contractor accounting software

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What is UK limited company contractor accounting software when you run a business? Further, what is contractor accounting, and how do contractor online accounting platforms on the cloud work when running a small UK business? As part of running your own contractor company, you may need to consider what is online accounting for contractors. Indeed, all businesses, including limited company contractors, require a system for their bookkeeping. This could be Excel accounting software for small businesses, such as an Excel spreadsheet-type system. However, what’s the best bookkeeping software for contractors if you go online? Key to note: using cloud online contractor software (UK) to keep your records makes your updates easier and saves time. Therefore, as part of moving online, it’s undoubtedly a good idea to research the top bookkeeping platform and best online accounting software for contractors.

When changing from a contractor bookkeeping spreadsheet to online accounting, you could look at UK free accounting software. Indeed, many providers offer free trials, and you could test this out before moving over. In this guide, we’ll look at how to switch to online accounting software. Contractor options for online software are now within easy reach for your business. There are plenty of deals out there from leading providers. You can check the market to see what’s on offer and how much each one costs. This guide will review several choices later for contractor’s accounting software. Moreover, we’ll look at what to consider regarding top online accounting software.

Initial thoughts

Contractor cloud accounting is still a new way to keep your business records as a UK contracting professional. Indeed, it’s only been around for a few years, but it’s becoming more popular as time progresses. When you use this, you’ll maintain your business’ accounting records on cloud-based software. As a result, this stores all the financial data for your business online in the cloud. You’ll access the UK bookkeeping software online via a web browser on one of your devices. Once you’re on the platform for your business, you can do any new updates to your records.

As a UK limited company contractor or small business owner, this new way of keeping records is something to consider. What’s more, the new online method is instead of an Excel spreadsheet or paper cashbook, as was very common in years gone by. Regarding UK accounting software, contractors can now switch, and many do. In summary, many UK businesses and contractors now switch to online accounting software for their company records. When you run your own business, digital updates are much easier. Moreover, online software is less prone to errors or mistakes, saving lots of time.

First thoughts on contractor company online records 

The types of UK contractor accounting software

There are lots of choices regarding contractor software online. Therefore, what’s the best online accounting software)? We’ll look at some choices later and let you know our thoughts. Depending on your business and what’s ideal, some will work better than others. Therefore, you can search for and try the best accounting software for small contractors. As a result, if you find an ideal system, you could change to this new way of record keeping in accounting and finance.

We’re now in the times of Making Tax Digital (MTD). As a result, MTD is in place for all those who register for VAT. What’s more, when you are VAT registered, you must use an MTD-compliant software package. Therefore, if you’re a VAT business, you must switch to an online system for the future. As a result, it could be time to look at some great contractor online accounting software (UK). If you switch, choosing the best MTD software would be good. As a result, once you set this up, you can keep your business records online in the future.

How to run your contractor limited company

When you run a business, you need a bookkeeper and an accountant to look after you. When you have this in place, one will take care of the bookkeeping, and the other will look after the annual accounts work. In times gone by, a small business accountant may have handled both roles for their clients. That’s unless you do your own bookkeeping. Therefore, many contractors sent invoices and receipts to their accountants to update the books. From this, the accountant would complete the bookkeeping and file the VAT. This worked well in the past; however, this option isn’t used as much now.

However, now there’s the option of small business accounting software. Therefore, when you use the best contractor software online, you can make many updates yourself. As a result, this should reduce your accountancy fees. Also, you’ll have a better oversight of your company’s records at any given time. Moreover, the accountant can also access this and look after your more complex areas. Therefore, you’ll both have access, and each of you can perform specific tasks with respect to record keeping. At the end of your company year, your accountant will complete the annual accounts for contractors and tax work and the filing with the UK authorities.

Types of bookkeeping systems

In recent years, some contractor accountants have offered a choice of two systems. The first is an Excel spreadsheet, which works well and still does now. The second choice is contractor bookkeeping software. This second choice is through an online portal, which will keep your records digital.

Therefore, what is online accounting for business, and how does it work? In essence, online accounting is a new way to keep your records. Moreover, this method will use digital software to keep the business records, which it stores online. Indeed, many small business owners now complete their bookkeeping through online software. As a result, contractor software for small business packages will make data entry much easier. Also, it’s simpler to make constant updates on an ongoing basis, saving you time. When we look at the options, FreeAgent is a popular choice. This is a great online system for UK contractors and small businesses alike. Further, many contracting professionals and small business owners regard this as the best cloud accounting software in the UK.

