FreeAgent went from startup to PLC in less than a decade and was snapped up by the Royal Bank of Scotland Group (now NatWest Group) two years later. It's used by more than 150,000 small businesses and has racked up dozens of trophies for best accounting or bookkeeping software.

Based in Edinburgh, the cloud accounting platform has distinct offerings for limited companies, partnerships and LLPs, sole traders, and, most recently, landlords. Here, we're looking primarily at the limited company product.

FreeAgent review: Price and features

Whichever tier you choose, paying for a year upfront gets you twelve months for the price of ten. That reduces the limited company price from £29 a month to £290 a year. Partnerships and LLPs will need to budget £24/£240, sole traders £19/£190, and landlords £10/£100. Those prices exclude VAT and apply from year two. First-year prices are discounted by 50%.

Every tier supports invoicing, estimates, expenses, time tracking, and VAT filing (it's recognized by HMRC for submitting MTD-compliant returns). There's no additional charge for payroll on the limited company, partnership/LLP, or sole trader plans. You can scan up to 10 receipts a month from which FreeAgent will draw out relevant details using its smart capture tool, but with an additional charge of £5 a month (plus VAT) to remove the cap, this feels more like an introductory offer.

The differences between the tiers are few and far between. However, the limited company, sole trader, partnerships and LLP plans lack tools for tracking property income and costs, while the landlord plan misses out on payroll. There's no self-assessment tool for partnership/LLP users, and only the limited company tier, reviewed here, can file end-of-year returns. 

The final differentiator is Amazon integration, which is currently free on all but the landlord plan, where it's missing. This lets you draw in data from a linked Amazon UK seller account to track sales in real-time. From 30 April, this feature will attract a monthly fee of £6 plus VAT on the three tiers where it's currently available.

However, if you have a business account with NatWest, Royal Bank of Scotland, or Ulster Bank, you can sign up for any FreeAgent tier for free. The same is true if you set up an account with Mettle, NatWest's account for sole traders and limited companies with two or fewer owners, and make at least one transaction a month. That transaction could be as simple as a standing order from your Mettle account to a business account you hold elsewhere. It strikes us that there would be very few businesses that couldn't therefore sign up for FreeAgent for nothing.

FreeAgent review: getting started

FreeAgent's interface is refreshingly simple. You don't need to understand bookkeeping conventions, and the only place you'll encounter anything close to double-entry is when tackling journals (which we'd recommend leaving to an accountant if you're unsure what you're doing). There's no need to venture beyond the basics either if you don't need to: you could spend years recording your accounts through the system without ever doing more than issuing invoices, recording payments, and reconciling bank transactions.

Aside from these key features, it registers contacts so you don't need to manually type them onto each invoice, can corral multiple jobs into projects, will issue estimates, track expenses, calculate your likely tax bill, and amalgamate balances across multiple accounts to give you a live overview of your business's financial health.

You can import contacts in vCard format or from Outlook, Google, Apple, or FreshBooks, and export them should you ever need to switch services. You can also export all of your FreeAgent data in Excel format if you want to keep a periodic local backup.

Recognizing that you might be migrating from an alternative platform – or upgrading from a spreadsheet-based system – you can import existing tax data, and of course set key variables, like your accounting dates, company number, and registered address. You can also define a price list for commonly sold products or services to simplify billing at a later date; define your own categories for sales, income, expenses, and so on; and, if applicable, set it up to work with the construction industry scheme for subcontractors to deduct money from invoices sent to contractors for submission to HMRC.

The dashboard presents key metrics from across your business in a clear and easily understood grid, with cash flow, profit and loss, and your invoice timeline in obvious boxes. There's also a handy notification bell, which alerts you to matters that need your attention and, on the tab behind this, FreeAgent's  Radar for general information and longer-term matters, like an upcoming end-of-year.

FreeAgent review: Billing tools

Many features can be personalized to suit your business, like the logo on your stationery and the layout of your invoices. There are eight tweakable layouts to choose from but if you want to – and if you have the skills – you can define your own using CSS. When you send an invoice, it's attached to your covering email as a PDF, and you can tweak the email, too, using placeholders for common variables like due date, project names, and your contact's first or last name. If you prefer, you can write the covering email from scratch before dispatching it, or download the invoice to print if more appropriate.

Mark an invoice as sent and FreeAgent will track when it's due, late, or paid; it can send automatic follow-ups after a set point, and you can issue reminders yourself. When a matching transaction appears in your linked bank feed, it will tentatively tie it to the invoice but not commit it to your accounts until you've checked and signed it off. It's not a problem if clients settle multiple invoices with a single payment, either: just feed it the relevant invoice numbers and FreeAgent will split the lump payment as appropriate.

If any of your clients prefer not to pay by transfer (or cash that you subsequently pay into your account so it appears in the bank feed), the platform integrates directly with GoCardless, PayPal, or Stripe, subject to you having the necessary accounts. Each of these levies separate fees from your ongoing FreeAgent charge. These start at 1% + 20p per transaction with GoCardless, 1.5% + 20p for Stripe, and 1.2% + 30p via PayPal, but do check the merchant fees tables for each service before signing up.

FreeAgent review: Recording and reconciling transactions

FreeAgent supports a wide range of UK-based open banking feeds, which both simplify the process (for developers like FreeAgent) of integrating the data and help keep it secure. For the majority of big-name UK banks, like HSBC, NatWest, and Lloyds, the full range of accounts and cards can feed directly into your FreeAgent records.

There are some notable exceptions. If you bank with Monzo, you'll need to connect FreeAgent as an accounting tool through the Monzo app. Revolut customers can do similar by logging on to the website (via a browser), navigating to the Hub, and working through the steps. And for Starling, log in – again through a browser – and find the FreeAgent option through 'Marketplace and Connects Apps'.

FreeAgent doesn't support EU bank services, including Ulster Bank in the Republic of Ireland, since the UK's withdrawal from the EU at the start of 2021. EU bank account holders will therefore need to upload statements or enter transactions manually.

Beyond traditional banking, you can set up FreeAgent to track a business PayPal account, as well as international currency accounts if the host banks support open banking.

When transactions appear in your feed, FreeAgent makes a good stab at explaining them, using historic data to assign them to categories, or values to set them off against your invoices. We've found it generally very effective – particularly when assigning sums to invoices – although when categorizing outgoings it might sometimes suggest that something you've bought previously is now a repeat purchase, just because the vendor matches, even if the price is significantly different.

FreeAgent review: working with others

Every FreeAgent account lives in a subdomain of freegent.com (so, itpro.freeagent.com, for example), and billing is per company rather than per seat. So, you can set up multiple users with their own logins and allied financial data like birthdays, UTR, and NI numbers. Each can be assigned one of eight permission levels, restricting whether they can access bills, banking, tax features, and so on. Setting this is trivial: just drag a slider to assign the appropriate level.

Designating a user level zero, for example, will put them on the books so you can pay them, but lock them out of FreeAgent entirely. Level one lets them file timeslips and, one step up from that, on level two they can create and edit expenses, and view and download their own salary, payslips, and dividends.

Aside from four staff accounts – director, company secretary, employee, and shareholder – there's an advisory tier for accountants, who get their own login to access your books and can likewise have their access controlled using the same eight grades. The only difference is that not being staff, they can't reset the company's data or delete its account from FreeAgent's servers the way a level eight staff member could, even if they've been assigned full access.

Approaching from the opposite direction, FreeAgent's dedicated practice dashboard for accountants lets them administer multiple clients through a unified interface. They can either introduce the client themselves, in which case they'll be responsible for the ongoing subscription and can pass on the cost, or enroll an existing FreeAgent user. Opting for the latter gives them the choice of taking over the subscription (as with a new account) or allowing the client to continue paying FreeAgent directly.

FreeAgent review: mobile app

FreeAgent introduced its mobile app in 2015. It does a good job of arranging key information on a smaller screen, with a dashboard that focuses on fundamentals and pressing tasks. 

You can log expenses, timeslips, and mileage on the move, create invoices, and create or look up contacts. Indeed, while we wouldn't recommend running your whole business through a mobile app (we find the browser-based dashboard more comfortable), there's very little you can't do on your phone. You can even upload a new company logo, change your VAT registration status, and connect new payment solutions. Just about the only thing you can't do is create and edit journal entries.

FreeAgent review: Is it worth it?

FreeAgent may be a relative newcomer, compared to the likes of Sage (43 this year), Intuit (41), or MYOB (33), but that in no way counts against it. It was conceived from the start as a SaaS product, matured quickly, and has shown steady feature growth ever since, without tending to bloat.

