Small Business Tips
When you run a small business, accounting software can be your best friend. Here's a look at why you'd need it and which features you should look out for when choosing one. We'll also give you a rundown of some of the best-rated accounting software packages for small businesses in the UK.
Why do I need accounting software for my small business?
Well, strictly speaking, you don't have to have accounting software. HMRC's rules require you to keep a record of all your business transactions — both income and expenses. But the rules don't specify which format these records should take, as long as they're complete, accurate and readable.
You could do your accounts on an Excel spreadsheet and HMRC wouldn't bat an eyelid – as long as they're complete, accurate and readable, of course. You could even buy a physical ledger book and write in all your transactions by hand.But, ask yourself:
- Can you afford to set aside at least several days each month to do your books manually?
- Do you know enough about accounting to get everything right?
- And, most importantly, are you 100 percent certain you have enough virtual or physical space to store your records safely and securely? Those ledger books take a lot of room, you know.
HMRC can slap you with penalties and interest if there are mistakes in your accounts. And if your business records are lost, stolen or destroyed, you'll need to do your best to recreate them.Is it worth taking these risks when there's a better way?
What are the advantages of using accounting software for my small business?
Put simply, accounting software can save you time, money and trouble. Here are some of the key advantages:
- There's no need to input each transaction individually by hand. You can upload a bank statement (or connect your bank account to the software), and all your account activity will appear in minutes.
- Most mathematical calculations happen automatically in the background, which keeps the risk of human error to a minimum.
- Accounting software keeps all your financial records — transactions, invoices and receipts — together in one place. This single source means it's easier to access everything at a moment's notice should you need to. It's also easier to collaborate with your accountant. Merely give them access to the software, and they'll have all the information they need to do your accounts and file your self-assessment tax return.
- All your data is backed up to the cloud, so you don't have to worry about making manual backups. Or having enough room for storage.
As a bonus, many accounting software packages automatically create all sorts of interesting and useful reports in real time, such as your:
- Profit and loss account
- Balance sheet
- Income by customer
- Expense by vendor
The reporting feature means you don't need to guess — or carry out lengthy calculations — if you want to find out how well your business is doing.