A new era & the introduction of contractor accounting software

We’re now in the time when MTD is here to stay. HM Revenue & Customs (HMRC) first brought this in for VAT-registered businesses above the VAT threshold. They also gave businesses extra time to adapt to MTD. Indeed, this was so some could carry on with spreadsheets and use a unique simple accounting software tool to file their VAT with HMRC. Now, all VAT-registered businesses should use an online contractor business software package which complies with MTD. Therefore, this is where contractor VAT digital software comes in for those in the UK contracting industry.

Most online cloud accounting software (UK) platforms charge a license fee when you sign up and use their contractor small business software. The typical charge is between £10 and £40 per month. Also, most of the best accounting software (UK) platforms offer a free trial, which allows you to test it out before you sign up.

There are also some less-familiar options for free contractor online software. These will provide basic plans for small businesses. Moreover, these plans cover your business up to a certain number of transactions per annum. Therefore, what’s the best small business accounting software for UK contractors?

What should we consider for online contractor accounting software (UK)? 

Best online digital platforms

If you choose online accounting for contractors, you must look for an online business accounting software specialist provider. When you consider business online accounting, contractor software choices are available from several providers. Even so, with such a wide range, it is the case that some are better than others. Each has its own merits, and some are better than others. Therefore, here are some examples of the best cloud accounting software for UK business:

FreeAgent This is an excellent piece of specialist small business accounting software (UK). It’s ideal accounting software for IT contractors and contracting professionals in other business sectors. Moreover, it’s the most popular accounting software (UK) for UK contractors and ideal for many other small businesses. Indeed, many regard FreeAgent as the best contractor accounting software out there. Thousands of contractors around the UK use this more than any other online platform. Therefore, this is currently regarded as the best online accounting software for UK contractors.
Sage This package is for businesses of all sizes. Many of the larger companies will use Sage, whether they are limited companies, partnerships, or sole traders.
Xero This package is for businesses of all sizes but is a bit more complex. Therefore, it’s much more suitable for larger enterprises.
Zoho Books This isn’t as popular as others, although some contractors and small businesses use Zoho Books MTD service and accounting software.
Quickbooks Online These have probably been around for the longest time. The software suits many businesses but is not a preferred contractor option.

A summary of the above

Regarding contractor accounting software pricing, most options charge around £20 to £40 per month. If you use one of these through a firm of IT contractor accountants or contractor accountants, they may be able to get a discount on the software for you. As we mentioned above, many regard FreeAgent as the best one out there. What’s more, a growing number of contractors use it. In addition to this, many small business owners, as well as contractors, regard it as the top accounting software (UK). Indeed, it’s because it’s easier to use than some of the other systems above and is focused on small businesses.

Are there any free options?

As another option for the best online small business accounting software providers, you could search online instead for ` cheap accounting software UK’ or `basic accounting software UK’. But, like anything else, going for the cheap option isn’t always the best idea. Instead, you may find such small business accounting online software isn’t as easy to use as the current better platforms which offer accounting software online for small businesses. Moreover, a cheaper option may not have a good support facility either. 

Micro businesses & free platforms

The term micro business is given to certain types of small businesses in the UK. Furthermore, this term includes UK contractors and freelancers. The small contractor software solutions mentioned above are ideal for most small and medium businesses. Even so, there are some options out there which offer a free online accounting system. These free accounting online software providers let you sign up if your business has few transactions. What’s more, this free accounting software (UK) option enables a business to use cloud accounting instead of completing spreadsheets. Therefore, you can search online for `best free bookkeeping software UK’. However, please be aware that some platforms advertise as free, but there’s a catch. This could include being free for several months or before you reach a certain limit of transactions etc.

When we research free options, a couple of examples of free accounting software online are:

  • QuickFile -this basic system works well and is easy to use.
  • Google Sheets -this is another basic type of system made by Google.

You might want to research one of these free online accounting software (UK) options if your company isn’t actively trading. You could search online to see if you can find any other free ones. Regarding the two above, you could investigate these if you’ve very few transactions through your business at present.

