Technology & Innovation

How to choose accounting software: 5 steps before you decide

To choose accounting software, start by identifying your business needs, legal and tax obligations, essential accounting tasks, technical requirements, and budget. The best option should give you room to grow as your needs change.

Published 7 August, 202611 min read Share

You can find accounting solutions for all types of companies, and most will cover the basics of recording income and expenses. But the right software should fit the way your business operates now, while supporting the way your business may grow. 

Your choice should account for practical details such as your legal and tax obligations, the tools you already use, the reports you need, and the total cost as your requirements change. 

Before comparing providers, use these five steps to understand what your business needs from accounting software and what to check before you buy.

Key takeaways

• Start by identifying what your business needs from accounting software, including your current accounting tasks, business model, team size, and future growth plans. 
• Check that the software fits your legal and tax status, including requirements around VAT, payroll, Making Tax Digital, data protection, and reporting. 
• Make sure the solution covers accounting basics such as bank feeds, reconciliation, invoicing, payment reminders, expense tracking, reports, and dashboards. 
• Assess technical capabilities such as integrations, cloud access, mobile use, usability, support, training, and the provider’s approach to future technology. 
• Compare the full cost before you commit, including pricing tiers, add-ons, payroll, support, implementation, data migration, and other possible fees. 

Here’s what we’ll cover: 

Step 1: Identify what your business needs from accounting software

Before you choose accounting software, start by mapping out what your business actually needs the software to do. 

That means looking at how your business operates day to day as well as the financial tasks, tax responsibilities, and reporting needs that come with it. 

For example: 

• A sole trader offering services may need simple invoicing, expense tracking, bank feeds, and support for tax submissions. 
• A product-based business may need inventory management, purchase orders, stock reporting, and e-commerce integrations. 
• A growing limited company may need more advanced reporting, user permissions, payroll, payments, accountant access, and stronger controls. 

You should also think about how your needs may change. If you plan to hire staff, register for VAT, expand into new markets, add e-commerce channels, or introduce more complex reporting, your accounting software should be able to scale with you. 

Everyone hopes their business will grow, and as it does, what’s required from you as the owner will become more sophisticated too, including the need to know more about business management. 

Good accounting software should be able to accompany you on that journey, with additional packages by the same software vendor sometimes coming into play as your business develops new requirements, such as payroll or payments processing.

Consider the long-term stability of the provider

Carl Reader is known as “The Startup Coach” and is the author of The Startup Coach and The Franchising Handbook. He has some wise words when it comes to examining the credentials of the company behind the software. 

“Look at whether the software provider is going to be around in 10 years’ time. Look at how well capitalised the company is,” Reader says. “Has it got the funds to be able to compete going forward? Has it got the staffing, infrastructure, and systems that you would expect to allow it to continue going forwards? 

“And in 10 years, will it be the same company, or is it likely that they might be acquired or pivot their business model, which might mean an uncomfortable transition?” 

Make financial data accessible to the right teams

Reader also sees value in tools that make data easy to find and share. He adds: “Businesses should be run on a grounding of a solid understanding of the financial data by all teams. The more that people understand how their actions contribute to the bigger picture, the better.” 

This underlines how far we are from the old days, when financial data was something closely guarded by those who “needed to know”. 

In a modern, forward-thinking business, financial data is shared with those who need it, and it’s shared instantly. For example, a sales team might have access to a dashboard showing insights into the company financials that will help with its progress. 

This kind of culture is one that promotes success and growth, and at its heart is the right accounting software. The ability to create bespoke dashboards or reports is a necessity, as is the ability to easily share them with key stakeholders. 

The best finance software takes a democratic approach when it comes to financial data. Not all data should be shared, of course, but allowing the right people to know the right information can truly revolutionise a business. 

Ask the software vendor the following before purchasing: “Is my accounting software designed only for finance professionals, or is it for the whole business? And how easy does it make it to share key data with stakeholders within the business?”

Step 2: Check that the software fits your legal and tax status 

Different businesses have different legal and tax responsibilities, so the right accounting software should match your status and obligations. 

For example, you may need different features depending on whether you are a:  

• Sole trader
• Limited company
• VAT-registered business
• Employer
• Contractor
• Charity  
• Nonprofit  
• Business selling internationally  

You may also need support for tax submissions, payroll, pensions, data protection, digital records, or reporting rules that apply to your business. Ultimately, covering these areas makes compliance easier to manage.

Reducing the admin burden of compliance 

Adam Prince is vice president of product management, compliance and migration at Sage. Talking specifically about accounting software, he says: “Remaining compliant has never been more important. 

“Tax, employment law, data protection, and more must be high on the list for anybody running a business of any size and are all pushed by the pace of digitisation. 

“But the right software helps you get it right without stress or having to sweat the details.” 

It’s tough being in business, but especially so if you’re a new business owner, when there are legal requirements seemingly coming from all sides. 

The most obvious is ensuring you take care of tax, because a business that is unable to pay its tax is essentially bust. Another common compliance area is payroll and pensions, where the rules can be complex but software can quickly simplify the workload. 

And then there’s the need to keep your data secure so you don’t fall foul of data protection laws. 

Good accounting software will certainly help you stay on the right side of the law by providing functions and features that make it easier for you to remain compliant. Essentially, the folks behind the software will have done the hard lifting for you and thought through the processes, making it easier for you to fulfil the requirements.