Getting started is quick and easy, and it doesn't require any knowledge of accounting best practices. So long as you can maintain a list of contacts and add items to an invoice, you're 90% of the way there. There's a stuffed knowledge base and, if you have problems, support is UK-based and the team includes real-life accounts.

It's good value for money, too. You could offset the cost of the £290 per year small business plan (excluding VAT, but discounted by 50% in year one) by doing your books in FreeAgent rather than outsourcing them. Better yet, if you employ an accountant to manage your end-of-year, giving them their own login means they'll have everything to hand. This could cut the time it takes them to do the job and, potentially, their bill.

In almost every business, the accounts department needs a close relationship with the IT department, but that doesn’t mean the two have much in common. In fact, many basic assumptions IT professionals make are totally disregarded by accounts departments. 

It’s a strange situation, considering the entire IT function in many organizations reports to the finance director. That may be a historical consequence of the fact accounts departments were often among the earliest IT adopters.

The first commercial computer deployed in the UK, after all, was Leo, a computer that handled payroll processing, inventory management and other jobs for Lyons Tearooms. While it may nowadays be considered to be more on the operations side of the business than purely accounts, it was commissioned and managed by the accounts department.  

Legacy Sage products are reaching end-of-life

Sage, in the UK, comes across as a friendly software house, which has made life easier for the hundreds of thousands of small businesses – the ones that have had their hands full managing their business and didn’t want to devote any more time and energy than necessary to tracking their accounts and managing their accounting software.

It must be said, such places tend to disturb the equilibrium of a fully paid-up nerd like me; I walk in and see the real “beating heart” PCs, running critical tasks such as order processing and shipping, all sitting with black DOS-mode screens. This would be the company’s historic installation of Sage: in some cases, there might actually be only a single PC set up to run the entire accounting function.

It’s understandable when businesses haven’t rushed to upgrade, however, because moving from one version of Sage to another can be as much of an upheaval, as moving from Sage to another competing product. So when the news broke that those character-mode screen versions from long, long ago would no longer be supported, it sparked considerable concern in businesses where the accounts software had been a fixture for longer than anyone working in the relevant department.

Since the announcement, the rest of the iceberg has become visible. It’s not just those early releases that Sage wants to withdraw support from, but all sorts of multi-user and multi-function packages are now developing end-of-life dates. For example, Sage 200 Extra Online is slated for deprecation in 2024.

Sage waking up is a good thing, though. It means the age of outdated versions running on singular legacy computers is coming to an end, and that’s great news for manageability, support, and security. And while forced migration is never welcome, it gives businesses an opportunity to move up to a more modern accounts solution, perhaps one that can integrate with a CMS or e-commerce service.

Pay attention to system design

While the accounts team often bears underlying responsibility for IT within a business, separating job functions and technologies is desirable. Traditional techies and computer science people love to converge and integrate; the ultimate expression of elegance in coding is when one program takes over the work of ten individual ones. This is wholly opposite to the instincts of accountants and bookkeepers; they know the value of separability. 

You may appreciate it too if you’ve ever set out to migrate a business that uses a clever, deeply integrated, perhaps cloud-based, all-singing, all-dancing accounting package. This broad scope can be very attractive and powerful when you’re just getting going – it’s a single solution to all your needs. 

Unfortunately, a lack of staging between distinct functions makes it hard to migrate to anything that doesn’t have the exact same structure. In fact, even before you think about where you’re migrating to, questions arise as to whether functions you don’t want to migrate (which may extend beyond the core accounts system) will continue working when the system is no longer whole.

In other words, if you’re congratulating yourself on having designed and commissioned a comprehensive management platform that precisely and exactly reflects the state of your business and marketplace, there’s a good chance you’re actually creating future obstacles. The ability to execute a partial migration, or a lazy cutover from old to new systems, is crucially governed by how you handle stuff that’s not inside the accounts function.

Finding a migration partner

When you are ready to migrate to a new accounting system, you may find choosing a destination almost as hard as implementing the switch. There are comparatively few medium-sized business accounting software packages you can just download and try out during a quiet patch. More often, the solution comes via a specialist, intermediary reseller, which might hopefully be au fait with your business sector, or with the business of making a particular piece of software actually work. 

This state of affairs hasn’t arisen by chance. It’s far from uncommon for package developers – in accounting, or otherwise – to make their software almost impossible to deploy and maintain without specialist knowledge. This puts you somewhat at the mercy of authorized partners, whose demeanors may range from refreshing honesty right through to frankly venal disregard for what you might actually want your systems to do for you. 

It’s as important to pick the right partner as much as it’s important to pick the right software package, therefore. This turns the whole thing into a much more organic, face-to-face process than you may be expecting. 

On the occasions when I’ve been drawn into a partner selection process, I’ve tended to immediately discard those who talk too much about return on investment. That has a lot to do with the businesses I’ve been working with: the idea of getting a demonstrable, financial return on your IT projects makes sense for a business churning out millions of identical products. But it can also be an indicator that the vendor doesn’t understand (or doesn’t care about) the fundamentals of your company. If you’re revamping a website for a company that imports antique Japanese pens worth £50,000 each, how on earth are you meant to calculate the value of a faster accounting system?

Overall, I’ve found partners in the accounting sector have something in common with the systems they support: they’ve experienced relatively little competitive or evolutionary pressure in the last couple of decades, and it often shows. For example, how many accounting products have appeared with support for cryptocurrencies? Would you even trust a partner-labeled business to deliver and implement such a thing? 

Think about your migration tactically 

In business, it’s often important to think strategically: work out your overarching aims, and identify the resources and methods you can deploy to achieve them. But migrating your accounts package probably doesn’t directly connect to your grand corporate mission. It’s a tactical endeavor, involving ideas such as reversibility, soft deadlines, modular adoption, and other buzzwords.

Cutting through the jargon, the goal is to manage away all the dramas and disasters which await a poorly-planned move. In some cases, this can involve a lot of people-management, but in this scenario, the challenges and solutions are largely technical. You have to start way back, with careful consideration of the cost of re-implementing custom code or special-purpose connections – although very often the whole reason for making a migration project is to escape from bodged-up customizations and move to a platform that properly supports the functions you need. 

The human-centric part of a project is managing expectations. An accountant may well expect that every last byte from the old system will be open to retrieval in the new, on the first day of use. In fact, this isn’t necessary and in most businesses, you can migrate the connections and import/export functions on day one, and after that, you have at least 89 days to debug the links and then import the historic transactions. At the bottom, most accounting deployments are essentially quite intricate (but low-stressed) multi-user databases. And any DBA will tell you, there’s no problem with filling up a historic transaction table while the regular users carry on with their daily grind. It’s just another expression of the difference in perspective between the bean counters and the nerds.

In truth, though, it wouldn’t hurt IT professionals to learn a few lessons from the world of accounting. When we come at projects from a technical mindset, we have a terrible tendency to design everything for maximum stress, only one level of security, and long downtime intervals during replacement work. Accounting has a lot to say about smoothing down those peaks of anxiety, thinking around those moments of no-return, and being able to go back to basics for short periods of downtime. These are the keys not only to a successful accounting migration – but positive results in any IT project.

When you’re setting up a business, you’ll no doubt have concerns about the costs involved. How much will payroll run to? What will the rent be on your business premises? What is my tax bill likely to be?

Once you start factoring in the costs of sourcing and running your technology stack, expenses can soon become unmanageable, particularly when soaring energy costs are making it harder to keep the office lights on.

Fortunately, there are plenty of free software options for small businesses out there, many of which will be more than enough for your needs before you even consider the paid tiers.

To help keep your business costs down, we've pulled together some of the best free software tools on the market, covering a range of use cases that most businesses will need from the get-go, whether that's business communications, productivity, or HR. They also provide some of the best Microsoft Office alternatives.

1. Slack

Best for business collaboration

www.slack.com

Whatever your industry, effective communication between your team members is almost certainly vital to the smooth running of your company.

Online communication tool Slack enables you to try its services for free for an unlimited period of time. If you choose this software, you can group your team messages according to channels, which enables those working on a particular project to communicate more effectively.

Under the terms of the free plan, you’ll have access to 10,000 of your team’s most recent messages. Other benefits include unlimited one-to-one voice and video calls for individuals, as well as 10 integrations with other apps such as Google Drive and Microsoft 365.

If you’d like access to a wider range of features, you can upgrade to one of the company’s paid plans, which offer services such as group video and voice calls.

2. Trello

Best for project management

www.trello.com

If you’re juggling numerous projects across your company, you could improve your efficiency with project management software Trello. Based on the Japanese model of Kanban management, Trello uses virtual boards that enable you to visualise your progress on key projects and then decide on your next steps. The most common analogy used to describe the software is a whiteboard covered in Post-It notes.

