I’ve spent a lot of time trialling cloud accounting software in the past year and thought I’d share my findings and views on the subject. In particular, my experience as a small business owner in the UK may be of interest to other UK-based business owners who are looking into cloud accounting as an alternative solution to desktop accounting software.
My accounting needs
I’ve been running small companies since 1998 and so I’m used to the chores of creating invoices, filling in lines in the cash books and sales books, reconciling bank statements with my own calculations, sending quarterly VAT returns to HMRC and gathering disparate bits of info for my accountant to do the annual return.
For a long time, our publishing and media businesses had only a handful of big clients that accounted for 95% of our work. We took on large projects with schedules lasting for a year or more, and our invoices and cash flow consisted mainly of lump sums coming in every few months.
Then the whole nature of publishing changed, and as we moved into digital media over the course of five years or so, we experienced an increasing number of clients for smaller projects with shorter schedules. This spawned a lot more accounts work, and my method of using a calculator and filling out an invoice template in Indesign, then copying figures into Excel sheets started to feel more clunky, burdensome and prone to error.
In the summer of 2012 Thameside Media took over the running of a neighbouring photography business – the Slippery Fishes Photo Studio. After just a few weeks into this new venture, which brought in dozens of new clients and a rapid turnover and workflow, I knew without a shadow of a doubt that we had to abandon the invoicing templates I’d been using for more than a decade and work out a more automated accounts system to cope.
Why we can’t use an advanced desktop accounts package
I looked into the UK’s most popular accounting software packages and asked my accountant and other small business owners what they recommended, but I soon realised that all the main desktop software for bookkeeping is for PCs only. While our studio is crammed with Macs.
I couldn’t find a single suitable accounting system for Macs that was going to be an improvement on using Excel.
I remember grumbling about the situation to a sales rep at Sage – the biggest accounting software provider in the UK. The rep agreed that it was a shame, and that there had been discussions for years at Sage whether to build a version for Macs, but the conclusion was always that it wasn’t cost-effective to do so. Would I consider buying a small PC or using Bootcamp on my Mac in order to use their software? My answer was resolutely No.
Curiously, the Sage rep didn’t think to mention the cloud accounting system recently launched by the company, called Sage One, which is accessed through a browser and thus can be used from a Mac as well as PC or even a tablet or mobile device.
I continued with Excel for a while, pushing their invoice templates to the limit.
I mainly work on web developments these days and it was in setting up an e-commerce system with a more complex payment gateway than PayPal that I found myself applying to another arm of the aforementioned Sage company for a SagePay account.
SagePay is one of the cheapest systems in the UK for taking online payments from UK debit cards such as VISA Debit, Maestro etc. (A comparison of payment gateway options for UK traders would be a full article in itself.) It’s a lot more complicated than PayPal, and involves setting up a merchant account with a third party such as Sage’s partner, Elavon.
Once SagePay was starting to operate successfully on my e-commerce site, I realised that my accounts work was increasing yet again as Elavon started transferring amalgamated transactions into our business current account several times a week. Not only does each transfer need to be marked as a separate line in the Excel spreadsheets, it needs to be reconciled with the component transactions and Elavon’s periodic deductions for processing fees.
It also made me realise that taking debit card payments online could be applied to other parts of Thameside Media’s business. Now I definitely wanted a more automated accounts system to cope!
By this point I had finally worked out that the term “cloud accounting”, which I had heard of but not really understood, might actually be very pertinent to my needs.
So what is cloud accounting?
If you’re not sure what cloud accounting is yourself, in a nutshell, it is an accounts system you access online through a browser. You log in to upload your figures and client lists, staff hours, project tallies etc. The system calculates tax and totals and generates downloadable invoices, spreadsheets, summaries etc. In its most advanced forms, cloud accounting can link into online payment gateways such as WorldPay and PayPal, pull in feeds from your business bank accounts, help reconcile your transactions, send automated invoices, notify you when your clients have viewed and paid their invoices online, and calculate your VAT return.
The cloud accounting providers charge a monthly fee and keep your data in The Cloud for as long as you keep subscribing to the service.
