Online accounting software is seeing widespread adoption in the UK due to its efficiency and convenience, as well as the new government requirements. 

Making Tax Digital (MTD) is HMRC’s plan to digitalise the tax system and will replace the current Self Assessment system (see here). As we move to software-only filing web-based and paper-based filing will no longer be available.

Here we will explain how your business can transition to these new technologies with the assistance of Lincoln Be Smarter and give an overview of the software available.

There are multiple bookkeeping software options available in the UK. It can be practical to hire an accountant when selecting the right software for your business needs. They may also be able to assist you with the transition and training of employees and collaborators.

Research and select a suitable online bookkeeping software that aligns with your business needs. Look for the necessary user-friendly features. For example, consider:

• Invoicing 
• Expense tracking 
• Your tax obligations
• Integration with your bank accounts 
• Ease of use
• Pricing within your budget
• Customer support 

Consider involving your team in choosing the accounting software and find a product that everyone is comfortable with. Provide proper support to make the switch smoother. There are guides such as videos, webinars and courses that can help train your team and get you up to speed.

Below is a list of four options for small to medium-sized businesses and freelancers in the UK. Quickbooks, XERO, FreeAgent and Sage. They are all cloud-based and include tax online filing. Here we will briefly list some pros and cons of each system. For more information, see here.

QuickBooks is the most popular system among small businesses, so there are plenty of online training courses available and is reported to have a very convenient user interface. However occasional problems with syncing with banks and credit cards have been reported. 

Xero offers a clean interface and an integration with third-party payroll service (Gusto). Listed cons include limited reporting and limited customer service. According to investopedia, it is the best choice for micro-business. (A micro-business starts with a small capital from a bank or other organisation and operates with up to ten employees.)

FreeAgent aims to be accessible to both accountants and non-accountants. The software has high ratings in terms of ease of use and enjoys popularity with small businesses, contractors and freelancers. The software is free if you have a business account with NatWest, Royal Bank of Scotland or Ulster Bank NI (see other pricing options).

Sage offers mobile functionality, multi-currency support and comprehensive reporting functions. According to a review by Forbes Advisor, it also integrates well with third-party apps. A 30-day free trial is available and there are different pricing plans available depending on the number of users. Some reported downsides include absence of time-tracking features and dated interface.

Consider the weaknesses and challenges you face with your current bookkeeping method and identify what needs to be improved before you begin your transition. Before transitioning to accounting software, ensure all your financial records are up-to-date. Gather relevant documents such as bank statements, invoices, receipts, and payroll information. Remember to keep physical copies of essential documents and create digital backups.

• Backups: Regularly back up your online accounting data to prevent loss or accidental deletion. Most online accounting software providers offer data backup options or cloud storage for added security.
• Run parallel systems: When you begin using the new online bookkeeping software, consider running it in parallel with your old system for a short period. This way, you can identify any inconsistencies and make necessary adjustments before switching completely.
• Connect your business accounts: Connecting your business bank account to the online accounting software allows for automatic importing of transactions. This will help you keep track of income and other financial transactions more effectively.
• Keep track of updates: The software you have chosen is likely to get updates over time. You might find it beneficial to keep track of the updates and get necessary assistance.

Lincoln Be Smarter can help you digitalise your accounting software to benefit your business – contact us to find out how we can help you with the latest software.