Updated: Jan 31, 2021
In short, the answer is YES!
Even if you are just starting out in business, its so important to have the right foundations in place from the beginning, you NEED to be financially organised from the start in order to know where you are spending those crucial first few hundred pounds. You must have a plan, especially if you start off with a loan or grant.
What are the main benefits of using an accounting software?
I don't know anyone who wants to sit with a pen and paper writing down all their income and expenses or even typing it into a spreadsheet (well, actually I do but we'll leave that story for another day). You have way better things to be doing with your time.
An accounting software will do all the calculations for you so there is less room for mistakes, as long as your transactions are coded correctly the information is going to be correct.
Ease of access
With a cloud based accounting software (which is what I would recommend btw) you are able to look up past transactions and run reports in seconds rather than spending hours searching through folders. It's super easy to share with your bookkeeper and accountant too!
Accounting software has the ability to connect directly to your bank (this is called a feed) it easily pulls through all your banking transactions, so no more downloading and importing bank statements. Depending on which software you choose there are some great add on apps available that will integrate with your accounting software, helping you to streamline your invoicing and credit control, data capture software for all those iddy biddy receipts and much, much more.
Your software can also operate as a data storage function and if its backed up to the cloud, it will always be available, say goodbye to those room consuming file cabinets of wasted paper and once you've snapped a pic of those iddy biddy receipts, they can go straight in the shredder!
Reduces stress at Tax time!
We all have to pay taxes and having disorganised records can cost you greatly when its time to file, you don't want to waste money paying an accountant an hourly rate of £35 to sort through all your receipts to prepare your tax return. If you don't know your numbers, how can you set aside money for any tax you owe?
Making Tax Digital
If your annual turnover is over £85000 then you should already have an accounting software in place so that you can file your VAT online. The Government introduced Making Tax Digital (MTD) in April 2019, so filing your VAT through an approved accounting software is a requirement. This will soon be rolled out to self assessment tax returns too (currently April 2023), so get organised now and you'll see just how much easier your life can be.
So now that you are sold on the idea of an accounting software, I bet you are wondering which one to use? Well there are a few out there, but my number 1 fave has got to be Xero!
I rave about it a lot because it is user friendly, has loads on functionality and is easy to clean up if my clients do happen to make a mess of it. This doesn't happen often though because for clients that want to do their own bookkeeping, I can offer full training and set up plus I can get a bit of a discount of their subscription too!