We get it, when you’re a small retail business owner you’re used to wearing many hats. One day you’re the customer service department, the next you’re HR (or marketing or visual merchandising or shipping or procurement!) but few areas of your business are more important than the financial side. Payroll, invoicing, VAT - it’s a complex area and one where choosing the right tool can make all the difference to your future success.
If you’re a UK-based retailer, you’ll no doubt be aware of the governments’ Making Tax Digital (MTD) campaign, which has now prompted many retailers to look again at their accounting practices and the necessity to go digital.
What is making tax digital?
Making Tax Digital - or MTD - is the UK government’s campaign to encourage all businesses to submit their annual tax returns digitally and to keep financial records in a compliant accounting software package.
The government is making these changes over a long period, starting with VAT returns for VAT registered companies with incomes over £85,000 (which became mandatory in April 2019). Companies with incomes below the VAT threshold can voluntarily sign up to MTD by keeping their records digitally and using MTD compliant accounting software but this will become mandatory in April 2022.
While some of the government’s own deadlines have moved around, the current plan is for digital income tax self-assessments to be mandatory in 2023 and corporation tax returns to be fully digital by 2026.
The best advice we can offer is to get on board with digital accounting practices now, as more support will be available from the Inland Revenue if you have any problems this year, compared to when every business in the UK is using this system from 2022 onwards. Also, typically, prices begin to increase once anything becomes mandated by legislation. So by getting into digital accounting now, you’ll be able to find out what features you need, what you don’t need and what’s worth paying a little more for.
What is the best FREE accounting software for small retailers in the UK?
We haven’t included any FREE accounting software packages in this list because we’ve found none that we can properly recommend. Some are open-source products that many people feel carry a greater cybersecurity risk - and when you’re dealing with financial information, it really isn’t worth it. Subscriptions to more secure packages start at less than £10 per month which is a small price to pay for the peace of mind you’ll gain from knowing your financial data is safe and sound.
Cobbling together your own system using Google Sheets, an online pdf converter and your camera phone is probably possible, but it is still wide open to errors, cybersecurity risks and will require a lot of additional work to create and maintain.
Importantly, we also haven’t found any HMRC-approved free accounting packages. So that free book-keeping system you’ve found online is highly unlikely to be compliant with MTD (without using some form of bridging software which, typically, will need to be paid for).
Do I need accounting software for my small business?
Well, to put it bluntly - yes, because the government says so. But to side with the man for just a minute, using a proper software package designed for small business will reduce your stress, save you time and basically, make your life easier. MTD exists because the government spends £8 billion per year investigating and resolving issues with tax returns that are caused, for the most part, by simple accounting errors.
While human error can never be fully eliminated, the use of a proper accounting system will drastically reduce the likelihood of errors and save you valuable admin time. You’ll also reduce the risk of lengthy HMRC investigations or costly errors if your cobbled-together system of notebooks, spreadsheets and bags full of receipts doesn’t work for the taxman!
According to one report from the Federation of Small Businesses, UK small businesses waste an average of three weeks per year navigating accounts and tax returns. Using a good accounting software package can cut that to the minimum.
What should I look for in an accounting software package for my retail business?
Some of the most important things UK retailers look for in their accounting software are:
Ease of use
Live connections to bank accounts
Free support online or by phone
Training and set-up support
Ability to easily send invoices
Ability to receive payments
Ability to integrate with other systems such as inventory, e-commerce, CRM
About These Reviews
At AirPOS, we have invested heavily in making our multichannel retail software integrate smoothly with multiple accounting systems. So we have some insight into the functionality of various accounting packages. We also spend a lot of time talking to our customers about their business and when we ask around, there are a few names that come up again and again.
For transparency - we don’t get any commission or affiliate payment if you click through and buy one of these packages. We’re basing our comparisons on feedback gathered from our existing customers in the UK who are typically small to medium-sized retail businesses, event organisers and crafters. If you’re a solo tradesperson or freelance consultant-type business some of these options might be better or worse for your particular set of circumstances. Most of our customers are small retailers and have a common set of accounting challenges such as reconciling card payments and bank transfers, managing stock and reconciling online and offline sales.
We’re basing our assessment on each platform’s cheapest package and you’ll see a checkmark when something is included in that entry-level and a + when something requires you to upgrade to the next level or pay for a bolt-on.
✅ No Contract
✅ Hard Copy Scanning
✅ MTD complaint
✅ Free online support
✅ Free Phone Support
✅ Links to bank accounts
✅ Mobile App
Sage is one of the most recognisable names in the accounting world and as such takes up a big portion of the market for small to medium-sized businesses. Sage’s Accounting packages for small businesses are subscription-based and have one of the lowest buy-ins at just £6+VAT per month.
Their standard package, at £12+VAT per month, opens up more business intelligence capabilities such as analytics and revenue forecasting. Some clever features such as their AutoEntry software can save you hours entering the details of hardcopy receipts and invoices but require a small additional subscription.