The Making Tax Digital programme 

Another reason to check whether accounting software fits your tax obligations is the UK’s Making Tax Digital (MTD) programme, which encourages businesses to submit tax information online. MTD for income tax is becoming mandatory in phases, starting with individuals registered for Self Assessment with self-employment or property income and qualifying income over £50,000.  

If the rules apply to your business, you may need compatible software to keep digital records and send updates to the tax office, HMRC. MTD is already relevant for VAT, so it is worth checking whether your software can support both your current obligations and future reporting requirements. 

Step 3: Check that the solution covers accounting basics

Once you know your business needs and compliance requirements, check whether the software handles day-to-day accounting basics well. 

At a minimum, this may include: 

• Importing bank account information automatically. 
• Helping reconcile transactions. 
• Generating invoices and receipts. 
• Sending payment reminders. 
• Tracking accounts receivable. 
• Managing expenses. 
• Producing useful reports. 
• Giving you clear visibility of cash flow and financial performance. 

Any accounting software should include a dashboard that makes key financial information easy to see at a glance. Instead of running a separate report every time you need context, you can view live information on cash flow, invoices, payments, and overall business performance. 

This makes it easier to spot trends, respond to issues earlier, and make decisions based on current data rather than waiting for periodic reports. Bespoke dashboards or reporting can also help different teams see the information most relevant to their work, while giving the business a broader view of financial performance. 

Step 4: Check how small business accounting software fits your tech setup

Accounting software may be powerful, but it has to fit into the way your business already works, without adding friction to your day-to-day processes.

Integration with your existing tools

Check whether the software integrates with the tools your business already uses, such as bank accounts, e-commerce platforms, payment providers, point-of-sale systems, payroll tools, CRM software, or expense management apps. 

Strong integrations can reduce manual data entry, lower the risk of errors, and make it easier to keep financial information consistent across the business. 

Cloud-based accounting software can also make it easier to access financial data from different locations, collaborate with your accountant, and keep the system updated without manual installs. 

A user-friendly interface

Look for a clear interface, simple navigation, and straightforward workflows for common tasks such as sending invoices, reconciling transactions, checking cash flow, and running reports. If the software feels difficult from the start, it may slow your team down or limit how often people use it.

Support and training resources

Even intuitive software should come with reliable support and training. Before choosing a provider, check what help is available during setup and beyond. 

This may include live chat, phone support, help articles, video tutorials, webinars, onboarding guidance, or access to certified accountants and advisers. Good support can make the difference between software that your business adopts properly and software that creates more questions than it answers.

Keeping one eye on the future

As well as meeting your current technical needs, the software should show that it can adapt as accounting technology continues to evolve. 

Roger Knecht is the president of Utah-based training organisation Universal Accounting Center and is an authority on how accounting software can benefit businesses of all sizes. 

On the topic of upcoming technologies and their impact on businesses, he says: “Accounting software is helping the business owner be more present in their business. 

“With the use of Artificial Intelligence (AI), we are just in the first phase of this evolution to give business owners the accounting information they need in a way they can use and understand it to make better-informed decisions.” 

When comparing accounting software, look at whether the provider is investing in features that reduce manual work, improve accuracy, surface useful insights, and make financial information easier to act on. It’s also worth asking whether the vendor has a progressive approach to core technologies such as cloud access, mobile use, integrations, security, and digital compliance. 

Step 5: Check the full cost before you commit

The total cost of the software could differ from the headline price for a number of reasons. For example, it’s common for accounting software to have different pricing tiers depending on:  

• Number of users
• Features included
• Transaction volume
• Number of entities managed
• Integrations required 
• Payroll functionality 
• Support level 

Some providers may also charge extra for add-ons, implementation, data migration, training, payment processing, advanced reporting, or additional storage. 

Before choosing a provider, check what is included in the base price, what you may need to pay for later, and whether the software remains affordable as your business grows. The cheapest option may not be the best value if it lacks important features, but an expensive platform may also be unnecessary if your needs are simple.

Choose the best accounting software for your business

Choosing the best accounting software for your situation is a matter of understanding your business needs rather than comparing providers on features alone. Your legal status, tax obligations, day-to-day accounting tasks, existing tools, team access needs, and budget should all shape the decision. 

The right solution should help you manage your finances more clearly, stay on top of compliance, reduce manual work, and give your business room to grow. Take time to check these areas before you commit so your eventual choice supports you as your business changes over the long term.

Frequently asked questions

What software do most accountants use?

Many accountants use widely adopted cloud accounting platforms such as Sage, Xero, and QuickBooks, though the right choice often depends on the accountant’s practice, client base, and location. If you work with an accountant, ask which platforms they support before choosing software, as this can make it easier to share records, collaborate on tax submissions, and avoid moving data between systems.

How much does accounting software cost? 

Accounting software prices vary depending on the features you need. Basic plans for sole traders or freelancers are often available at lower monthly prices, while more advanced plans that include payroll, inventory management, multi-user access, or detailed reporting cost more. Before comparing prices, check what is included in each plan and whether you’ll need paid add-ons as your business grows. 

Can I switch accounting software later? 

Yes. Most businesses can move from one accounting platform to another, although the process may involve exporting financial records, importing historical data, reconnecting bank feeds, and checking opening balances. If you expect to outgrow your current software, choosing a provider with migration tools or support can make changing systems easier. 

Do I need accounting software if I already use spreadsheets? 

Spreadsheets can work for very small businesses with simple finances, but they often become difficult to manage as transactions increase. Accounting software automates tasks such as bank reconciliation, invoicing, expense tracking, reporting, and tax record keeping, helping reduce manual work and the risk of errors. 

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