With so many bookkeeping solutions out there in the market, it can be hard to know which software will suit your business or your record keeping needs if you are a self-employed contractor.
We all know we should be filing our sales invoices and receipts, along with our bank statements, neatly in a file. But how do we go about recording the entries?
Well, we’ve come up with a handy guide to identify the pros and cons of the different options available to help choose the right bookkeeping software for you.
It’s worth noting that HM Revenue & Customs (HMRC) don’t offer much advice about the best way to keep your records or which software to choose. And to make matters worse, they have increased powers that allow them to fine business owners for not keeping adequate records. So this is an important business decision whether you've just started out or if you are looking to upgrade from the software you are currently using.
Great – for small businesses with low numbers of transactions
Not so great – if you need to share information with other people
Having a manual cashbook can be a low-cost way of maintaining your books. Virtually no training is required, but it’s always a good idea to get some help with the layout of your cashbook and what headings to use from your accountant, if you have one.
But there are some big downfalls to a cashbook. Clearly, a cashbook alone cannot illustrate how the business is performing- it requires reforming to shape it into some management accounts.
The primary danger in having cashbooks is the physical risk - they can easily get damaged or destroyed. This could lead to problems when it’s time to prepare your accounts and file your tax return.
Great – if your business has outgrown cashbooks
Not so great – if you need management information
Spreadsheets are again a low-cost option for maintaining your records and they take all the pain away from having to tot up those columns.
Again, there’s very little to learn about how to maintain them but it would still be useful to get some advice from an accountant about layout and the headings to use etc. Unlike cashbooks, the physical storage issue could be prevented by keeping back-ups online and offline.
However, backups aren’t ideal because we can end up with multiple versions and worse still, they can become corrupted. We’re also at the mercy of our formulae being accurate and there remains that issue of management information not being readily available.
Altering transactions is undoubtedly easier in a spreadsheet than a cashbook - but is it almost too easy making it tough to identify who changed what and when.
Desktop bookkeeping software
Great – if you want management information
Not so great – if you want to collaborate
Desktop products are reasonably priced and backups are available to keep data safe. They also offer the opportunity to run reports, giving us valuable insight into the performance of the business and the knowledge to make the right choices.
Desktop software goes that step further than spreadsheets and cashbooks can - maintaining customer and supplier ledgers and the ability to reconcile bank accounts. This makes business owners happy, because they have more information and therefore more possibilities for reporting thereon.
There is often a learning curve involved in adopting a bookkeeping product. The threat to data loss remains without backups, otherwise the whole objective is defeated. While some desktop software will have a one-off fee, users are often encouraged to upgrade to the next version every year.
If you wish to upgrade your computer or outsource your bookkeeping then desktop software can have its limitations.
Great – if you want multiple people involved and 24/7 access anywhere in the world
Not so great – if you’re in a slow area for broadband
Cloud products are hosted over the internet; no software is physically downloaded. So it is absolutely critical to have a dependable broadband connection and a steady speed. Again, there may be some training required but the interfaces in these products are so appealing, some claim to only need as little as 30 minutes of tutorial.
Perhaps one of the biggest drawbacks to cloud products, is that they are subscription based. Therefore, whereas there may only be a one-off cost for a desktop product, you could be paying for your cloud product every month for as long as you need it.
While the low cost fee each month won’t hurt the bank balance, the possibilities with cloud products could far outweigh this minor point. In the cloud, sales invoices can be produced as normal- but then emailed straight to the customer.
Through the system, we may even be able to see when the invoice is viewed and make the invoices clickable taking your customers to the payment options seamlessly. There are possibilities to work together- internally within the organisation, with multiple people being able to login simultaneously on real-time data, with varying access rights.
Many businesses include their accountant in the access list to check the record keeping is accurate and use the data to produce a full set of accounts. Backups are generally not required because the software providers themselves are backing up the data- but always check you’re happy with their processes in place.
There are some great partnerships with bank feeds, payroll software and receipt processors. Keep an eye out for their apps too- which can mean photos of invoices taken on your smart phone can be propelled into your bookkeeping records when you’re out-and-about with smart technology that can identify where to store the receipt.
We can help
As well as providing all of the regular bookkeeping and accounting advice you’d expect about what to keep and what to claim for, we also provide:
- Assistance with selecting the right solution for your bookkeeping needs
- Initial software set up support
- Bespoke training for you and your staff
Your local TaxAssist Accountant will give you peace of mind that your affairs will be handled accurately and in a timely fashion, which liberates you to concentrate on your business.
Contact us today to find out more about our accounting and bookkeeping solutions tailored to your business.
By Jo Nockels
Last updated October 2014
Disclaimer: The information provided is based on current guidance (at date of publication) from HMRC and may be subject to change. Any advice shared here is intended to inform rather than advise. Taxpayer's circumstances do vary and if you feel that the information provided is beneficial it is important that you contact us before implementation. If you take, or do not take action as a result of reading this information, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.