The main players in cloud accounting
This is a rapidly expanding industry, with several dozen companies offering variations of cloud accounting. I personally trialled six of the main services in 2013 and was even a beta tester for a couple of the companies over a few months, giving them my candid feedback on their services at a non-public trial stage.
One of the main features I was testing was the ability of the cloud accounting software to integrate with the two main online payment gateways that support UK debit cards: SagePay and WorldPay. As mentioned above, Thameside Media currently uses SagePay to handle online payment for products and services. It’s worth pointing out that most of the cloud accounting services offer integration with PayPal and some credit card services, but relatively few support the main UK debit card processors. Other features I tested were bank feeds and calculations of VAT returns for HMRC.
Below I summarise what the six services I trialled offer for UK small businesses.
- Pros: UK-specific offerings for sole traders, limited partnerships and limited companies
- Cons: Currently no integration with main UK online payment gateways
- Cost: £15 to £25 + vat per month depending on trading status
- Verdict: Good all-round package for many types of UK-based small businesses, particularly freelancers. Nice interface.
- Pros: Currently the most advanced features of any of the cloud accounting providers including the ability to pull data feeds from UK business banks such as Natwest for the all-important task of bank reconciliation, and to handle multiple currencies
- Cons: No integration with the main UK online payment gateways
- Cost: £9 to £25 + vat per month depending on number of transactions and features needed
- Verdict: Cutting-edge services with the only feature missing being integration with payment gateways such as SagePay and WorldPay
- Pros: An easy to use invoicing and VAT-calculation system that integrates with SagePay and can be accessed by accountants as well as business owners
- Cons: Not as advanced on other features as some of the others. Astonishingly its integration with SagePay – another arm of the same company – is only at a basic level!
- Cost: £5 to £10 + vat per month depending on trading status
- Verdict: Good low-priced service for simple accounts and basic SagePay integration, but the company clearly lags behind the other cloud accounting players on the technical front
- Pros: Comprehensive invoicing and timesheet system, plus integration with multiple online payment gateways
- Cons: Not a full accounting service specific for UK business (it is based in India)
- Cost: $19.95 to $99 per month depending on volume (approx. £13 to £65 per month; no VAT is added because it is not based in the UK)
- Verdict: The most advanced cloud invoicing system with features such as auto-billing and the best integration with online payment gateways, but lack of UK-specific features can be an issue
- Pros: Well-designed invoicing and timesheet system for freelancers and small businesses with very simple accounting needs
- Cons: Not a full accounting service specific for UK business (it is based in Canada)
- Cost: $19.95 to $39.95 (approx. £13 to £25) per month depending on volume and features needed (no VAT is added because it is not based in the UK)
- Verdict: Nice to use but a bit pricey for the limited set of features
- Pros: Zoho Invoicing is a stand-alone service similar to Freshbooks, while Zoho Books is a more comprehensive accounts service including bank feeds
- Cons: Popular but not specific for UK business (it is based in the USA)
- Cost: $24 (approx £17) per month for unlimited volume (no VAT is added because it is not based in the UK)
- Verdict: Well-priced and well-regarded service if you don’t mind it not being geared to UK tax accounting
Annoyingly, it slowly became apparent to me that no single provider currently offers all the features Thameside Media wants from cloud accounting. If Xero were to offer integration with SagePay or WorldPay then I would move to them in an instant. My current compromise is to use the comprehensive invoicing and SagePay integration of Invoicera, then do the rest of Thameside’s accounts using Excel. It’s not as efficient a system as I’d like.
I’m hoping that 2014 will see further developments in cloud ccounting to help businesses like my own.
Update July 2014
Since this article was written, Thameside Media has moved to Xero, and dropped using SagePay in favour of Payment Express which integrates nicely with Xero. Four months into using Xero, we can confirm that it has comprehensive features for UK businesses. We would like to see the interface improved, though. And response time to queries is often 24 hours, which feels slow. My accountant has some clients on Freeagent, whose response time is instant – you can simply phone them up!
Clearbooks has also become a serious player on the UK cloud accounting market. It doesn’t have all the features that Thameside Media needs, but it is well worth looking at if you are a small business based in the UK.