You can also assign tasks, establish timelines, create calendars, and view metrics. Once you’ve created a new task, every aspect of the task can be managed, tracked, and shared with other members of your team.

Another point in Trello’s favour is that the software has integrations with apps such as Confluence, Slack, Dropbox, and Evernote.

3. Wave

Best for business accounting

www.waveapps.com

For many small business owners, invoicing can be one of the most time-consuming aspects of the accounting process, Using the free version of Wave’s customisable software, you can create an unlimited number of invoices in any currency.

You can also view your transaction history with your customers, set up invoices reminders to email your customers when payment is due, and track sales tax. Another of the software’s most attractive features is the ability to set up recurring billing for repeat customers, which could drastically reduce the amount of time you spend chasing payments.

4. Skype

Best for videoconferencing

www.skype.com

With the rise of remote working, it’s essential that you choose the right video conferencing platform for your business’s needs. While a number of rivals have emerged in recent years, Skype’s free plan remains one of the most attractive on the market. As well as supporting one-to-one chats, the app enables you to hold group video calls with up to 100 participants.

A major advantage here is that you don’t need to download an app in order to use the service, and can do so through your browser.

5. Wix

Best for website building

www.wix.com

If your business requires a website (and in the digital age it almost certainly will), the free website-building tools offered by Wix may well come in handy. Operating through a simple drag-and-drop interface, the software enables you to add key elements to your site without any knowledge of coding, which makes the process far less demanding for beginners.

If you’re seeking a no-frills website, the company provides hundreds of design templates for free. Be aware however that the free version will automatically display ads for Wix on your company’s site.

6. LibreOffice

Best alternative to Microsoft Office

www.libreoffice.org

If you’re a fan of traditional Microsoft Office packages such as Word, Powerpoint, and Excel, but would rather avoid the price tag, LibreOffice offers an attractive, free alternative.

Its main services are Writer (word processing), Impress (presentations), Calc (spreadsheets), Base (database), and Draw (vector diagrams). As the successor to OpenOffice, LibreOffice is compatible with a range of document formats such as Microsoft Word, Excel, and Powerpoint.

7. Thunderbird

Best email platform

www.thunderbird.net

Whatever your organisation's size or industry, sending and receiving email is likely to be at the heart of your operation. Although arguably less well-known than some of its rivals, free email app Thunderbird is likely to offer all the features you need to manage email communications across your business.

Its main features include a mail account setup wizard, a quick filter toolbar, tabbed email, smart folders, and an add-ons manager. There is also a one-click address book feature, which enables you to add people to your contact list by clicking on an icon next to their name when they send you a message.

If you’re sharing large documents, you can also speed up the transfer by uploading these to an online storage provider and sharing the link.

8. Duplicati

Best business backup suite

www.duplicati.com

Open source backup software Duplicati enables you to back up files and folders through strong Advanced Encryption Standard/AES-256 encryption. It will also save space across your network with incremental backups and removal of duplicate data.

If you opt for Duplicati, you can run updates through the web-based interface or via the command line interface. The software is configured by a web interface that runs in any browser, and therefore can be accessed from anywhere.

Duplicati is compatible with Windows, MacOS, and Linux operating systems.

9. Mailchimp

Best email marketing platform

www.mailchimp.com

While the term “spamming” evokes a sense of dread in most legitimate business owners, email marketing can nevertheless be a key to the successful operation of many companies.

Mailchimp is an American marketing automation platform and email marketing service. Using the free version, you’ll have access to a number of features such as one-step automation, which will deliver messages to your customers depending on who they are and how they interact with your company.

This version enables you to send messages to a single audience of up to 2,000 contacts. Although this is likely to be sufficient for many small businesses, you can increase these figures by upgrading to one of the company’s paid plans.

10. Freshteam

Best HR management platform

www.freshworks.com

Smart HR software Freshteam offers services such as applicant tracking, onboarding, and time-off management. Free for up to 50 employees, the company’s Sprouts plan includes a dedicated recruitment team inbox, a basic careers site, and an employee directory.

If you’re unsure whether Freshteam is right for your business, or have questions over which plan to choose, the company offers a free demo of its services. The free plan is also available as iOS and Android mobile apps.

SAP has announced the launch of a new Partner Talent Initiative that will identify and train both new and existing talent in the SAP Partner Ecosystem.

The aim is to support the IT channel’s increasing demand for skilled certified individuals, the company said in an announcement. The programme will provide a rigorous, full-time curriculum to certify professionals in high demand areas, including RISE with SAP S/4HAHA Cloud and an introduction to SAP S/4HANA Financial Accounting.

Participants will then graduate with three SAP certifications, before re-entering the partner ecosystem as graduates ready for employment.

The scheme is already underway, with the first two groups of professionals taking part in the programme. Upon completion, these graduates will start a three-month intensive training programme to help equip them with SAP consultancy skills.

“By launching the Partner Talent Initiative, graduates of the programme will learn invaluable skills, helping customers and partners successfully become Intelligent Enterprises and provide high-quality services,” explained Celine Cazali, chief partner officer at SAP UK & Ireland.

“Through a rigorous curriculum, combined with continuous feedback and support, our programme will equip the next generation of consultants with the mindset, skills and ambition needed to succeed in the channel and beyond.”

Participants will receive ongoing support and continuous feedback from delegates, instructors and the wider partner team throughout the training period, SAP said, as well as access to enablement content, live SAP software practice, expert-led learning environments, and the chance to obtain SAP Global Certification digital badges.

Additionally, SAP is offering a business development fund (BDF) incentive to those who recruit, train, and certify new consultants under their new Drive2Deliver partner capacity initiative.

Paul Cooper, chairman of the UK & Ireland SAP User Group (UKISUG), said the Partner Talent Initiative will “help address a potential skills gap in the future".

“Our most recent member research highlighted that many organisations are concerned a lack of available skills will impact the speed their organisation moves to SAP S/4HANA,” he said.

“A thriving partner ecosystem with more certified talent will be essential in supporting customers’ SAP S/4HANA journeys and developing the next-generation workforce.”

Fundbox has partnered with Visa as it looks to strengthen digital payment offerings within its embedded working capital platform.

The first stage of the new collaboration centres around the launch of the Fundbox Flex Visa Debit Card, issued by Pathward N.A., which the firm says will help small businesses better manage their cash outflows.

The pair will also work together over the coming months to introduce a series of new payment products, which will include a Buy Now, Pay Later (BNPL) solution for flexible payment options, and a push-to-card transfer option for instant fund disbursement through Visa Direct.

“Small businesses that embrace digital tools tend to be more resilient and better able to compete,” explained Jack Forestell, Visa Chief Product Officer, in an announcement.

“As Visa continues to work towards digitally enabling 50 million small businesses by 2023, we’re excited to be teaming up with Fundbox to bring a range of new, digital offerings to the market from cards to instalments to disbursement.”

Fundbox’s Flex Pay solution focuses on spend management and is designed to help business owners manage payables while also offering flexibility around expenses. The platform has achieved strong growth and quick adoption since its release, with the firm reporting payment volume increasing over 80% quarter-over-quarter.

Fundbox says the strong performance of Flex Play has contributed to the growth of its working capital platform, with the company now having crossed $160 million in annual revenue run rate.

Now, the Fundbox Flex Visa Debit Card adds Flex Pay to card-accepting merchants to help enable convenient payments for expenses such as travel, supplies, and incidentals.

“We’ve seen our working capital solutions become more embedded within our customers' cash flow cycles as small businesses adopt digital payments to drive growth and operational efficiency,” commented Prashant Fuloria, CEO of Fundbox.

“In order to accelerate the flow of funds to our customers, it’s critical for us to continue enhancing our core payment capabilities, and our partnership with Visa is a significant step towards that vision.”

Intuit has agreed to pay $141 million in restitution after an investigation conducted by the Office of the Attorney General (OAG) revealed the TurboTax owner engaged in phony digital tactics to lure low-income Americans away from federally-funded free tax preparation services.

The multistate investigation, prompted by ProPublica’s conclusive report, also unearthed Intuit’s counterfeit “free, free, free” ad campaign to boost sales of TurboTax’s Free Edition.

While TurboTax "freemium" products were free for approximately one-third of US taxpayers, IRS Free File products were free for 70 percent.

In its elaborate scheme to deceive taxpayers, Intuit also barred its IRS Free File landing page from search engine results in a bid to covertly deny the free filing option to eligible taxpayers during the 2019 tax filing season.

Under the terms of a settlement signed by the attorneys general of all 50 states and the District of Columbia, Intuit will dismiss TurboTax’s ad campaign and pay restitution to nearly 4.4 million taxpayers who were coaxed into using the company’s ‘paid’ TurboTax Free Edition for tax years 2016 through 2018, limiting their participation in the free IRS Free File Program offered through TurboTax.

