We know sole traders are independent business people with drive and ambition. If you’re one of them, you'll need sole trader accounting software that fits the way you do business. Leading accounting software providers Xero share their tips for how to find it.
Software that helps you work smarter
It’s a great time to be a sole trader. Technology has changed the boundaries and created new opportunities.
Depending on the type of work you do, you can be based almost anywhere. For example, many sole traders need little more than a laptop and an internet connection. Others might need tools, supplies or a vehicle, but they’ll still be agile – ready to move wherever work takes them.
With all this freedom, you’ll want accounting software that works the way you do. Sole trader accounting software has to fit in with the flexible way you working. This guide will help you find the right package for your solo venture.
The rise of the sole trader
In the UK, sole traders make up a large proportion of businesses. Some of them work in creative industries – writers, media buyers, photographers and designers. Some are management consultants, project managers, programmers or developers. Other occupations include builders, electricians, accountants and beauticians. The range of sole trader jobs gets larger each year.
Sole traders tend to be upbeat and optimistic people. More than three quarters say their best working days are still ahead of them. So if you’re a sole trader, or thinking of becoming one, you’re in good company!
The pros and cons of being a sole trader
There are two sides to being a sole trader. On the plus side:
- You have no one to answer to but yourself.
- You have the freedom to work anywhere, at any time.
- You have the potential to earn more than you would as an employee.
But there are disadvantages too:
- You may have to work at inconvenient times – for some professions, deadlines can be tight.
- If you don’t work, you don’t get paid.
- There’s no sick pay or holiday pay.
- You have to wear many hats – your jobs include CEO, marketing, sales, PR, development, customer support… and office cleaner.
- The success of your business depends on you alone.
- It can be a lonely way of working.
So there are some sacrifices, but most people feel they’re worth making. Many people who become sole traders never look back.
Lightening the load by moving online
One reason sole traders are so positive is because technology has made it easier than ever to do business. Online or cloud-based software has streamlined many processes and sped up the exchange of information. For example, you may already be using:
- online office tools like Microsoft Office 365 or Google Apps
- email services like Gmail
- cloud-based file storage
- social media to market your services and keep in touch with customers
- video conferencing to talk to clients and friends
- websites to reach new clients.
What’s left? Accounting software. If you’ve moved everything else online, it makes sense to do the same with your accounts. There’s no point being tied to one computer when your other software gives you freedom.
Choose the right tool for the job
It might be tempting to use a spreadsheet for your accounting data. But spreadsheet programs like Microsoft Excel weren’t designed as a substitute for accounting software. You can quickly run into problems if that’s the way you’re using Excel. Here’s why:
Your figures don’t stay up to date
Spreadsheets don’t automatically update – they show you the static numbers, and not the meaning behind them. Accounting software helps you see your cashflow in real-time. Reports and graphs give you clear information and a sense of the big picture.
Spreadsheets can be riddled with mistakes
It might be easy to start with a spreadsheet doing manual data entry and simple sums. But if you want your business to run efficiently, manual copy and paste techniques are no way to thrive and grow.
Spreadsheets aren’t scalable
Sole trader accounting software should grow as you do. It will help you with tasks like payroll and direct payments. And you’ll be able to share data with your accountant and bookkeeper remotely. No spreadsheet can do all of that.
There’s no audit trail
Accounting software keeps track of every entry and who made it. This is called an audit trail and it’s an important part of accounting. But anyone can change a spreadsheet, leaving no record of what was done or who did it. This can leave your business open to fraud.
You’ll know from running your own business that it makes sense to use the right tool for the job. Get this right the first time and you’ll avoid problems later.
The benefits of online accounting software
There are many advantages to using online accounting software for your business. Here are some of the main ones:
Access from any device
Log in to your accounting software from your laptop, smartphone or tablet – you’re not stuck using a single computer in an office.
Simple, easy-to-use features
As a sole trader, you don’t need bloated software with unnecessary features. You need a package that does what it’s supposed to do and that’s easy to understand.
Log in from anywhere
If you’re out and about a lot, it can feel like you have no fixed workplace. So you need to be able to work from anywhere. Online sole trader accounting software lets you do that. Wherever there’s an internet connection, you can get to your accounts.
You don’t need to worry about technology
If you’re not technical, updating computer software can be stressful. With the best online software, that bother is taken away. Updates are carried out by the software company while you sleep – and your data is backed up automatically.
Your accounts are confidential. With online accounting software nobody has access to them unless you hand over your password. Cloud security is much safer than leaving data on your hard drive or a USB stick.
Ability to share data
You may not have employees, but you will have to share data with your accountant or bookkeeper. Some software will allow you to give people a remote login – and you can control their level of access.
Pay as you go
Choose software that’s based on a subscription model. This will mean a small cost every month, instead of a lump sum up front. For businesses just starting out, this really helps save costs.
Find the right software for you in three steps
Now you have an idea of the type of sole trader accounting software you need, it’s time to select the best package for you. Here are three simple steps to help:
Ask for recommendations
You need software that’s worked well for other businesses like yours. So talk to other people in your situation. Network with other sole traders, online and in the real world. Find out what accounting software they use, and if they’d recommend it. And don’t forget to ask your bookkeeper or accountant for suggestions.
If your business grows, you may need to hire employees. Try to find software that will grow with your business. You may not need full payroll features today, but next year… who knows?
Try before you buy
Companies that believe in their products should be willing to offer a free trial. See if you can sign up to online accounting software for free. Test it, get used to it and see if it will work for you.
Make it part of your business
Even if you hire a bookkeeper or accountant, you may have to do some of the daily driving yourself. With the right software, financial management can be easy – and even fun.
Sole trader accounting software isn’t just a key part of your business. Think of it as a way to fine-tune the way you work. It can help you become more efficient – and pretty soon you'll wonder how you managed without it.