Accounting software can be the financial hub of your company. You use it to keep accurate financial records and perform tasks such as:

• creating and sending invoices
• creating quotes and estimates
• recording expenses
• completing tax returns
• checking cash flow or profit and loss
• creating budgets and forecasts

Accounting software can automate many of the repetitive, manual tasks involved in maintaining your accounts. For instance, many packages can be linked to your bank account and automatically check bank transactions against your records.

As well as saving you time, accounting software can give you a better understanding of your business finances. Because the software holds all your financial data, you can generate reports that show how your business is doing.

Finally, accounting software makes it easier to meet the legal requirements when running a business. For example, you can file VAT returns without having to do any manual calculations, or quickly access the figures you need to file your company accounts.

To use desktop accounting software, you must install it on your computer and run it there. All the data relating to your accounts is also stored on your computer.

Cloud accounting software runs on the internet. There’s nothing to install on your computer. To access the software, you visit a website and sign in with your username and password. This means you can use cloud accounting software from virtually any device with a connection to the internet (including tablets and mobile phones).

Most businesses now use online accounting software rather than desktop software. Online software is generally cheaper and faster to set up, and easier to use.

Modern accounting software is generally designed to be user-friendly, particularly if it is aimed at smaller businesses. It may take a while to get familiar with how it works, and perhaps with a few accounting terms, but you should not need specialist accounting expertise.

More sophisticated packages aimed at larger companies may be more complex and use more accounting jargon. But larger businesses often employ trained bookkeepers who have the necessary knowledge and experience.

You may find that you need some understanding of accounting to make the most of what the software can offer and to pick the right package for your business. For example, you may want to set your system up to break down expenses into the most important categories and to track key figures, such as the amount of working capital tied up in the business. It can be a good idea to work with your accountant to get things set up the right way from the outset.

The majority of businesses, even the very smallest, use some form of accounting software. While it’s still perfectly valid to run your business accounts on paper or using Excel, there may be advantages to switching to dedicated software. For instance:

• Save time. Accounting software can automate many tasks you perform by hand, like checking bank statements or sending late payment reminders.
• Make better decisions. Accounting software gives you easier access to information that actually means something, so you can use it to make decisions based on facts.
• Fewer headaches. Good accounting software will help you meet HM Revenue & Customs (HMRC) requirements and keep you up to date as legislation changes. And, if you’re ever selected for an HMRC audit, you’ll have good records to show.

If you are registered for VAT, you will almost certainly want to use accounting software. Under Making Tax Digital, you must keep digital records and submit VAT returns online. Making Tax Digital is gradually being extended to other taxes.

Similarly, if you have employees, you will want payroll software to handle real-time PAYE returns.

It’s usually more practical for the smallest businesses to get by without accounting software. But even then, it often makes sense to start using it. A cheap or free package will get you into good financial habits and make it easier to handle more transactions as your business grows.

In some cases, yes. Companies operating in certain industries or sectors have to comply with specific accounting requirements. For instance, wholesalers / retailers of Automotive and UPS batteries businesses must have Custom software. If your business falls into this category, it’s important your accounting software is able to cope with your requirements.

It’s a good idea to talk to:

• Similar businesses. Your contacts may be willing to share experiences of accounting software. Learning how companies like yours have successfully (or otherwise) implemented accounting software can be enlightening.
• Your accountant. Your accountant, bookkeeper, or other trusted financial adviser should be able to recommend software. Using the same software as your accountant makes it easier to share data and can help reduce costs.
• Your staff. Make sure the people who will be using your accounting software play a part in selecting it. It’s important they are comfortable using the software and have confidence in your choice.

Most of the accounting software is made simple by design so that it can be accessed easily by people. So, no special training is required in order to track income and expenses, create customer invoices, or print reports.

Yes, you can easily import/export data to and from the accounting software. The type of data that you can import/export depends on the package you choose.

If you have employees, you need payroll software to handle PAYE returns. You will want to be sure that your payroll and accounting software work together well, so that payroll figures flow through to your accounts.

Many accounting software providers offer payroll as an optional ‘module’ (at extra cost). Getting a combined package from a single provider can be a good choice. It may be cheaper than using separate packages, and should ensure that payroll and accounting are linked.

As with choosing accounting software, you should think carefully about what you need your payroll software to handle: for example, if you have employees working overseas or want to be able to manage benefits and expenses.

Even though most cloud accounting software will back your data up automatically, it’s a good idea to make your own backups regularly as well. If the cloud software provider ever goes bust, or shuts down without warning, this reduces the impact to your business.

Most packages will allow you to export details of all your customers, suppliers and transactions.