Not all cloud accountancy packages were created equal
The internet has enabled the creation of a different world of IT systems. Outside the US, Xero is the market-leading online accounting package. In the US it’s Intuit’s Quickbooks, and there are many others, such as FreeAgent, Kashflow and Zoho, with Sage finally getting its act together and releasing Sage One.
Each of the platforms is different, although all offer the same core services. The golden rule is that using any cloud-based accounting package will be better than sticking with paper and a spreadsheet.
For sole traders
If you run your business as a sole trader you would still benefit from using an online accounting system, although you won’t need as much of the functionality as a limited company would, so make sure you aren’t paying for something you don’t need – Xero has lower cost variants that will give you what you need.
If you need simple book-keeping and are under the VAT threshold (£85,000) then ReceiptBank has a service – 1Tap Receipts – which also might suit your business.
Try before you buy
Which package is best for your business comes down to personal preference – or which one your accountant supports.
If you need to make a choice, all of the systems offer free online demos and some offer free trials.
I am a Xero Partner and prefer it to the others as I find it the most visually user-friendly. Even though I’m comfortable with tables full of numbers, I do also appreciate seeing things visually (I am a doodler and also love to draw.)
I find you can have really useful conversations with clients about their business when looking at some of the visual reports that Xero produces which would be much harder to do – and take much longer – if I had to explain things line by line from a balance sheet.
As the UK market leader, Xero also has the largest app interface – more than 700 time-saving apps are currently in its marketplace, many of them free or very low-cost – all designed to make your business more efficient.
If you think about the opportunity cost of any task you do – that’s the impact of what you could have been doing if you weren’t doing that bit of admin – then paying £25/month for an app like Chaser (which chases overdue invoices) seems like a pretty good investment.
What will it cost?
Online accounting will cost you between £10 and £25 a month on top of your accountancy fees.
However, cloud accounting packages are far more intuitive and give you a multi-dimensional view of your business. Lots of sophisticated reporting is available to you at the touch of a button. Things like forecasting, planning, reporting, who owes you the most money and which client takes longest to pay – all really useful intelligence about your business.
Being able to view this information in real time at the same time as your accountant – even if you aren’t at the same location – is a real advantage. And there’s no need to back up or download information from the system, it’s all done automatically.
So why do I still need an accountant?
The main reason to have an accountant is for their advice. Online accounting software means that, more than ever, your accountant should know your business and be able to advise on key aspects.
And of course, if you’re running a limited company, you still need an accountant to prepare your limited company accounts and VAT returns.
A good accountant will have an eye on your numbers regularly, not just ahead of a quarterly or annual meeting, and will proactively flag any issues, which means you can deal with things in a much shorter timeframe.
You’re missing the point if you’re looking at your accountancy fees as a cost. What you’re buying isn’t compliance, its knowledge and insight.
A point to note, though, is that all of the systems have a partner scheme which rates accountancy practices, whether that’s bronze, silver and gold or another rating system.
You might think that a Xero Gold partner is a mark of quality. It’s not. It’s awarded based on volume – the number of clients they have on the system. So larger, more traditional accountancy practices have bought up smaller ones in order to get more clients on the system and achieve the top status.
It’s easy to be fooled into thinking that a Gold Partner will be using all of the functionality of a system, but that’s not necessarily the case. When considering your accountancy firm, look for one focused on adding value, not just with an accreditation from the software they sell.
How do I choose the right cloud accounting package for my business?
So much of this decision will come down to personal preference about the system. Like you would when buying a car, take a test drive.
Ask others what packages they use, what they like and what they don’t like about the systems. If you know businesses similar to yours, find out what they use and whether it suits their needs.
As with all business decisions, do your due diligence ahead of making the purchase. And if you need some expert support with the decision-making, do get in touch.