Per reports, affected consumers will receive a direct payment of approximately $30 for each year that they were defrauded. In total, the state of New York will receive over $5.4 million for nearly 176,000 New Yorkers who were tricked into paying for free tax services.

“Intuit cheated millions of low-income Americans out of free tax filing services they were entitled to,” commented Attorney General James.

“For years, Intuit misled the most vulnerable among us to make a profit. Today, every state in the nation is holding Intuit accountable for scamming millions of taxpayers, and we’re putting millions of dollars back into the pockets of impacted Americans. This agreement should serve as a reminder to companies large and small that engaging in these deceptive marketing ploys is illegal. New Yorkers can count on my office to protect their wallets from white-collar scammers.”

HM Revenue & Customs (HMRC) is calling on UK businesses to migrate their customs reporting to a new IT platform that is set to replace the Customs Handling Import and Export Freight (CHIEF) system on 31 March 2023.

The Customs Declaration Service (CDS) has been in the works since 2014, demand for which has intensified following the UK's decision to leave the EU.

CHIEF has been criticised for being unsuited for the post-Brexit age due to its limitations of being able to process only 60 million customs declarations a year. This is almost five times less than the 270 million additional customs declarations per year anticipated by HMRC from UK companies for the import of EU goods.

CDS, on the other hand, will be able to handle an estimated 255 million declarations per year. Since being launched in 2018, the platform has processed more than 2.5 million declarations to date, HMRC announced on Thursday.

After running parallel to CHIEF for five years, CDS will become the UK’s main customs IT platform. CHIEF is expected to be turned off on 30 September 2022 after almost three decades in operation. Due to system migrations for larger businesses potentially taking up to six months, HMRC is asking organisations to begin the move now.

Commenting on the announcement, HMRC directors general for Borders and Trade, Katherine Green and Sophie Dean, said that CDS will provide HMRC with “the capacity and capability to grow in line with the Government’s ambitious trade plans and to have the world’s most efficient customs system by 2025”.

“We know the introduction of new rules can be challenging and appreciate all the efforts industry has already made to keep goods flowing. We understand a system change can take time which is why we are asking businesses to start the migration process now. We’ll do everything we can to support businesses to get this right. Help is available online, through our guidance on GOV.UK, our webinars and over the phone,” they added.

Last month, HMRC faced criticism after a scathing National Audit Office (NAO) report revealed significant inconsistencies in the implementation of IR35 tax reforms.

The 555 sub-postmasters who were the first to take the Post Office to court in 2019 over its faulty Fujitsu Horizon software will receive “their fair share of compensation”, chancellor Rishi Sunak announced today.

Despite winning the landmark High Court case, the group, also known as ‘the 555’, were prevented from benefiting from the Historic Shortfall Scheme – a fund created by the Post Office to compensate another group of 181 victims following the original court case.

Last month, Sunak was urged to adequately compensate the ‘555’, who were facing “financial ruin” after being forced to use the 2019 compensation to cover high legal fees as well as financial losses sustained in the years following their wrongful convictions.

“There is no valid reason to exclude the 555 from being fully compensated and the Chancellor must come forward with the required funding now,” said Darren Jones, chair of the Business, Energy and Industrial Strategy Committee.

Five weeks after Jones’ appeal, Sunak expressed hopes that the newly announced compensation scheme will provide “a measure of comfort” for the ‘555’.

“The Horizon IT dispute has had a devastating impact on postmasters and their families, with many losing their livelihoods or being wrongly convicted for crimes they didn’t commit. Without the efforts of these postmasters, this terrible injustice may have never been uncovered so it is only right that they are compensated fully and fairly,” he added.

Commenting on the news, Postal Affairs minister Paul Scully said that “the pain and distress that the Horizon scandal has inflicted on hundreds of postmasters over the years cannot be overstated”.

“Without the efforts of the 555 pioneering postmasters who brought this to court, this injustice may never have seen the light of day nor would the statutory inquiry have been set up, which is why I made it my priority to ensure they are all fairly compensated. While we can’t right the wrongs of the past, I hope this important compensation package is a turning of the page, as we continue working with the Post Office to ensure something like this can never happen again,” he added.

The amount of compensation they will receive is due announced “in due course” and will be set out by the Department for Business, Energy & Industrial Strategy.

The Justice for Subpostmasters Alliance (JFSA) and the Business, Energy and Industrial Strategy Committee wasn't immediately available to comment on Sunak’s announcement.

The UK government is facing pressure to adequately compensate the 555 sub-postmasters and sub-postmistresses who took the Post Office to court in 2019 over its faulty Horizon software.

Despite winning the case and having their names cleared, high legal fees meant that they only received £20,000 per person, significantly below the more than £100,000 in estimated losses said to have been sustained in the years following their wrongful convictions.

The court settlement also prohibited the group, also known as ‘the 555’, from benefiting from the Historic Shortfall Scheme – a fund created by the Post Office to compensate another group of 181 victims following the original court case.

Many of the subpostmasters and subpostmistresses are now said to be facing “financial ruin” and even homelessness.

Darren Jones, chair of the Business, Energy and Industrial Strategy Committee, which authored the report into the Post Office–Horizon compensation, described the scandal as “one of the largest miscarriages of justice in British history”.

“It is clearly entirely unacceptable that the group of 555 victims who first brought this scandal successfully to court are being left in a worse position than those who are being compensated thanks to their action. There is no valid reason to exclude the 555 from being fully compensated and the Chancellor must come forward with the required funding now,” he said.

Jones urged the government and the Post Office to “speed up their efforts to deliver full, fair and final compensation for every single victim”.

“Justice will not be done unless they do so,” he added.

Earlier this week, Post Office chief executive Nick Read told the Telegraph that all victims of the Horizon scandal will receive compensation by the end of 2022.

“We have made good progress to offer redress to those affected by this scandal. The overwhelming number of the 72 people who have had their convictions overturned have now each received interim compensation payments of £100,000,” he added.

The Fujitsu-developed Horizon system, used for accounting and stockpiling, was used as evidence to successfully convict 736 people of theft and false accounting between 2000 and 2014.

The story was first reported back in 2009 by Computer Weekly, which has since continued to campaign on behalf of the postmasters.

Google has reportedly agreed to pay €345.2 million ($387.1m) in back taxes and interest to the Irish government.

The payment, discovered by the Irish Times in Google Ireland's accounts filings, included €218 million in back taxes to the Irish government and €127.2 million in interest. The payments are a tax settlement between Google and the Irish government that forms part of a total 2020 corporate tax bill of €622 million.

Google Ireland made €48.4 billion in revenues during 2020, representing a year-on-year increase of €2.7 billion from €45.7 billion. It also made €2.85 billion in pre-tax profits that year, up 46% from €1.94 billion during the prior year.

In April, the paper reported that Google had used an accounting technique called the 'double Irish' to siphon money from its Irish operation. Google's Irish operation licensed intellectual property from its tax-registered entity in Bermuda, paying royalties in return. This allowed the company to use Bermuda (which has a zero percent tax rate) as a tax haven. The Irish government viewed the company as tax-resident in Bermuda, while the US considers it to be tax-resident in Ireland.

That arrangement, abolished in 2015, was finally phased out for existing users in 2020. Google restructured its tax operation that year, moving its intellectual property holdings back to the US.

In October, Ireland said it would join an international agreement that would set a minimum 15% tax rate on multinational companies, up from its previous 12.5%. It's part of an OECD initiative that calls for companies to pay taxes in countries where their products and services are sold.

Last year, an EU court ruled that Apple didn't have to pay €13 billion in back taxes after a long legal battle.

Big tech companies have come under fire in the past for using tax loopholes around the world that enable them to escape payments.

The third quarter of 2021 set an all-time record for venture capital (VC) investment in UK fintech startups, at £3.6 billion.

The achievement signifies the sector re-gaining ground following a financially difficult year.

According to Tech Nation, the UK fintech has received $11.4 billion in VC funding over the past nine months – more than double the amount of 2020's total ($4.57 billion).

The first half of 2021 saw the number of the UK’s tech unicorns double, with 20 tech companies achieving the prestigious status. Out of the ​​112 tech unicorns in the UK, the largest number in Europe, 40 are part of the fintech sector. London was found to be the main fintech unicorn hub in the continent, hosting 35 of them.

However, this couldn’t have been achieved without foreign investment: almost half ($5 billion) of the investment made into UK fintech firms this year has come from US investors, with Tech Nation interpreting it as a sign of the “international appeal of some of the UK’s world-leading fintech firms”.

