What bookkeeping software should I use?
When it comes to running a business, bookkeeping is one of those tasks that’s vital but often not the most exciting. Fortunately, modern bookkeeping software has made managing business finances far easier than it used to be.
If you’re wondering which bookkeeping software to use, you’re not alone. With so many options available, it can feel overwhelming trying to figure out which one is the best fit. The truth is, the “best” software depends on the type of business you run, how tech-savvy you are, and what features you actually need.
Why Use Bookkeeping Software?
Gone are the days of paper ledgers and endless spreadsheets (though some still bravely persist). Bookkeeping software offers a range of benefits:
Automatic bank feeds – transactions flow straight into your accounts.
Faster invoicing – create and send invoices easily.
VAT management – track and submit VAT returns (including Making Tax Digital requirements).
Expense tracking – snap receipts and log costs in real time.
Reporting – see profits, cash flow, and outstanding invoices at a glance.
Time saving – automate repetitive tasks like reconciliation.
The Most Popular Bookkeeping Software for Small Businesses
1. Xero
Xero is one of the most widely used platforms for small businesses. It’s cloud-based, user-friendly, and offers a comprehensive set of features.
Key Features:
Automatic bank feeds and reconciliation
Invoicing and payment tracking
VAT returns compliant with Making Tax Digital
Payroll (as an add-on)
Integration with hundreds of apps (including payment systems and inventory tools)
Who It Suits:
Small to medium businesses, especially those that want flexibility and plenty of app integrations.
2. QuickBooks Online
QuickBooks is another big name in small business accounting. It’s intuitive and designed with non-accountants in mind.
Key Features:
Bank feeds and reconciliation
Invoicing, estimates, and payment reminders
VAT tracking
Payroll and CIS (Construction Industry Scheme) support (optional add-ons)
Good mobile app functionality
Who It Suits:
Freelancers, sole traders, and growing businesses who want an easy-to-use interface.
3. FreeAgent
FreeAgent is popular with freelancers, contractors, and very small businesses. It’s particularly well-liked for its simple, jargon-free interface.
Key Features:
Invoicing and payment tracking
Expense tracking with receipt capture
VAT submissions (MTD-compliant)
Built-in time tracking
Self-assessment filing (for sole traders)
Who It Suits:
Micro businesses, sole traders, freelancers, and contractors looking for simplicity.
4. Sage Business Cloud Accounting
Sage has a long-standing reputation in the accounting world. Its cloud offering is designed to be competitive with newer platforms like Xero and QuickBooks.
Key Features:
Invoicing and payment tracking
Bank reconciliation
VAT submissions (MTD-ready)
Reporting and cash flow forecasting
Payroll available (as an add-on)
Who It Suits:
Small businesses who prefer a brand with deep accounting roots, or those already familiar with Sage products.
5. Zoho Books
Zoho Books is part of the larger Zoho suite of business apps, offering affordable bookkeeping with a range of tools.
Key Features:
Invoicing and expense tracking
Bank feeds
VAT returns and tax management
Inventory tracking
Workflow automation
Who It Suits:
Small businesses looking for affordability and integration with Zoho’s other tools (CRM, HR, project management).
What Features Should You Look For?
When choosing bookkeeping software, consider:
Ease of use: Can you navigate the system comfortably?
VAT support: Does it support Making Tax Digital (MTD) if you’re VAT registered?
Invoicing: Can you create branded invoices and track payments?
Bank feeds: Does it connect to your bank to pull in transactions automatically?
Reporting: Does it give clear insights into your profit, cash flow, and tax obligations?
Integration: Can it connect with other tools you use (e.g., payment gateways, payroll, CRM)?
Support: Is customer service responsive and helpful?
Pricing: Is it affordable based on your business size?
Cloud Software vs Desktop Software
Most modern bookkeeping software is cloud-based, meaning it’s accessible anywhere, anytime, from any device with internet access.
Cloud Advantages:
Access from anywhere
Automatic updates and backups
Easy collaboration with your accountant
Desktop Advantages (less common now):
Fully offline access
One-off licence fees (though most are moving toward subscriptions)
For most small businesses today, cloud-based options are the norm.
Free vs Paid Bookkeeping Software
Free Options:
Wave (non-UK focused) – free but limited UK tax support.
Pandle – free version available with optional paid upgrades.
Free tools can be fine for very simple needs but often lack VAT filing, full automation, or proper support.
Paid Options:
Offer full features like VAT, payroll integration, reporting, and better support. For businesses registered for VAT or with employees, paid software is typically necessary.
Things to Consider Before Choosing
Industry needs: Some software offers features tailored to retail, manufacturing, or service industries.
Growth plans: Choose software that can scale with you (adding payroll, more users, more transactions).
Accountant compatibility: Check what your accountant prefers — it can make sharing data much easier.
Trial periods: Most offer a 14- to 30-day free trial. Test how it feels to use day-to-day.
Common Mistakes When Choosing Software
Focusing only on price: Cheaper isn’t always better if it means missing crucial features like VAT support or good reporting.
Not checking for MTD compliance: VAT-registered businesses in the UK must comply with Making Tax Digital.
Ignoring future needs: Switching software later is possible but can be a hassle. Choose something you won’t outgrow quickly.
Choosing based on brand alone: What works well for one business might not be the best for another.
Summary: What Bookkeeping Software Should I Use?
There’s no single answer — the right software depends on your business’s size, complexity, and personal preferences.
Xero and QuickBooks Online are the most popular choices for small to medium businesses looking for flexibility, automation, and scalability.
FreeAgent is ideal for sole traders, freelancers, and contractors who want simple, intuitive tools.
Sage appeals to businesses that like working with a traditional accounting brand.
Zoho Books offers great value, especially if you already use other Zoho apps.
The good news is that bookkeeping software has come a long way. Most platforms are easy to use, reliable, and HMRC-compliant. Choosing one is less about finding the "best" and more about finding the "best fit" for your business.
