14 Dec
Best Cloud Accounting Software for Small Businesses (Updated for 2023)
Traditional accounting was for a very long time the core foundation for accounting methods and processes; however, with the use of desktop computers, accounting software brought a new level of ease and accuracy to the traditional accounting methods.
With time the needs and demands of the markets rose as they became global and businesses started to seek expansion to countries other than their own. Therefore, businesses around the world are now shifting to cloud accounting software to manage their income and expenses; in a more technologically advanced and collaborative way.
These small business accounting software have changed the workings of traditional accounting and bookkeeping. The new systems are becoming a trend as SMEs are racing to become adopters of this useful technology.
Using this innovation, they are not only able to meet their goals related to statutory accounts and annual tax returns but are able to build complete eco-systems around business operations, reporting and filings.
The cloud software service providers offer their clients with online accounting software in exchange for a small monthly fee. Therefore, small businesses seeking help in management accounts, and bookkeeping do not have to pay a lump sum amount to implement costly ERP or redundant desktop-based solutions.
What is a Cloud-based Software for Accounting?
Cloud accounting is a revolutionary way to manage high-grade accounting software without the need of expensive infrastructure; the term cloud means that you can access the software and the data within it from anywhere in the world with just a computer and the internet.
Through cloud storage, a business or their accountant can securely and efficiently manage financial records and information without the anchor or being located in a specific location. The cloud software system can handle big data much more easily than traditional desktop apps.
The online integration makes the data accessible to users, anytime, anywhere, and using any device. However, a basic internet connection and correct credentials for security are still essential to access the system.
To increase efficiency and accessibility, many accounting software provides a cloud platform and have built their digital apps to be downloaded on different devices.
According to Mordor Intelligence businesses will opt for cloud accounting software and its market will grow between 2019 to 2025 with a predicted CAGR of 8.5%. The report reveals that the advancement and efficient functionality of bookkeeping software with the integration of supporting apps and technologies is what makes this market so much in demand.
These cloud software can automate 50% of the accounting processes; however, you might still need a suitable accountancy Firm to manage and analyse the data further for cash flow and financial forecasts.
Making Tax Digital Demands Digital Cloud Accounting Records
As the deadline looms for the initiative of Making Tax Digital by HMRC, businesses are looking for efficient, technically easy, yet comprehensive bookkeeping software. MTD (Making Tax Digital) has brought changes to the way, businesses used to manage and report their tax, and accounts.
The VAT process already requires digital accounting records to be reported for business finances through MTD-compliant solutions. These MTD-compliant small business accounting software digitises the financial records, which were once kept using desktop apps or on paper.
VAT-registered businesses are required to digitise their business financial records through compatible accounting software to submit their VAT returns.
Sole traders, enterprises or anyone that is responsible for tax, will have to shift to some kind of business cloud accounting software or bridging software to remain compliant with the changes. Moving to an accounting system can be overwhelming due to the complex procedures involved. In such cases, outsourcing to a Cloud Accounting expert can save time and ensure accurate compliance.
Why are Accounting Software important in a Business?
Payroll and Invoicing Software
When running a business, ensuring your finances are in order is essential, especially when you have to deal with paying your employees and sending out invoices. Thankfully, technology makes everything easy, as you can use cloud accounting software with built-in automated invoicing facilities and simple payroll functionality. With MTD (Making Tax Digital) in play, finding the right solution is even more important now.
Businesses initially only had the choice between using desktop accounting software with limited functionality, Microsoft office or expensive Enterprise Resource Planning or ERP’s, which could only be afforded by large corporations and enterprises.
Cloud Accounting Software has changed the game, similar to marketplaces which are operated by large operating systems such as windows, google play or apple store. The biggest players in the cloud accounting software industry have also created huge marketplaces with smart and intuitive add-ons.
Using these, a small business has at their disposal software and technologies which previously only enterprises could afford, and SME’s could dream about, to amplify their growth.
Why Do Businesses Need Cloud-Based Accounting?
