Accounting software

Types of accounting software


Accounting software allows you to monitor and manage the financial health of your business. Many different types of accounting packages are available on the market, with options to suit different business sizes, sectors, industries and even work processes.

Free accounting software

It is possible to get small business accounting software for free. However, free software often comes with limitations - for example, disruptive advertising or locked access to advanced features that are bundled into paid tiers.

If you're not sure which accounting software to use, freeware may allow you to try out different products without having to commit. It can also help you familiarise yourself with using different features so you have a better idea of what type of product you might need.

Small business accounting software

Small business accounting software typically provides all the basic bookkeeping features like invoicing, payroll, reporting and more. These are usually simple programs, easy to use, available off-the-shelf or over the internet. They may have different tiered price plans, providing more functionality for additional fees.

Some small business accounting packages may allow you to integrate them with other services you use in your business, for example, job scheduling or online payments. Other solutions may allow you to create customised functions or modules to fit your specific needs. 

Enterprise accounting software

Enterprise accounting software is a package of programmes that allows an organisation to track their financial transactions and the resulting data.

These types of packages are usually more expensive and offer all the standard financial tools and reports, as well as a wider range of features and functions. For example, they will often integrate:

Enterprise-level software commonly features industry-specific modules, eg for construction or manufacturing. Keep in mind that advanced features come at a higher price, so unless you run a complex operation or have very specific business needs, investing in such software may not be worth your while.

Online accounting software

Both free and paid for accounting software may be hosted online or on remote servers in the cloud. Such products offer accounting capabilities in a way that is similar to Software as a Service (SaaS) business model.

Online accounting software usually offers great flexibility and cost benefits. It frees you from having to install and maintain software on your premises and allows you to access your data and your services from remote offices or on the go. However, due to their nature, online accounting software systems pose certain risks, in particular to:

  • data protection
  • portability of your data
  • business continuity options
  • service level agreements around service provision
  • reliance on internet access and connectivity

If you're considering cloud computing, read about the advantages and disadvantages of SaaS.

Within all the different categories of accounting packages, you can choose from many different options. It is important to choose a solution that fits your business needs. Avoid paying for extra features if you don't need them and, if possible, check trial versions first to make sure that the software meets your expectations.

Find software compatible with Making Tax Digital

From 1 April 2022, it's also important to choose software that is compatible with your Making Tax Digital for VAT obligations. This may be:

  • record-keeping software that updates and stores your records digitally and works directly with HMRC systems allowing you to file a VAT Return
  • bridging software which works with non-compatible software like spreadsheets, accounting systems and other digital bookkeeping products and lets you send the required information digitally to HMRC in the correct format

If you haven't got it already, search for compatible software to ensure you can meet your Making Tax Digital obligations.

See more on choosing the right accounting package.