Tech Nation published the findings as part of its announcement of the new cohort of the latest iteration of its sector-specific growth programme for fintech entrepreneurs, Fintech 4.0.

30 companies have been accepted into the programme this year, covering areas such as insurance, investment, blockchain, and digital assets.

This includes the London-based, SME-focused trade finance marketplace Nu-Credits, and Newbury’s open banking-enabled payments-as-a-service platform Ordo.

Although the majority (60%) of inductees hail from London, Scotland and Wales were represented by cloud-based R&D accounting application WhisperClaims and order-and-pay service provider Yoello.

Katja Palovaara, fintech programme lead at Tech Nation, said the organisation is “delighted to welcome these 30 inspiring fintech companies to the Fintech 4.0 cohort”.

“As the UK’s flourishing fintech sector continues to drive more investment than ever before, our fintech companies are not just disrupting traditional financial sectors; they are working alongside them to ensure that everyone has the tools and knowledge they need to succeed financially," she said.

"Many of these fintechs are not only focused on helping people earn more and invest better, but on making the world a better and fairer place. We can’t wait to see what they do next."

Former Post Office workers who had been falsely convicted of fraud based on evidence from a faulty accounting system have had their names cleared, after over two decades of legal battles.

The subpostmasters had been convicted of theft and false accounting, based on information drawn from the Horizon software system, which had been in use by the Post Office since 1999.

The Fujitsu-developed system, used for accounting and stockpiling, was used as evidence to successfully prosecute 736 people between 2000 and 2014, out of which 42 maintained their innocence for over a decade.

It would later emerge that a system bug had produced financial shortfalls in branch accounts, resulting in unaccounted funds.

Many falsely convicted Post Office employees had their personal lives destroyed as a consequence of the convictions, having been sent to prison and denied insurance in many cases. Some have since passed away, unable to hear today’s verdict.

However, following years of legal battles, Lord Justice Holroyde at the Royal Courts of Justice in London said the Post Office "knew there were serious issues about the reliability of Horizon" and had a "clear duty to investigate" the system's flaws.

Those who have had their convictions overturned in today’s ruling are as follows: Josephine Hamilton, Hughie Thomas, Allison Henderson, Alison Hall, Gail Ward, Julian Wilson, Jacqueline McDonald, Tracy Felstead, Janet Skinner, Scott Darlington, Seema Misra, Della Robinson, Khayyam Ishaq, David Thomas Hedges, Peter Anthony Holmes, Rubina Shaheen, Damien Owen, Mohammed Rasul, Wendy Buffrey, Kashmir Gill, Barry Capon, Vijay Parekh, Lynette Hutchings, Dawn O'Connell, Carl Page, Lisa Brennan, William Graham, Siobhan Sayer, Pauline Thomson, Tim Burgess, Nicholas Clark, Margery Williams, Tahir Mahmood, Ian Warren, David Yates, Harjinder Butoy, Gillian Howard, David Blakey and Pamela Lock.

Commenting on today’s ruling, Post Office chief executive Nick Read said that he is “in no doubt about the human cost of the Post Office's past failures and the deep pain that has been caused to people affected”.

"Many of those postmasters involved have been fighting for justice for a considerable length of time and sadly there are some who are not here to see the outcome today and whose families have taken forward appeals in their memory. I am very moved by their courage. The quashing of historical convictions is a vital milestone in fully and properly addressing the past as I work to put right these wrongs as swiftly as possible and there must be compensation that reflects what has happened,” he added.

Computer Weekly originally broke the story back in 2009, and have campaigned over the past decade on behalf of the postmasters.

Due to coronavirus and resulting cash flow difficulties, many companies are likely dealing with the impact of a loss of customers and reductions to debts being paid. The smart companies are shifting their focus to developing a treasury plan for cash management to strengthen their resilience against future disruptions and uncertain economies.

Through proactively optimising the A/R process, you can prevent existing capital from going to waste and increase liquidity to future-proof your business.

Download this guide to:

• Explore the A/R process in detail
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The economic volatility of 2020 has made it a business imperative to remain agile, through a focus on liquidity and optimising working capital. Real time visibility and the monitoring of important financial KPIs, risk metrics, and customer information are all vital to driving robust decision making in receivables processing and enabling quicker business recovery from any type of disruption.

Those companies that have fared the pandemic best have had strong processes and automation that gave them a higher level of cost efficiency, speed, operational resilience, and customer relationships. This whitepaper outlines what benchmarks a company can measure themselves by throughout a recovery phase.

Download this pdf to consider:

• Key performance indicators
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Many people equate digital transformation with automation, but automation is just one part of the transformation journey, and while it’s extremely important, you have to implement it where automation is feasible and be realistic about what it can achieve.

Digital transformation, on the other hand, is the integration of technology into all areas of a business, changing how the business uses people, processes, and technology to improve business performance. This whitepaper shows how digital transformation in accounts receivable (A/R) enables businesses to move faster in a slow economy.

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Cloud-based accounting software firm Xero has acquired Waddle, a lending platform which specialises helping small businesses gain access to capital.

The transaction, valued at AU$ 80 million (around £44 million) is expected to be completed before the end of the year and is subject to satisfaction of closing conditions. According to Xero, the transaction, integration, and operating costs are expected to have minimal impact on the company’s FY21 EBITDA.

Xero CEO Steve Vamos described the Waddle acquisition as “an important step” in the company’s “strategy to help small businesses better manage cash flow and gain access to working capital”.

He added: “Waddle’s lending platform has the potential to enable a wide range of banks, fintechs and other lenders to better support small business financial needs. We’re excited about the benefits Waddle can bring to many of our customers and banking partners.”

Founded in Australia in 2014, Waddle’s lending platform service automates the manual processes involved in invoice financing, making it easier for banks and fintechs to lend to small businesses.

Although headquartered in Sydney, Waddle - which has been a Xero ecosystem partner since 2016 - currently also serves customers in the UK. Following the acquisition, it is expected to continue to offer services to customers and partners, including other accounting software providers.

The announcement comes two years after Xero acquired document management and collection software Hubdoc for £53 million. Following the acquisition, it was also announced that Hubdoc’s co-founder and CEO Jamie McDonald joined Xero’s leadership team as executive general manager of product, accounting, and global services. It is unclear whether Waddle co-founders and directors Simon Creighton and Nathan Andrews will hold any new positions within the company.

Xero offers three tiers of SaaS accounting suites targeting businesses of various sizes: Xero Starter for £10 per month, Xero Standard for £22 per month, and Xero Premium for £27.50 per month. Unlike some of its rivals, all three tiers support online VAT submission to HMRC and also offer new subscriber discounts.

For many businesses and independent IT professionals, IR35 was set to dominate this year; the expanded tax legislation was going to crack down on the use of limited companies by contractors in order to exploit tax loopholes, while simultaneously forcing organisations to pay the national insurance contributions of many of its temporary freelancers.

The ongoing coronavirus crisis has now kicked those plans into touch, with the enforcement of the new legislation pushed back until next year - but what impact will this delaying have on IT contractors and those that employ them, and how should they be preparing for when it does finally come into force in 2021?

In this week’s episode of the IT Pro Podcast, Adam and guest host Keumars Afifi-Sabet talk to James Poyser, InniAccounts CEO and founder of IR35 comparison site Offpayroll.org.uk, to find out exactly what the changes mean, and how those affected should respond.

Footnotes

News

• Xerox officially drops hostile bid for HP amid coronavirus crisis
• Zoom’s legal woes continue with class-action lawsuit in California
• Elon Musk's SpaceX bans Zoom over security fears
• Zoom admits meetings don't use end-to-end encryption
• Supreme Court rules Morrisons was not liable for 2014 data breach

In-depth

• IR35 news: COVID-19 knocks IR35 reforms into 2021
• How to pick the best cloud accounting software
• What is Making Tax Digital and how does it affect your business?
• How to choose the right accounting software for Making Tax Digital

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Large corporate targets are getting harder to breach as they often have the resources to constantly upgrade and improve their security systems. But small businesses are a growing target, with 43% of cyber attacks targeted at them as they are seen as easier to breach.

The first step to creating a safer accounting practice is to understand the common ways cybercriminals get access to sensitive information. This whitepaper focuses on what's most important for accountants, including:

• Recognising the security risks faced online, and the accountant's role in protecting sensitive information
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Barely anybody has the time, let alone the will, to bury themselves in spreadsheets or receipt books when they could be focusing on growing or even scaling up their small business. Thankfully, a handful of fantastic app-based alternatives are able to wrestle you away from much of the heavy lifting.

They promise to remove boring administrative tasks from your day-to-day workflow, which may be difficult to manage, especially while you’re on-the-go. Your handheld device, therefore, from your phone to your tablet, could come to be your saving grace, allowing you to automate administrative tasks while you’re out and about. We’ve combed through a number of UK mobile accounting apps for your iPad so you’ll never have to fret about an admin-heavy accounting workload again.

