Okay, first up let’s agree that we’re talking about online accounting systems. I mean, unless you’re a pretty substantial business, who’s using desktop systems anymore?
It can be complicated choosing the right one, so we’ve produced this handy guide for you.
Ask Your Accountant for their Advice
We would always recommend speaking to your accountant when it comes to choosing your accounting software. They understand your business so should be able to advise which system would best suit the needs of your business, as well as meeting your personal preferences.
However, many accountants have tied themselves to one system. A worrying trend we’ve observed over the past couple of years is accountants putting all of their clients onto the same system. They’re doing this because it’s easier for them; however they should be advising based on what’s best for their clients.
So when you speak to your accountant about this, ask them to tell you why they’re making their recommendation.
What system should you use?
Below we’ve briefly summarised the main features & benefits of each of the four main systems, along with our thoughts on who they are best suited to.
Let’s get started.
Edinburgh-based FreeAgent were one of the first online accounting systems to hit the market, launching back in 2007. Their focus has always been to take away the mystique of accounting and make it easy for users to manage their finances.
FreeAgent is ideal for freelancers, sole traders, and small businesses up to 5 people. You won’t need to worry about learning ’Account Codes’, and the user interface has been beautifully designed making it probably the easiest system to use for non-accountants.
We’ve been using FreeAgent for one of our businesses since 2012 and love it! We know many creative professionals who swear by it.
There’s also a good range of apps that will integrate with FreeAgent, which adds to the flexibility of the product. It also comes with a really nice dashboard, which tells you all of the things you need to know such as your profit, bank position and tax liabilities.
If you’re a freelancer, and you like using well designed systems, then FreeAgent would be ideal for you.
Founded by the charismatic Duane Jackson, Kashflow’s been around since 2006. It’s quite similar to Sage, using a very similar account structure, although in recent years the User Experience (UX) has been improved so it’s a little more user-friendly.
All of these systems will automatically pull in transactions from your bank, and Kashflow does this well.
We’ve been using Kashflow for our Golf business since 2008, and it would be fair to say that we like it, but don’t love it. It’s the least user-friendly of the four systems that we’re reviewing here and needs bookkeeping and accounting knowledge to be able to use it properly.
Again, the capability exists to connect Kashflow to other apps, however these are fewer than the other systems reviewed in this article.
Kashflow also doesn’t include payroll capability, which makes it less competitive than the others.
Owned by Intuit, QuickBooks is the most popular online accounting software in North America. It’s starting to get a foothold here in the U.K. too.
We don’t use this system ourselves, however one of our clients does, so we’ve been getting used to it lately.
It talks to your bank, will do your payroll, Vat etc, and has a nice, intuitive and easy to use interface. There’s also an ecosystem of Apps that will connect with QB, which makes it quite a flexible tool.
It’s still early days for us, but I would say that QB is closest in functionality to Xero. It’s nicely designed and easy to use for a non-accountant.
Xero was a little later to the UK market (launching back in 2008), however they’ve scaled rapidly and can boast over 4,000 accounting ‘Partners’ in the UK now, and they just recently passed the magic million user mark globally.
We use Xero ourselves for Ashton McGill, and have several clients using it. Xero is jam-packed with great features and they have a App Marketplace with over 500 add-on options, making Xero the most flexible system out there.
A little accounting or bookkeeping knowledge is needed to set it up correctly and then use it, but your accountant should be able to help with that.
Xero is a great option for a growing business. It handles payroll and Vat well, whilst reporting is okay, however if you want beautiful visuals then you’ll need to add one of the Marketplace apps such as FUTRLI (which we love!).
Xero are constantly developing the system and adding new features, so this is definitely a system that can grow with your business.
Unless you’re a £10m+ turnover business, then you really should be using an online accounting system. Which one will depend on what you do, the volume of transactions, how much bookkeeping knowledge you have, and how user-friendly you like your software.
There is no one-size fits all option – two similar businesses could very well use different systems and that could be absolutely right based on their individual needs & preferences.
All of these systems come with free trial periods, so my advice would be to sign up and take a look.
Which system should you use? It depends, but your accountant, if they’re truly looking after your best interests, should be able to help you make the right choice.