Business across the world are now shifting to the cloud-based accounting phenomenon, and businesses based in the UK are no exception. But why would you need online accounting software when you are handling your accounts properly?
Well, the answer is to stay compliant with HMRC and its tax policies; moreover, keeping business records digitally makes it easier to analyse the costs that you can claim as an allowable expense. For businesses, integrating technology might be challenging if the market is not familiar with technical and complex computing processes.
Even online retailers and E-Commerce businesses struggle with technical accounting. However, now any business can access their business finances and accounts information in real-time without giving full control to outsourced accountants through cloud accounting software.
The Top Cloud Accounting Software in 2023
As of 2023, here is an updated list of top accounting software, specifically cloud accounting software, based on their popularity, features, user reviews, and industry reputation:
1. Xero
Xero, the leading Cloud accounting software in the industry, continues to offer a wide range of features and functionalities to help businesses manage their finances effectively. With the ability to raise invoices, process payroll, and submit VAT in line with MTD (Making Tax Digital), Xero has solidified its position as a top choice for businesses.
Bank reconciliation is seamless with Xero, allowing users to connect their business bank accounts, credit cards, and payment gateways for live real-time data entry.
This ensures that financial records are up to date and accurate. Additionally, Xero provides convenient mobile apps for both iPhone and Android devices, enabling users to manage their business finances on the go.
In terms of integration and affiliated apps, Xero offers a comprehensive ecosystem that supports various business management tasks. Users can leverage these apps for inventory management, bookkeeping, invoicing, payroll processing, business management dashboards, VAT returns, and expense claims. Xero makes it easy to import data from bank accounts, credit cards, or other transactional sources like PayPal.
What sets Xero apart is its versatility, catering to businesses of all types and sizes. Whether you’re a business owner, sole trader, or part of an organization, Xero can adapt to your specific requirements and provide the necessary tools to streamline your financial processes.
Overall, Xero’s ongoing commitment to innovation and user-friendly functionality has solidified its position as the leading cloud accounting software, making it a reliable choice for businesses seeking efficient financial management solutions. Speak to our Xero Accountants to see how we can help build a Xero eco-system around your business needs.
2. QuickBooks
Quickbooks are one of the largest and the earliest small business accounting software providers in the world, developed by Intuit. The software offers multiple features even in their most cost-effective package, and sole traders and freelancers can use this package to track their income. Moreover, QuickBooks is helping small businesses with creating invoices, cash flow insights, track business performance, run payroll, and much more.
For the year 2023, QuickBooks has already updated its services and products, and a few of its other products will be launched soon. The competitive spirit and value addition make QuickBooks a major competitor for Xero.
Quickbooks now offers streamlined payments, and businesses are able to accept multiple payment methods in the QuickBooks Self Employed package. You and your clients have access to mileage tracking through QuickBooks. Most businesses can outsource their accounting to Expert Accountants for QuickBooks to maximize value addition.
The main highlights in 2023 for Quickbooks are the addition of multi-company reporting with Spreadsheet Sync in QuickBooks Online Advanced, setting email schedules for standard and custom reports, recognising deferred revenue automatically, better and more custom user roles, a custom report builder and the performance centre.
3. Sage Business Cloud Accounting
Sage Business Cloud Accounting, formerly known as Sage One, is a cloud-based small business accounting solution that offers a range of powerful features. With a subscription and an internet connection, you can access the software on your PC, Mac, or mobile device through a web browser or dedicated mobile app. Some key features of Sage Business Cloud Accounting include:
- Invoicing: Create, send, and track invoices to streamline your billing process and get paid faster.
- Bank Account Integration: Connect your bank accounts through open banking to automatically import and reconcile your transactions.
- Stock Management: Keep track of your stock levels to effectively manage inventory and avoid shortages.
- VAT Returns: Easily calculate and submit your VAT returns to HMRC (Her Majesty’s Revenue and Customs) to stay compliant with tax regulations.
- Cash Flow Forecast: Use the dashboard to forecast your cash flow and explore different scenarios to make informed financial decisions.