FreeAgent

FreeAgent, an app for freelancers and small businesses alike, is a piece of accounting software with everything you’d expect alongside a suite of features to manage your sums in the cloud. UK-based users can choose between four account types including UK Sole Trader, UK Partnership, UK Limited Liability Partnership and UK Limited Company, with FreeAgent automating your calculations based on your selection. The app can even be set up to process VAT information.

For sole proprietors or freelancers, meanwhile, you can manage your personal and business banking arrangements simultaneously and separately, with the software allowing for the capacity to process small business financials. These include business proposals and invoicing as well as tax estimates, in addition to integrations with PayPal and GoCardless.

FreeAgent also sports a highly-rated iOS app. Using mobileAgent, you can’t do everything you could from a computer, but you can do the most important things, like invoicing a client on-site and billing for services rendered before even starting the car to drive away. You can even keep track of real-time expenses.

FreshBooks

Of all of the apps on this list, FreshBooks boasts the highest rating in the iPhone/iPad app store.

FreshBooks was built specifically to make the day-to-day of the small business owner’s life just easier, focusing particularly on streamlining the part that’s most important to you - getting paid.

It’s built for the completely non-accounting professional, aka you.

The FreshBooks Cloud Accounting iPhone and iPad app even comes equipped with a freelancer’s favourite tool - a project manager. The app tracks billable time against project budgets, and then you can manage tasks and hours in a calendar view to see time spent by project, enabling not only you to stay better organised, but to keep track of any staff or freelancers you work with.

The iPad app also sports a robust dashboard to track income and expenses.

“When I'm in a rush or at a meeting, it's great to be able to invoice the client on the spot and walk out with a cheque,” reviewed one FreshBooks user. And if you, like me, will probably still struggle with the accounting of it all, FreshBooks will be there to help you, via UK and Irish free-phone support lines, promising to pick up within two rings...

Which accounting app is right for your small business then?

There’s no doubt about it, accounting apps take the dread out of the financial equation. With these tools balancing budgets and tracking time and expenses, hopefully you can focus on what you need to do (and want to do) and ditch those spreadsheets once and for all!

Do you think we are missing a great small business accounting app from this list? Get in touch to share your thoughts.

KashFlow

KashFlow was built for and developed around just the UK market. Loathe spreadsheets and accounting jargon? Then KashFlow may be the perfect small business accounting app for you.

The developers behind the app promise that no accounting knowledge is necessary – no numerical lingo, no complex operations, and no complicated formulas to remember.

The KashFlow developers really wanted to create the simplest, most streamlined accounting app out there, only giving you just what you need for your small business - payroll, invoicing, proposals and estimations, and plenty of third-party add-ons to allow you to pick and choose the rest of the functionalities you may need.

Most of KashFlow’s fans it for its savvy-yet-simple application of VAT. The software supports Standard VAT, the Flat Rate Scheme, Cash Accounting (as well as Cash FRS) and EC Sales Lists. VAT Returns and EC Sales lists can be filed directly to HMRC from within the software.

However, while the software is well-liked among its users, the iPhone and iPad app doesn’t have the best reviews.

Using the KashFlow app you can do everything you'd expect, including checking your bank balances, overdue invoices and purchases, adding new purchases and sales, and uploading receipt snaps, however most of the complaints on the iPhone/iPad listing say that it simply misses the mark because, while two years ago it seemed like a reasonable app, it’s fallen behind the times since, needing a huge overhaul and update.

But, if mobility isn’t as essential as ease of use, KashFlow seems like a no-brainer to us.

Nutcache

Nutcache is more focused on running an entire project-based business rather than specifically bookkeeping, but its invoicing and expense management offerings are particularly impressive.

You can track the time spent on each part of a project, which makes billing much easier and the invoicing abilities make sending out invoices super-simple, whether you already have a template you use or need to create one.

You can add your own logo and send it straight off to the client in just a few clicks, with many automated options to help them tally up with the wider accounts management, including the ability to set up recurring invoices if you invoice a client for the same work and amount every month, just with a different PO or invoice number.

If an invoice is overdue, you can easily track it from the main dashboard and if that client is consistently overdue, you’ll soon notice and can take instant action.

XeroTouch

Xero is an accounting app that’s been built in the cloud, ripping away from the common shackles of typical legacy-built accounting software. It claims the crown as the number one small business accounting software in the UK.

It's available as both iOS and Android apps and has been made with mobile-friendliness in mind, allowing you to keep track of your income and expenses no matter where you go.

The app’s simple interface allows you to see your current balances at-a-glance, as well as peek at upcoming bills and outstanding invoices. You can create, send and track the status of those invoices right from your clients’ offices.

Using XeroTouch you can snap photos of receipts and track your expenses immediately, as well as keeping track of all your varying bank accounts, credit cards and PayPal, from anywhere. XeroTouch even acts like a simplified CRM, allowing you to find contact info that you can send to your GPS.

One freelance executive assistant and self-publishing e-book author tweeted of the app, saying: “Have to say the automated bank feed into Xero just makes life so much simpler! Couple that with the fantastic reconciliation, it’s fantastic!”

Xero is known specifically for making reconciliation ultra simple as you it lines up expenses, highlighting any discrepancies. Plus, with Xero you don’t have to pay extra for your accountant to access your details when dreaded tax time rears its ugly head.

Automated tools are changing the landscapes teams work in, the role that they play in an organisation and how efficiently they operate.

Finance teams work in a high-pressured environment, and efficiency is key. Internally, teams need access to data quickly so that it can be analysed and presented to business stakeholders. The data the corporate finance team provides the organisation, fuels growth.

This whitepaper looks at how embracing digitalisation will improve finance team's accounts production processes, and why automated accounts production is the way forward for organisations.

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For the latest IR35 news, head to our hub

HMRC first rolled out IR35 legislation in April 2000 to deal with the longstanding issue of contractors establishing limited companies to avoid making the same income tax and national insurance contributions that employed workers are compelled.

Limited companies are embedded with loopholes, such as allowing directors or "employees" to be paid dividends that have lower tax rates compared to income tax. More and more IT contractors were, therefore, setting up their own companies to take advantage of these benefits and minimise costs.

IR35, however, meant that contractors who worked for an organisation regularly enough that they would be near-indistinguishable from a hired worker would be liable to pay tax and national insurance as if they were processed through the payroll. The rules first applied to contractors working in the public sector, with self-employed staff needing to declare whether or not they’d fall under the IR35 rules.

Reforms in recent years shifted that burden from contractors to employers and also paved the way for the off-payroll working rules to be extended to private sector organisations. Following several consultations, and a few delays, the rules were finally extended to apply to all private sector organisations and contractors from 6 April 2021.

Why was IR35 introduced?

With the introduction of IR35 rules, HMRC hoped to recoup the same levels of income tax and national insurance from contractors as they did from employees. Rather than demanding that contractors pay more tax directly, however, IR35 manages the relationship between the employer and the employee and requires employers to establish whether somebody working on a contractual basis should instead be deemed as being employed by that organisation.

The main argument against this equivalency is that contractors don’t benefit from the same perks as hired employees do, such as paid holiday, maternity or paternity pay, private health insurance or a pension with employer contributions. Contractors also claim that their situation is much more volatile and that their work can be terminated without notice.

When ex-chancellor Gordon Brown introduced IR35, he set out to collect an extra £200 million in National Insurance contributions per year, but only £1.5 million was recouped per year between 2002/2003 and 2007/2008, according to a Professional Contractors Group Freedom of Information (FOI) request.

More recently, the former chancellor Philip Hammond used the November 2016 Autumn Statement to announce reforms to the off-payroll working rules, also known as IR35. The organisations employing contractors, instead of the contractors themselves, would have to determine their employment status from April 2017.

"The government believes public sector bodies have a duty to ensure that those who work for them pay the right amount of tax," Hammond's statement read. "This reform will help to tackle the high levels of non-compliance with the current rules and means that those working in a similar way to employees in the public sector will pay the same taxes as employees."

Then, the government announced it would extend these reforms to the private sector, subject to a lengthy consultation period. These changes were due to take effect from April 2020 but were delayed due to the COVID-19 pandemic. They finally came into force in April 2021.

How does IR35 affect me?

According to ContractorCalculator, workers should expect to pay approximately 25% more in tax every year if their work falls under the IR35 reforms. However, roughly half of all contractors will never go full-time with a company, despite the changes, according to research conducted by tax advisor Qdos Contractor. While 95% of those surveyed believed IR35 will make being self-employed less advantageous, just 4% said they plan to switch to working directly for a company.