The benefits when you use online accounting software 

Initial advantages of online accounting for limited company

When we investigate what is online accounting for contractors, we see that there are lots of great features to test out and use. Indeed, when running a company and using cloud accounting, the best contractor software (small business) packages have many accounting functions. Therefore, most of the top cloud-based software providers have features including:

  • You have a good overview of your business finances and cash flow.
  • There’s an auto bank reconciliation, which is excellent compared to spreadsheet systems in the past. Indeed, when using spreadsheets, you’d need to do this manually. Still, this feature assumes your bank connection to the software is correctly set up.
  • Most well-known software platforms allow accounting in multiple currencies. For instance, you may have an account in Euro or US Dollars.
  • You can use digital billing software for contractors and issue unlimited contractor invoices. Moreover, there’s also the facility to set up recurring invoices. Besides sending invoices, most systems enable you to track them. They’ll show when invoices are paid and which ones are still due. This feature is key to keeping track of any amounts owed.
  • You can keep track of any accounts payable to your suppliers.
  • Most online software choices include an unlimited user option. This enables you to add your employees and any other directors.
  • An expense management system that you can use for each employee should the need arise.
  • Expense tracking for your employees.
  • You can file certain company tax forms via the online platform.
  • A list of frequently asked questions with their respective answers. Also, many have various online help videos. These will help explain how to carry out specific tasks on the software.

Further thoughts on initial pros

Your online accounting software gives a good overview of your business’s financial picture. What’s more, when you use cloud accounting, the system shows your profit so far in the current year. Further, it’ll show what funds are currently in your business. These are helpful tools for determining how much dividends your company can pay.

More benefits on contractor accounting software & cloud accounting

The main advantages of cloud accounting for contractors are:

  • Your company bank account can link up to the online system. As part of this, your business bank data will auto-import into your online software portal. Also, there’s another option to upload your bank transactions into the portal. What’s more, you may have a company credit card or a personal credit card with which you pay for business transactions. In this case, you can add the credit card account to the online system, and it’ll import your transactions from here.
  • You can add business expenses you incur on a personal basis to your online software. Many now allow you to take a photo of the receipt with your smartphone. You can upload the expense into your online software when you do this.
  • When you do updates yourself, you must classify each entry for income and expenses. Moreover, you must do this for other business transactions such as tax payments and payments to you. Further, you must choose the correct VAT rate for each transaction. As a result, it’s much quicker than entering four or five data fields for each entry, as you’d have done in a spreadsheet-type system. Therefore, although there may be a small cost for using an online digital platform, it’s much easier than using spreadsheets. Due to this fact, many non-VAT registered businesses now use this method because of the time saved.

Further benefits when you use online financial accounting software 

There are some further advantages of cloud accounting software for UK contractors:

  • You can create sales invoices on many online systems and send them to your customer or client. Some online packages allow time tracking for your invoices, enabling you to keep a record of this. As a result, your time can feed into the invoices you create in the system. What’s more, the platform can allow you to track which invoices are still unpaid. Therefore, that’ll help you monitor which invoices are still due so you can chase them up.
  • Some online systems allow you to record your inventory management. This will enable you to track any business assets you purchase.
  • You can file certain company tax returns via the digital platform. This process is much easier than using the HMRC platform, which was formerly the case, or filing paper returns, which was the case before this.
  • It is key to note that you’re in control when you run your own accounts system for your business. In this context, it’ll feel good to be more in control of the finances yourself. This is when you compare it to sending all your records to your contractor accountant to let them deal with it. What’s more, you’ll have all the information for your own business readily online. As a result, you can see your business’s financial standing and cash flow in real time.

What are the best features of online contractor accounting software? 

Fewer mistakes with contracting accounting software

Online software makes bookkeeping far easier, and you’re less prone to mistakes. This is because the software reconciles the business bank account continuously. Another reason for fewer mistakes is the software does all of the adding up for you. This will include totals of your expenses owed and totals for each type of expense in your business and other areas. Moreover, once the platform is up to date, it’ll auto-work out the VAT return figures, making VAT filing easier. The software can also calculate your P&L account and Balance Sheet numbers to see your overall business totals.

One thing you do need to do is make sure your bank feed in your online portal is working fine. The feed needs refreshing from time to time for security reasons, and you need to reconnect the platform to your company bank account. Once reconnected, it’ll import any missing items from the bank account.