You also need to pay more to invoice or accept payments in currencies other than your base currency, use payroll features and collaborate with other users (such as your accountant or another member of your team).
Overall, our customers who use Sage are happy with their packages and particularly praise the excellent training resources available online and the free support for UK customers. As a very established business, you will benefit from the advanced level features available (with an upgrade) and the high level of support via a variety of contact methods. The product is also very stable, which means it has very few ‘bugs’ or random errors in the software which can be an issue for some less established products.
Some of our customers have commented that it is best for more experienced users who have used other Sage systems before but they haven’t found it difficult to train up new team members thanks to the generous availability of online training resources.
Quickbooks from Intuit has several packages with its entry-level starting at £12 per month. However, this entry-level has all of the features of Sage’s standard package - plus hardcopy data extraction which is an add-on for Sage - and is regularly discounted for promotions).
Higher levels of subscription unlock more analytics features and allow you to add more users to collaborate on your accounts but their basic level packs more punch than Sage and many users report the system being a touch more friendly for beginner-level users.
Quickbooks is highly regarded in the industry and by our specific set of customers. The design is easy to use, their mobile apps for both iOS and Android are well-liked and their functionality hits the mark for many businesses, especially service-based businesses and freelancers.
We have heard some negative feedback about Quickbooks ability to sync with certain common card readers. A feature which is obviously a problem for retailers particularly.
Quickbooks are also the only one of the three packages reviewed here to not offer a completely free trial period. They do offer a 50% discount for three months but nothing for free, which certainly speaks to their confidence in their product but also might be off-putting for some.
✅ No Contract
✅ Hard Copy Scanning
✅ MTD complaint
✅ Free online support
❌ Free Phone Support
✅ Links to bank accounts
✅ Mobile App
Xero is another subscription-based accounts package for small businesses and undoubtedly the most popular with AirPOS customers.
The starter plan is a powerful accounting package for sole traders, freelancers and new businesses and at just £10 per month has a solid suite of tools included right out of the box.
We know plenty of small business owners who subscribed to the basic package from Xero when they were starting out and have stayed with them for years - which is the best review you can get.
Importantly, Xero immediately allows you to collaborate with other employees or external suppliers such as your accountant, even with the basic subscription - a feature that usually costs more in other packages.
The only limitation with Xero is that its starter package limits the number of invoices you can send each month to 20 and the number of bills you can pay to five.
That won’t be a problem for many retailers who primarily accept payments in person or online through a payment gateway but for b2b or service-based businesses the limit on invoicing means most will need to quickly upgrade to the standard subscription at £24 per month.
Xero’s basic package also includes that document scanning ability to avoid hours of manual data entry for receipts and you can add payroll for just £5 per month and individual expense claims for just £2.50 per month per user - functionality which costs much more with most other accounting packages.
Additionally, Xero has a free trial that allows you to try all of its features (including the paid add ons) for three months - a hard to beat offer for small retailers.
The feedback from our customers is almost 100% positive on Xero. Admittedly, their customer support is not as robust as some other packages but the number of problems users encounter seem to be fewer also. The system is designed to be easy to use and intuitive, which might be a reason for this.
Its list of functionality in basic and standard levels hits the mark for UK retailers particularly and many users work with a chartered accountant who is also experienced in Xero, so have that added layer of customer support if the answer to the problem isn’t easily discoverable.
Irish businesses do need to work a little harder with Xero as there is no dedicated ‘Irish version’ of the software, so Irish VAT rates need to be manually set during your set-up process but if you work with an accountant or you’re relatively tech-savvy this is a small hurdle to overcome.
As it is our client’s favourite accounting software package, we have created a custom integration with Xero, to make reconciling your online and offline shop sales with your accounts even easier.
This integration was thoroughly tested, is now well established and comes highly recommended by cloud accounting experts such as the award-winning Xero-Certified Chartered Accountancy Practice, Cloud 360.
Cloud 360 Accounting are the leading Xero advisory firm in Northern Ireland. Their CEO, Kieran Phelan, is a chartered accountant who become the first Xero Certified Advisor in Northern Ireland in 2010. The firm are the 2021 winners of Xero’s UK Small Firm of the Year award. Kieran confirms why they recommend Xero for all their clients:
“We recognise that small businesses need access to up-to-date financial data to help them make better and timely decisions. We help SME’s to build a cloud-based financial system with Xero at its core.
For those SME’s in retail or hospitality, we always recommend building AirPOS into the equation, sending real-time sales and inventory figures into Xero.
There are huge time savings and efficiency gains from having Xero at the core of your accounting function, as well as the ability to connect multiple other apps to enable growth and predictions for your business”.
The Best Cloud Accounting Software - Our Recommendation
Our recommendation for the best accounts software package for UK retailers is XERO. The higher level of functionality available in its basic and standard subscriptions, coupled with its ease of use and beautiful design makes it a winner for our customers.
We always love hearing about new start-ups or lesser-known solutions, so let us know if your favourite package isn’t mentioned here and what you love about it. Find us on social @airpos or contact us here.