- Business Reporting: Generate and export essential business reports to gain insights into your company’s financial performance. You can also upgrade to Sage Intelligence for more advanced reporting capabilities.
- Mobile Apps: Manage your business on the go using the Sage accounting mobile apps, available for iOS and Android devices.
In addition to these features, Sage Business Cloud Accounting allows you to add payroll services and accept online payments through Stripe for an additional fee.
Pros of Sage Business Cloud Accounting include its powerful range of features, 24/7 support, and the ability to easily add other Sage services as your business grows. However, there are some cons, such as a dated user interface (UI), reports lacking visual impact, and the absence of time tracking functionality.
4. Clearbooks
Clearbooks is an exceptional software designed specifically for small and medium-sized businesses and their accountants. Renowned for its user-friendly interface and streamlined accounting processes, Clearbooks offers a range of features that make it an ideal choice for businesses of all sizes. The software provides an organizational dashboard integrated with various operations, enabling small businesses to efficiently manage their accounting tasks.
One of the standout features of Clearbooks is its ability to create and issue professional invoices, ensuring prompt and efficient payment from customers. The software also offers automated payment reminders, helping businesses get paid faster. Clearbooks integrates with secure payment providers, guaranteeing the safety of transactions.
Clearbooks simplifies the management of bills and purchases, providing a clear overview of outstanding payments to suppliers and facilitating the reclaiming of VAT. The software’s auto-bills feature further streamlines the process by automating repetitive tasks.
The software offers seamless bank transaction management through its auto-import functionality, allowing users to link their bank accounts and import transactions effortlessly. This feature greatly simplifies the reconciliation of payments with invoices, bills, and expenses.
Clearbooks excels in VAT tracking and submission, enabling businesses to easily track income and expenses and submit Making Tax Digital (MTD) VAT returns to HMRC in just a few simple steps.
For effective financial oversight, Clearbooks provides a range of management reports, including Profit & Loss and Cash Flow statements, giving businesses a clear snapshot of their financial performance. Additionally, the software offers convenient solutions for managing Construction Industry Scheme (CIS) requirements, including automatic listing of CIS deductions on invoices, subcontractor verification, and generating reports and statements.
Clearbooks supports multi-currency accounting, allowing businesses to create invoices, track bills, and manage expenses in over 170 currencies. It also offers tools for tracking fixed assets, managing project finances, monitoring stock levels, and recording timesheets for accurate billing.
In addition to its extensive feature set, Clearbooks provides value-added extras to enhance the accounting experience. These include the Clear Books Mobile app for convenient on-the-go management, the ability to share information with accountants, and free email and phone support for all customers.
Clearbooks has maintained its position as a leading cloud accounting software this year due to its integration with other tools and its valuable additions such as VAT returns, payroll, payments, HR, and accounts.
5. Zoho Books
Zoho Books continues to be a reliable and feature-rich accounting software solution for small businesses and accountancy firms. With its comprehensive range of features, Zoho Books offers granular control over creating transaction forms and records. The software provides multiple payment gateways, a user-friendly interface, and efficient time and project tracking capabilities.
In addition to its existing features, Zoho Books now offers a customizable option, allowing small businesses to tailor the software to their specific needs. This includes managing invoicing, cash flow, expenses, banking, bills, projects, sales orders, purchase orders, payments, VAT returns, reporting, automation, and more.
6. Freeagent
FreeAgent is a powerful accounting software designed for freelancers and small businesses, offering a wide range of features to streamline financial management. Here are some key features that make FreeAgent a comprehensive solution:
- Invoicing: Easily create and send professional invoices to clients, automate payment reminders, and enable online invoice payments to get paid faster.
- Expense Tracking: Record and categorize business expenses, track mileage, and keep all your receipts organized in one place. FreeAgent also allows you to snap photos of receipts using the mobile app.
- Time Tracking: Keep track of billable hours and project timelines with built-in time tracking tools. This feature is especially useful for businesses that charge clients based on hourly rates or project milestones.