As mentioned above, there are fewer mistakes when you use online software for your business. Under a spreadsheet service, it’s possible to miss entries or transpose the figures. When this happens, it takes time to track such errors down. These types of errors no longer exist when you use an online system. Once again, all bank account entries will auto-import through if your bank feed is connected.

Mobile friendly

Most of the best cloud accounting for contractors’ packages now have a mobile app. Therefore, if you take the time to look for the best app for self-employed contractors, plenty of choices are available. As a result, you can access the app when you’re out and about and not in front of a PC. This is great because when you’re on the move, you can view the position of your business accounts online. You can scan the receipt when you’re buying something for your business. The app will load it into your account as one of your expenses. This is a time saver as it saves you carrying out such tasks once you are home.

Mobile viewing is now a growing trend, and it’s here to stay. In terms of business, many contractors and other business owners will connect to their accounts online. When they do this, they can carry out some tasks to save time later. Moreover, when you travel by train, bus, or taxi to work, you can do business record updates on the go. As a result, it’ll save you from doing this on your laptop or PC, perhaps on an evening or weekend when you get home. Many find this very handy and a good time saver regarding company updates.

Good online support

Another plus point for going online is there’s a good backup from the software providers, should you need it. The support is there because you may run into issues from time to time. This could occur when you use the software. What’s more, you may need help if you don’t understand something. On the other hand, you may not know how to work one of the features. As a result, there’s good online support from the top providers if any queries arise when you use their platforms.

For instance, in most cases, FreeAgent will reply to you regarding any queries on the same day. Indeed, this is the case if you ask them a question during the day rather than in the late afternoon. What’s more, their responses are detailed and explain what to do to fix the issue. On the other hand, they may ask for support access to view the problem and find a fix. Therefore, to sum up, most online systems have good customer service support, and they’ll help you solve any issues quickly.

Maintain your business records

As part of running a business, you must retain your records for a certain length of time. These include bank statements, invoices, receipts, and mileage records. Using online software, you can keep most of your records electronically rather than on paper. The only thing you can’t keep electronically is all the receipts for your costs.

When you use accounting software, you’ll be in good stead should one of the tax authorities need to view your records. This could come by way of a VAT or tax enquiry. This assumes you’ll be in good stead if:

Scanning all your receipts into an online system would take quite some time. Therefore, the best approach is to use a mixture of online and offline records. 

UK contractor accounting software & current digital reporting 

Business tax forms

After our earlier thoughts on the best contracting software, which tax forms can you file via this? When you use a digital platform for your business, you can currently use most online systems to:

  • File your VAT returns to report your sales tax and purchase tax.
  • File your RTI (Real Time Information), which reports the deductions from payroll.

MTD plans for the future

In the future, the aim of MTD is for a business to do other tax filings via an online platform. These include:

However, most of the above are some way off due to the complexity of such documents. Note: You can file the UK income tax return via some online packages, but only if you have simple income details.

For small businesses, including contractors, the best cloud accounting provider, as mentioned earlier, is FreeAgent.

When we research the best MTD software for small businesses (UK), FreeAgent fits the bill. Indeed, the FreeAgent system captures all the tax form filings mentioned above. Furthermore, the current FreeAgent cost is £33 per month, although many contractor accountants can offer this half-price. What’s more, if you bank with Natwest, RBS, or Mettle through your company, you can get the software for free, and the bank will pay for the software licence.

Final thoughts

When we investigate what is online accounting for contractors, it’s still a new way to keep your business records. Although it’s still relatively new, it has its plus points for you as a contracting professional. The system is advancing as we move along, and it aims to improve in the future.

If you or your accountant don’t use a contractor accounting software package, we have a guide that explains how to change contractor accountants. One thing to consider when looking to change is whether your new accountant uses contractor online accounting software and is familiar with how this works. It’s a plus point if they use the best MTD VAT and UK accounting software.

Finally, if you switch to online accounting software for small businesses (UK) and sign up for one of the best online accounting software solutions for contractors, please consider FreeAgent. As part of joining, there’s a monthly licence fee; as mentioned, this fee is currently £33 per month. However, some accountants can offer this for you at half price. Further, if you bank with NatWest, RBS, or Mettle, they’ll cover your FreeAgent licence fee.

Link to Contractor Advice UK group on


Published On: April 6th, 2024 / Categories: Accounting, First timer guide /

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