi-currencies accepted,
Good for: being the only free accounting software available on the market.
Bad for: advance features are paid, including the opportunity to chat online to a live agent.

5. What to think about before choosing an accounting software provider

  • Users: how many people will have access to the software? This matters, not just because of security but also most providers will charge extra fees for more users.
  • Functions and features: consider what exactly you mainly need for your business. For example, sending invoices, payroll, stock control or self-assessment integration?
  • Easy-to-use: if you’re not feeling confident using accounting software, find ones with a user-friendly dashboard. Additionally, look for customer support, how-to videos and other online support to help you.
  • Security: misplacing paperwork is a common practice, but using accounting software means that it has features to protect your data from hackers or if it gets lost. As it’s stored on the internet, it also means that it’s backed up regularly.
  • Integration: if you’re using other business software or apps, then you should ensure the accounting software integrates with these so that information can be transferred easily.

Wrapping Up

One of the biggest considerations for accounting software for sole traders is the cost. But this problem has easy solutions. For instance, you can begin with signing up for a provider using a free trial and pay for a plan later if the service is suitable. Alternatively, you can start with a basic package and upgrade for more features as your business grows. If you have further doubts about which self-employed accounting software to choose, ask your accountant for advice and help with the transition.