- Project Management: Manage projects effectively by setting budgets, tracking project progress, and assigning tasks to team members. This feature helps you stay organized and ensures projects are completed on time and within budget.
- Cashflow Management: Monitor cash inflows and outflows in real-time, identify trends, and forecast future cashflow. FreeAgent provides a clear financial health overview, helping you make informed business decisions.
- Financial Reports: Access various accounting reports, including profit and loss statements, balance sheets, and cashflow statements. These reports provide insights into your business’s performance and help with financial analysis.
- Tax Compliance: FreeAgent simplifies tax-related tasks by generating MTD (Making Tax Digital) compatible VAT returns automatically. It also assists with Self Assessment by auto-populating tax returns and allowing you to file directly to HMRC.
- Bank Feeds and Integrations: Connect your bank account to FreeAgent to import transactions automatically. Additionally, FreeAgent offers integrations with other popular software and services, allowing you to streamline workflows and reduce manual data entry.
- Mobile App: Stay productive on the go with the FreeAgent mobile app. Access your financial information, capture receipts, and manage invoicing and expenses from your smartphone or tablet.
FreeAgent aims to provide a user-friendly experience, saving time and effort on administrative tasks, and empowering businesses to make smarter financial decisions. With its comprehensive feature set, FreeAgent is suitable for freelancers, small businesses, and other business types looking for efficient accounting software.
7. Kashflow
We have selected KashFlow as one of the preferred accounting software due to its efficient features for importing data from popular software such as Excel and QuickBooks. With its user-friendly interface, businesses can quickly familiarize themselves with its features. KashFlow allows small businesses to create estimates, set up automation, record purchases, and import bank transactions.
A significant advantage of KashFlow is its compatibility with HMRC, enabling businesses to directly connect and access their accounting information in a centralized location.
This direct connectivity streamlines accounting and tax compliance processes for small businesses. Moreover, KashFlow integrates with advanced payment processors like GoCardless and supports globally accepted payment methods, expanding business payment options.
While KashFlow has made some changes to its accounting software, such as eliminating customizable dashboards, it still offers a range of useful features for small businesses. Additionally, companies can try KashFlow Payroll for free through a simple form submission.
8. Freshbooks
One of the most popular online software for small businesses, their accountants and bookkeepers is FreshBooks. This accounting software provides numerous features to handle business reports, time tracking, expense tracking, and invoicing, all from a user-friendly interface. It also offers integration with third-party services such as Zendesk, MailChimp, WordPress, and PayPa/
Is there a free alternative to Paid cloud Accounting software?
If your budget is low or if you do not have a budget at all, you can always opt for using free cloud accounting software offerings, accounting software such as Wave, SalesForce, Zipbooks, GnuCash, etc.
Wave software is completely free and can provide functionality such as invoicing, accounting, and scanning of receipts. Other services are also available on a pay-as-you-go basis. GnuCash is open source, meaning if you have a developer, you can modify the software per your business requirements.
Which accounting software is the easiest to use?
Different accounting software options vary in user-friendliness, and choosing the easiest software depends on your preferences and familiarity with accounting processes. QuickBooks, for example, is often considered user-friendly due to its intuitive interface and the availability of free customer service for assistance.
It also offers a free 30-day trial, allowing you to assess whether it suits your needs. However, it’s important to note that most accounting software assumes some accounting knowledge and certain processes may be complex without the guidance of an experienced accountant. Ultimately, the best accounting software for you depends on your specific requirements and comfort level with the software’s functionality.
Cloud Software Resource
Making Tax Digital – Which software is compatible?
The deadline to register for digital self-assessment is nearing; the constant changes in legislation are keeping all business owners on edge. Recently VAT became applicable to MTD requirements, with other categories planned to be included soon, such as income tax. Most accounting software in the year 2023 will be compatible with HMRC’s requirements for MTD (Making Tax Digital). You can always visit the official UK government website to confirm the software compatibility with MTD; before deciding which software to buy.
