To find the best accounting software for your business, follow these four steps:

Online or offline – Most startups and small businesses prefer online software because they are affordable, easier to set up and integrate with other business applications, accountants can access them from their office, they include free data backups, etc.

Capabilities – For example, if you need an invoicing feature, do you want to be able to send invoices directly from the software, enable online payments (usually costs extra), send reminders, etc. In case of payroll, do you need automatic PAYE calculations and filing, ability to print payslips, etc. Make sure to test the software capabilities during the trial period.

Integrations – How well the software integrates with the business applications you´re already using (inventory management system, CRM, time tracking app, PayPal, Square, etc.). Or, do you have to purchase any 3^rd party integrations in addition to the accounting software?

Number of users – How many people in your company will use the software? Do they need full or partial access? Do you have an accountant who will need to access the records occasionally?

Compliance – Know your legal obligations and make sure the software you choose meets the required standards. This is especially important if you´ll be using the software to store customer or employee personal data.

VAT returns – If your turnover exceeds £85,000 per year, you must register for VAT and file your VAT returns using HMRC approved software. Also, there are different VAT rates and exemptions so make sure the software supports the ones you need.

Cash or accrual accounting – During the setup, you´ll be asked to choose between the cash and accrual accounting. In the cash accounting, revenue is recorded when you receive payments from customers and expenses are recorded when you pay supplier invoices. In the accrual accounting, revenue is recorded when you send sales invoices and expenses are recorded when you receive supplier invoices. The complete set of rules can be found at Gov.uk

Customisation – Check if you can customise invoices and emails (e.g., upload your logo), change fields´ names, add/delete fields, etc.

Everyday bookkeeping – It shouldn´t be difficult to record revenue and expenses, update supplier and customer details, link to your business bank account, work with different currencies, file VAT returns, import or export data, etc. Check how easy it is to export the entire accounts, in case you want to move to a different accounting software in the future.

Reporting – As a minimum you´ll need profit and loss and balance sheet reports. Reports that show creditors and debtors over 30, 60 and 90-day periods are very useful for your cash flow management. Make sure the reports are in the right format for your needs. Check the audit trail features (a chronological picture of how an event was recorded in the accounting system, including the information about who created the record, when, etc.).

Customer support – During the trials, test their customer support (chat, phone, email) to see how friendly they are and how quickly they respond. Have a look at the training materials, check if there´s an additional fee for any kind of customer support (e.g., software setup, maintenance, password recovery, etc.)

We have reviewed a number of online and offline accounting software applications to help you choose the best solution for your business, and the results are presented in the tables below. You should also consult your accountant, if you have one.

DISCLAIMER: We are not affiliated, authorised, endorsed by, or in any way officially connected with the companies mentioned in the tables below. These are basic comparisons of the main features included in their accounting software to help you identify the software that could potentially meet the needs of your business. Make sure to take advantage of their free trials and always test the software before committing to monthly payments.

In the table below, we compare the most popular online accounting applications used by established small businesses (e.g., have employees and a high volume of transactions). If you´re just starting out, they could be too complex for your business, and you may consider one of the free accounting solutions.

In the table below, we compare two accounting software specifically designed for sole traders. However, sole traders can use any of the online or offline software applications mentioned in this guide, including the free ones.

In the table below, we compare the most popular free online accounting software that can be used by limited companies, partnerships and sole traders. There´s also a free offline accounting application, GnuCash, in the last table of this guide.

Although an online accounting application would generally be a better solution for a small business, some business owners still prefer to use offline applications. In the table below, we compare a few offline accounting applications, which could be affordable for a small business.