Accounting software is a great way to help you save time, money and avoid accounting errors. The right system helps you prepare and send invoices, keep track of accounts, and makes it easier to meet tax deadlines, which will help you to avoid fines from the HMRC.
The UK government has introduced Making Tax Digital (MTD), which means all businesses above the VAT threshold of £85,000 will need to use accounting software by 2022. MTD will also soon be applicable to self-employed traders for income tax on earnings above £10,000, with the deadline set for April 2023.
The adoption of MTD will phase out paper-based processes and increase the need for accounting software. In this article, we are going to cover the following topics:
- What is accounting software?
- What are the benefits of accounting software for contractors?
- What are the must-have features?
- What is the best accounting software for contractors?
What is accounting software?
Accounting software helps contractors record, report and manage their financial transactions. You can safely balance your company’s books, manage cash flow, track invoices, settle payments and expenses, and run reports to analyse your financial performance. In addition, your financial data is secured in the Cloud so you can access your documents 24/7 and from anywhere.
Benefits of accounting software
Being a contractor can be challenging, especially when you have to manage different clients and can’t hire a full-time accountant. In addition, you need to manage your finances and ensure that you’re not spending money needlessly. Also, because you’re self-employed, you will need to manage your taxes, income and expenses more efficiently than someone with an employer.
Accounting software should automate these tasks to help you manage your time more effectively and focus on the jobs that really matter: running and growing your business.
Some of the benefits for contractors include:
Access easily and securely on the go
Almost all accounting software uses Cloud technology; this allows you to easily access your financial information on several devices regardless of your location.
Having your financial information available to you in a matter of seconds means you can have access to real-time data, so you can make better financial choices and manage your contracting business on the go. Whether you’re travelling to meet a client or you’re abroad and need to check up on your finances, accounting software makes it easy.
Manage your income and expenses
Accounting software can also help you focus on managing your cash flow (the money flowing in and out of your business), which is essential to growing your business and planning for the future. However, it’s crucial that you use accounting software that keeps track of the following:
- Invoices: you should be notified when an invoice is paid and prepare and send invoices automatically to your clients.
- Expenses: choose accounting software that you can access through your phone via an app, and that allows you to track expenses. The Countingup app allows you to capture receipts and store them easily in the system. You also make it easier to reclaim expenses in the future.
Spend less time on accounting tasks
Did you know that almost 75% of accounting tasks can be automated? By using accounting software, you can significantly reduce your time working on accounts and focus more on growing your contracting business.
Keep track of your tax
HMRC will be checking in on your finances and taxes, so it’s good to be prepared and have your records organised. As a contractor, you will also have to meet tax deadlines to avoid late penalty fees.
With the help of accounting software, you will receive running tax estimates and cash flow insights that will help you meet tax deadlines. With the deadlines for Making Tax Digital approaching, many small business and self-employed contractors will have to adopt integrated accounting solutions like Countingup. Not only will they make keeping track of your business’ accounts easier, they’ll also make filing your tax returns and sharing your business’ accounts with your accountant more straightforward.
What are the must-have features of the best accounting software for contractors?
With so many different options to choose from, you must find the right software for your contracting business. It should have the following features.
Designed for contractors
Some accounting software is specially designed for larger businesses with multiple employees on their accounts, as well as international customers and high-volume accounts. As a contractor, you want to choose accounting software that is straightforward to use. Countingup is easy and free to set up in a matter of minutes, simple to use and specifically designed to fit small businesses. This means it takes all of your needs into account.
As a contractor, you’re probably constantly busy managing different clients and trying to achieve a work-life balance. Choosing accounting software that comes as an app on your phone makes it significantly easier to manage your finances and track expenses on the go.
Separate business and personal
Setting up and using a business current account will be key for you to keep organised when it comes to your financial admin. As mentioned above, you will have to keep track of many different variables such as income, expenses and taxes. These are much easier to keep track of when you have a business account separate from your personal account. The Countingup app automatically categorises your expenses and gives you a tax estimates so that you can confidently set the right amount aside in preparation for your tax return.
Save time on accounting admin with Countingup
Countingup is the unique business current account with free built-in accounting software that is helping thousands of contractors keep on top of their accounting.
Designed for one-person businesses, the unique two-in-one app automates the time-consuming aspects of bookkeeping so that you can focus on running your business. You’ll receive a running profit and loss report, cash flow insights, tax estimates, automatic expense categorisation and the ability to create invoices instantly.
Find out more here.