Our comparison image shows which software are MTD (Making Tax Digital) compliant and which is not.
What is the benefit of Cloud accounting Software?
Cloud accounting is more efficient and secure and has vast storage for your financial records. Online documents and transactions also give you easy access to your business information. Most importantly, the organised system will save time by avoiding unnecessary procedures and headaches in managing the accounts. The eco-system is scalable with cloud accounting software. Therefore, accountants for tech companies that are extremely high growth usually prefer using cloud accounting software instead of ERPs in the initial phases.
Can accounting software replace accountants?
Although innovative accounting software is bringing change, we cannot deny the importance of a certified chartered accountant in the rise of business performance.
Common Questions About Accounting Software Answered
What’s the difference between desktop accounting and cloud accounting?
Desktop accounting was quite an innovation but is now old school. To manage your bookkeeping through desktop software, you must download the required software on the computer to access the features. However, you only need official security credentials and an internet connection for cloud accounting.
Do I have to know about accounting to use accounting software?
Suppose your business financial records are not online and are currently on paper or desktop apps. In that case, you may still need a basic understanding and knowledge to use online accounting software.
The basic knowledge will help you find trends and identify spot opportunities. Moreover, the proficient accounting software will give you insights into the true standings of your company.
However, you might not have to worry about the complex procedures if you already have an accountant on board with your company.
However, the basic knowledge will help you understand your finances to monitor better the performance of the accountancy firm or accountant you have hired to do the difficult calculations and compliances.
I am a Startup. Do I also need accounting software?
For startups, buying accounting software might look like overkill; you can easily manage initial financial records on paper or desktop apps.
However, the HMRC makes it compulsory for even sole traders to register for self-assessment; you must have compatible accounting software to report your finances, accounts, and tax returns.
It might look less compelling as you’ve just started your business; however, it would be much easier to understand the complexities when you begin managing accounts online from day one.
How do I choose the right accounting software?
We have listed above accounting software that you can analyse for your usage. However, taking the trial versions of preferred accounting software will help you better understand each one per your business requirements and needs. You may also hire an accountancy firm to help you integrate the most compatible software for your business.
Can I easily migrate my current accounting and customer information?
This question is valid if you already use accounting software you want to replace or upgrade. The last thing we want you to experience is problems while moving all your old financial records to any other software. However, most leading software get the clients on board after guiding them through the initial moving process.
Author Bio
Jibran Qureshi FCCA is the Managing Director of Clear House Accountants, and has over 10 years of experience in practice and across multiple industries. Jibran’s educational background includes a Master’s in Financial Strategy from Oxford University and an Executive MBA from Hult International Business School. His experience in Financial Strategy, Tax Planning, Operational Consultancy and Performance Reporting guide his cognizant approach to leading Clear House and its clients to the future. It was this dexterity that led him to be Enterprise Nation’s Top 50 Advisors.
Jibran is fueled by his passion for helping businesses. He unequivocally believes that as business advisors and accountants for our clients, it is our responsibility to work with them as business partners. As specialists, it is our duty to help our clients navigate through the complexities of constant change and the implications that come with it.
Over the past decade, innovative disruptions have changed the way businesses work, everything from cloud software, innovative business models, to AI and machine learning, have impacted how businesses operate, grow, and expand.
Jibran recognized the need to manage these disruptions sustainably, early on and shaped Clear House Accountants to not just be compliance specialists, but advisors who help build complex ecosystems around cloud accounting software, provide advice on funding support, help manage innovative tax schemes, set up and implement complex strategic plans, and much more. So, his clients can thrive, not just survive.
Jibran developed his prime role as the Managing Director to build Clear House’s capabilities so it can add value for their clients. He is of firm belief that this can be done through consistent high-level training, building the right tools, and creating roadmaps to help businesses cope with prospective disruptions. He envisages that every client that comes on board, is provided maximum value through onboarding, ongoing services and the right mix of tools to help them become the best in the world.
Galen
What’s up, its nice paragraph regarding media print, we all be familiar
with media is a wonderful source of facts.