Whether a contractor is subject to IR35 is determined by the organisations hiring the contractor, rather than the contractor themselves. They should both, however, separately assess whether IR35 applies to the particular job or work they have been brought in to complete.

What makes things more complicated though, is that there isn't a set of formal guidelines either the organisation or the contractor can refer to in order to decide whether they should be considered an employee or a contractor. It's all down to discretions. However, if the contractor:

• Works onsite in the organisation every day
• Uses equipment provided by the organisation rather than their own
• Manages people within the organisation
• Uses employees from the organisation to work on the project

It's pretty likely they would come under the scope of IR35 and their position should be carefully examined.

HMRC does have a tool that can be used to determine the tax status of a contractor and whether they are subject to the same tax as an employee, but another report suggested it isn't that reliable, with a third of cases inputted being flagged as not a case for IR35, despite being proven otherwise in court.

"The tool states that 'HMRC will stand by the result given unless a compliance check finds the information provided isn't accurate, which is no guarantee at all, because they just have to say 'you are wrong' and it doesn't count for anything," said ContractorCalculator LooCEO Dave Chaplin at the time.

What did IR35 do to the public sector?

Perhaps more so than the private sector, government and public bodies rely heavily on IT contractors. The introduction of IR35 was predicted to lead to an exodus of contractors, with the changes met with fury when first proposed.

Public sector 'walkouts'

Expectations, when IR35 changes were being rolled out to the public sector, were that project delivery would suffer after an 'exodus' of contractors from organisations. Research suggested that in the first few months, IR35 reforms had caused a fleet of contractors to quit the public sector. Indeed, results showed that 83% considered private sector jobs to be more attractive. Moreover, nearly half of contractors said the public sector lacked the digital skills needed to complete future projects, with 62% saying organisations will suffer from the departure of self-employed workers.

"The IR35 has clearly had a huge impact and it is really worrying to see IT contractors leave the public sector in their droves," said Dominic Harvey, director of CW Jobs, at the time.

"We are now facing a perfect storm of a brain drain from the public sector, questions over future project delivery, and an increase in fees from those contractors choosing to stay put: all are a real cause for concern."

Since the reforms took shape in 2017, there has been no less derision among contractors and the wider tech sector.

Subsequent research commissioned by HMRC suggested there was some hardship felt across the public sector, with 32% of public sector bodies finding it more difficult to fill contract vacancies. Approximately a third of public sector bodies, meanwhile, said contractors were less willing to carry out work for them since the reforms were introduced. Alarmingly, 60% of central government bodies reported that their staff had spent more time on administration since the reforms.

Government 'doesn't understand' impact of IR35 enforcement

In March 2018, critics leapt on comments made by the Treasury's financial secretary regarding IR35, claiming they show that the government simply did not understand the true impact of IR35 on the UK's two million independent workers.

In response to a question directed at former chancellor Philip Hammond regarding the effect IR35 reform has had on UK small businesses, Mel Stride MP said: "The off-payroll working rules (sometimes known as IR35), do not affect small business owners who are genuinely self-employed."

Qdos Contactor's CEO, Maley, said that this was another example of the government's "total lack of understanding on the impact IR35 reform has had and continues to have, on genuinely self-employed contractors".

"In theory, IR35 shouldn't affect the genuinely self-employed, but in reality, it's a different story altogether," he claimed. Maley added that following public sector reform last year, a number of organisations, including the NHS, made blanket decisions placing their entire contractor workforce inside IR35 to protect their liability.

"This, along with many inaccurate IR35 decisions, placed many genuinely self-employed contractors inside IR35, resulting in the workers paying similar taxes to employees, but without any of the benefits," he said. "The Treasury's attitude towards IR35 is short-sighted - a real concern given private sector reform increasingly looks on the cards."

Incorrect IR35 decisions

IR35 complexity has led HMRC to wrongfully tell self-employed contractors the rules did not apply to them, according to a trade body for umbrella companies.

PRISM said it has identified dozen-plus incidents in which HMRC made the wrong decision due to the alleged complexity of the tax rules, which public sector bodies must enforce on their contractor workforces.

"This is the most recent change to the tax legislation affecting contractors and the mistakes being made by HMRC are causing confusion and further tensions across the market," said Crawford Temple, CEO of PRISM.

"This is more evidence, if any were needed, that the whole system of tax and employment legislation is too complicated for people to understand."

Additionally, the Freelancer and Contractor Services Association (FCSA) said HMRC's software is proving an obstacle for contractors trying to submit online tax returns, as it cannot compute how the dividend tax allowance impacts other tax allowances.

Julia Kermode, FCSA's chief executive, said: "Once again the UK's smallest businesses are being hindered and it appears that HMRC has no intention of resolving the software issue."

Justifying the expansion of IR35

One reason why the government is so adamant in pushing through private sector reforms, extending the rule changes from applying to just the public sector, could lie in the immediate changes that occurred.

The public sector was generally a less attractive place for contractors to work, with many tech workers not enthused by the prospective loss of revenue that would occur from taking up public sector work. Of course, extending the rule change to both spheres would eliminate this as a factor entirely, and perhaps negate some of the effects on public sector recruitment.

The government ran two consultations in 2019 on the extent to which it will extend the reforms to the private sector, and earmarked April 2020 as the date by which contractors and employers must abide by the rule change. The results of the second consultation can be seen here.

The government said at the time that not extending the IR35 reforms to the private sector would cost the Treasury £1.3 billion in lost revenue, however, as the public sector reforms show, the figure recouped will likely be lower than this.

Concerns raised by the House of Lords

On 22 April 2020, the House of Lords wrote a letter to the Treasury with a list of concerns it has regarding the rollout of the IR35 tax legislation.

The letter was written by the chair of the Finance Bill Sub-Committee Lord Forsyth of Drumlean and addresses such issues as non-compliant umbrella companies, the reliability of the Check Employment Status for Tax (CEST) tool, and the success of the 2017 introduction of IR35 reforms to the public sector. The letter also touches upon the uncertain economic situation due to the coronavirus lockdown.

“Contractors have told us that the coronavirus pandemic means that they do not expect to win new business in the next few months. How will the government support these people? Will they be compensated for any business lost because companies terminated contracts in anticipation of the implementation of the new rules in April 2020?” wrote Lord Forsyth.

“What assessment has the government made of whether those engagers with contractors who are treated as employees for tax purposes but not for employment rights will cancel contracts rather than keep contractors on under the COVID-19 job retention scheme? If such contractors have been using PAYE, will they be able to benefit from any measures that the government puts in place to protect self-employed people during the coronavirus outbreak?”

The reforms, nevertheless, came into force from 6 April 2021, although businesses and contractors will benefit from a 12-month grace period, during which time HMRC will take a "light touch" approach to IR35 enforcement. They should expect tougher action against those who violate the IR35 rules from April 2022.

Regular readers will understand the power of the cloud to streamline and simplify their business processes, and accounting department work is one of the many areas that stand to benefit from the technology. Businesses both big and small can benefit from the various cloud accounting software solutions available, which allow accounts to be processed without the need to repeatedly buy expensive licenses for on-premises packages that require frequent patching and updating.

And it almost goes without saying at this point that cloud-based software that can be used and maintained remotely and on a variety of devices will help your accounting department to better work and collaborate with the minimum of disruption during this time when most of us are working remotely and on-prem solutions are becoming increasingly difficult for dispersed workforces to manage.

There are many different services to choose from, and it can be challenging to identify which cloud accounting software will be the best for your business. To help you make the right choice, we have broken down some of the key things to consider – including how cloud software can assist with the Making Tax Digital initiative – and some of the best options that are available.

How much does cloud accounting software cost?

For microbusinesses and SMBs, cloud accounting software is a blessing. Most providers have tiered offerings with prices based on criteria such as the number of users or the amount of data you process.

For example, Xero's base level plan is 10 per month, allowing you to send five invoices and quotes, enter five bills and reconcile 20 bank transactions each month.

Zoho Books, meanwhile, has an entry-level tier that costs 6 per month, allows two users, five automated workflows and 50 contacts, as well as Bank reconciliation, custom invoices, expense tracking, projects and timesheets, recurring transactions and sales approval.

Most providers also offer a free trial period, which may help you make up your mind as to which service to choose - just don't forget to cancel before the time's up if you decide it's not for you!

Does cloud accounting software replace normal accounting software?

Yes. Cloud accounting software is a standalone product and doesn't require you to keep any software you have already.

There are several advantages to this type of software versus normal buy-once products too. First, you can scale up or down to fit the needs of your business - as you grow, you can move up tiers depending on your needs. Or, should you need to scale back, you can move back down tiers too.

