Any self-employed individual running their own business knows that juggling everything from marketing to accounting is a lot to handle. However, managing finances becomes significantly easier when you use accounting software. While you focus on daily business tasks, accounting software for sole traders can save you hours by handling the bookkeeping for you.

In this guide, I’ll cover the essential aspects of self-employed accounting software, what to look for when choosing the right provider for your business, and a review of some of the most popular options available.

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1. What Is Accounting Software?

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Accounting software is an online, cloud-based tool that enables you to manage and track all your business finances in real-time. From invoices and taxes to payments and reports, this software can handle it all. The specific functions available depend on the software package you choose. All your financial data is securely stored in the cloud, allowing you to access it from anywhere with an internet connection.

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2. Why Use Accounting Software for Your Business?

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There are numerous benefits to using accounting software, and here are a few key reasons to integrate it into your business operations:

• Reduces human error: By computerizing your financial data, the risk of mistakes is minimized compared to manually entering figures on a spreadsheet.

• Saves time: Once you input the relevant information, the software can automatically use it for various financial reports, eliminating the need for manual data entry.

• Enhances security: You can control who has access to your financial data via the cloud, reducing the risk of unauthorized access.

• Cost-effective: Although there is a subscription fee, accounting software is generally more affordable than traditional paper-based accounting methods.

• Real-time access: You can view and manage all your accounting information, such as transactions and overdue invoices, in one place as they update in real-time.

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Additionally, with the introduction of Making Tax Digital, accounting software for sole traders will soon become a requirement for maintaining digital records of your accounting and taxes.

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3. What Does Accounting Software Do?

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Essentially, accounting software automates your bookkeeping tasks. It can also help you get paid faster by streamlining all financial processes. The core functions include:

• Managing accounts: Connects with your business bank account, online payments, and expenses, simplifying reconciliation.

• Billing and invoicing: Provides customizable invoices that you can send and track. The software can also send reminders for late or unpaid invoices.

• Tracking sales: Monitors stock levels and customer records by using data from your bills and invoices, even automating invoices from orders.

• Managing payroll: Handles payroll tasks such as wages, expenses, and bonuses.

• Monitoring cash flow: Tracks outstanding payments and produces forecasts to help you compare performance against your budget.

• Generating reports: Creates comprehensive financial reports, including profit and loss statements and tax or VAT management.

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4. Popular Accounting Software Platforms

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Many popular accounting software providers offer similar functions and features, but the best choice depends on your business needs. Here’s an overview of some top options:

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4.1 FreshBooks:

• Pricing: Offers three pricing plans tailored for small businesses, with a free trial available.

• Features: Includes recurring billing, estimates, real-time reports, expense tracking, unlimited invoices, online payments, and time tracking for project work.

• Best for: Client-based businesses, especially those charging by the hour.

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4.2 Xero:

• Pricing: Offers three pricing plans, including a 30-day free trial. Lower-tier plans have strict usage limits.

• Key features: Includes invoicing, quotes, bank transaction reconciliation, bill/receipt capture, VAT return submission, payment processor integration, inventory tracking, and report generation.

• Best for: Comprehensive features in the basic plan and an easy-to-use interface.

• Drawback: Customer support can be difficult to reach.

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4.3 Crunch:

• Pricing: Offers various plans based on whether you’re a sole trader, limited company, or small business owner, with a free basic plan available.

• Key features: The web interface includes functions for sales, expenses, banking, payroll, company tax, accountancy, and self-assessment, along with an annual accounts health check and unlimited support.

• Best for: Freelancers and small businesses looking for a free online bookkeeping system.

• Drawback: Payroll functionality can be more expensive compared to other providers.

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4.4 QuickBooks:

• Pricing: Offers four different pricing plans, depending on your business needs.

• Key features: Includes tax planning, mobile mileage tracking, record keeping, invoicing, inventory management, detailed reporting, live chat support, numerous third-party integrations, and a mobile app.

• Best for: Comprehensive features for freelancers and sole traders.

• Drawback: Monthly plans are more expensive than competitors, with limited features at lower pricing tiers.

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4.5 Wave:

• Pricing: Free, with optional paid add-ons for payroll and payment features.

• Key features: Includes invoice management (recurring billing, tracking, and reminders), double-entry accounting, and multi-currency support.

• Best for: Being the only free accounting software available on the market.

• Drawback: Advanced features and live agent support require payment.

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5. What to Consider Before Choosing an Accounting Software Provider

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• Users: How many people will need access to the software? Consider this not only for security but also because many providers charge extra for additional users.

• Functions and features: Identify the key features your business needs, such as invoicing, payroll, stock control, or self-assessment integration.

• Ease of use: If you’re not confident with accounting software, look for a user-friendly dashboard. Additionally, check for customer support, how-to videos, and other online resources to assist you.

• Security: Accounting software typically includes features to protect your data from hackers and accidental loss. Since it’s cloud-based, your data is regularly backed up.

• Integration: Ensure the software can integrate with any other business tools or apps you’re using, allowing for easy data transfer.

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Wrapping Up

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Cost is often a significant factor when choosing accounting software for sole traders, but there are flexible solutions available. You can start with a free trial or a basic plan and upgrade as your business grows. If you’re unsure which software to choose, consult your accountant for advice and support during the transition.

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Related Posts:

• How to Chase an Unpaid Invoice

• Understanding Invoicing Payment Terms

• Ways to Accept Online Payments for Your Small Business

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