Second, you don't need to create independent backups of your data. The beauty of the cloud is that everything is stored off site with redundancy built-in. So if all your computers suffer from a ransomware infection, for example, or the building you work from floods and your IT hardware is destroyed, at least your accounts will be safely held off-site.

Third, if you decide the service you've chosen isn't right for you then you can move over to a different one without the burden of knowing you've sunk a lot of money into your initial purchase and will have to do so again, as is the case with traditional software.

Does cloud accounting software replace my accountant?

No. Cloud accounting software helps you manage your accounting workflow and keep track of transactions. A professional accountant helps you make sense of all this information and make sure it's all in order before you submit it to the tax authorities or take it to your bank if you're seeking a business loan, for example. So it's best for you to retain the services of the person who deals with your accounts now, as you would with any other accounting software.

Is cloud accounting software good for larger businesses?

That largely depends on how large your business is and how many users you would like to add. Some offerings cap out at around a dozen users even on the most expensive plan, which might not be enough for a large business, or even organisations sitting at the top end of medium-sized.

Other products, however, offer unlimited users, although they may have other limitations that make them unsuitable for your needs. Whatever size business you are, it pays to shop around, but this is especially the case for bigger organisations.

Will cloud accounting software help with Making Tax Digital?

It can do. Making Tax Digital (MTD) is the government's initiative to modernise the way businesses submit their tax records. It wants to move all tax filing - including VAT, Corporation Tax and Self-Assessment - to electronic systems by early 2020. This means that whatever the size of your business, from micro through to enterprise, MTD is something you will need to get to grips with sooner rather than later.

Some services pitch themselves as being "MTD-ready", especially at the top tier, but it's worth familiarising yourself with the requirements of Making Tax Digital, if you aren't already. Take into account what each product offers, how comfortable you are with the needs of MTD and how helpful (or convenient) something that's MTD-ready will be for you.

More information on Making Tax Digital can be found in our guide to MTD preparation, but it's worth speaking to your accountant to work out what's best for your individual business needs.

Which is the best cloud accounting software for me?

As alluded to above, this will largely depend on your situation. Consider your needs - not only things like the number of users you have or the number of contacts you can add, but also what you can really afford. Remember, as your business grows you can always move up a tier to unlock those extra bells and whistles that were a nice-to-have but are now more necessary to your operations.

To help you make your decision, check out IT Pro's reviews of some of the major cloud accounting software offerings, including details on pricing, features and configuration.

• Zoho Books review: Everything but the kitchen sink
• Sage Accounting review: A capable but imperfect accounts package
• FreeAgent review: Financial software you can count on
• Intuit QuickBooks review: Quick to impress
• Xero review: Xero to (almost) hero
• FreshBooks review: Slick, but shallow

HMRC's new Making Tax Digital scheme came into effect on April 1, which means that all subsequent filings from VAT-registered businesses in the UK must use accounting software or a bridging tool to file online via the MTD portal, as well as keeping compliant records of VAT transactions.

The easiest way to ensure that you're compliant is by using online accounting software to ensure that your books are kept correctly, automatically track VAT in your transactions and which, once linked to your MTD account, allows you to make your monthly or quarterly VAT returns in a couple of clicks.

Here, we've highlighted some of the best MTD-compliant accounting suites for small and medium businesses in the UK, between them suited to a wide range of budgets and requirements.

Intuit Quickbooks

QuickBooks is an absolutely top-notch accounting suite, with features that include time tracking and full payroll with support for PAYE income tax and deductions for staff, billed at £1 per employee per month.

Bank accounts can be linked for automatic syncing or, with a bit of fiddling, added to your Chart of Accounts by hand so you can manually upload statements. It's extremely polished and comfortable to use, with one of the best web interfaces we've seen in an online accounting suite and a similarly efficient mobile app.

Note, though, that QuickBooks' entry-level £8 per month Self-Employed tier doesn't support MTD VAT filing and its higher tiers don't support self-assessment. This means that Quickbooks is a better choice for bigger SMEs, while sole traders and freelancers should look at alternatives such as FreeAgent.

Charities and rights organisations should also be aware that there's a cloud over Intuit's ethical credentials due to its US lobbying efforts to keep the government from allowing private citizens to file personal taxes online without the use of commercial software such as their own TurboTax product.

Price when reviewed

QuickBooks Essentials: £15 per month (exc VAT)

QuickBooks Plus: £22.50 per month (exc VAT)

Read our full Intuit QuickBooks review for more information.

FreeAgent

Unlike some services, which restrict the number of clients or invoices you can work with at cheaper tiers, FreeAgent's UK subscription tiers give you everything your businesses can legally take advantage of, with no other restrictions. Its interface and documentation are also excellent and we were very pleased to find that FreeAgent, almost uniquely, uses UK data centres.

Thanks to integrated self-assessment submissions, it's extremely well suited to sole traders and freelancers, whether in service or sales-based industries, while its tier for limited companies includes full real-time payroll filing and PAYE support.

Other features include project and time management, bank account linking and manual account and statement tracking for transaction reconciliation, multicurrency support across all tiers and a detailed automated reminder system for overdue invoices.

Its pay-monthly price is a little more expensive than rivals such as FreshBooks and QuickBooks but, for VAT-registered small businesses, the features FreeAgent provides mean that you'll never outgrow your accounting software and you won't have to pay for extra bolt-ons.

Price when reviewed

Sole Traders: £19 per month (exc VAT)

Partnerships: £24 per month (exc VAT)

Limited companies: £29 per month (exc VAT)

Read our full FreeAgent review for more information.

Zoho Books

A wealth of features at even lower subscription tiers, along with the already-great value pricing, makes Zoho Books a very worthwhile choice for small businesses on a budget.

It provides an excellent set of tools for managing your business's incomings, outgoings and VAT. Its top Professional tier is particularly good for sales-oriented businesses that need inventory tracking. Multicurrency support, time tracking and MTD-compliant VAT returns are present at all tiers. The only major downside is that it doesn't have any kind of payroll facility - you'll have to rely on third party software or services for this.

Its entry-level Basic tier is limited to 50 contacts - customers or suppliers - but includes both bank linking and manual statement upload for transaction reconciliation, custom invoices, expense tracking, projects and timesheet. The Standard tier increases your contact limit to 500 and adds support for more automated workflows and modules, plus the ability to log bills, issue vendor credits, use reporting tags, require purchase approval and receive SMS notifications.

The top end Professional tier has unlimited contacts,10 user seats, purchase and sales order, an inventory for basic stock control and support for a custom domain name.

Its interface is a little more complex than some of its rivals, but Zoho Books doesn't skimp on features. If you can do without integrated payroll, this one of the most cost-effective ways to track your finances and make sure you're MTD-compliant.

Price when reviewed:

Zoho Books Basic: £5 per month (exc VAT)

Zoho Books Standard: £10 per month (exc VAT)

Zoho Books Professional: £15 per month (exc VAT)

Read our full Zoho Books review for more information.

New Zealand-based cloud accounting specialist Xero is geared up to support HMRC's new Making Tax Digital VAT payment scheme - which becomes mandatory for all UK businesses with turnover above the 85,000 VAT registration threshold from the 1 April 2019.

Xero is among the more expensive SaaS accounting suites around, with three tiers targeting businesses of various sizes. Xero Starter costs 10 per month as standard but severely limits the number of transactions you can process every month: you can send just 5 invoices, enter 5 bills and reconcile 20 bank transactions. This means that it's only suitable for the very smallest of businesses.

Priced at 22 per month, Xero Standard removes those limits, while for 27.50 per month, Xero Premium adds multicurrency support for SMEs that do business overseas. New subscriber discounts are frequently available for all tiers.

Unlike some of Xero's rivals, all three tiers support online VAT submission to HMRC. Bolt-on features are also available at levels, including Payroll at 1 per employee per month, Projects at 5 per user per month and Expenses at 2.50 a month for each user. You can invite your accountant to access your books, and any bolt on service that you want to add, free of charge.

Xero review: Getting started

When you sign up to Xero, you're prompted to add a few details about your company and then taken to the main dashboard, where a guided setup wizard awaits you.

You're asked a few simple questions to configure your financial year, whether you want to stick with Xero's default chart of accounts categories or import your own from a previous accounting suite, and are invited to connect your bank to directly import transactions.

The Add Bank Accounts screen - also available via the Bank accounts screen in Xero's Accounting menu - allows you to connect accounts from a large number of financial institutions that do business in the UK, including PayPal and both business and personal services from the usual high street banks.

However, although a number of online-only banks such as Revolut, TransferWise and HSBC's well-established First Direct are represented, some of the current wave of digital challenger banks don't appear. ING, Monzo, and Shine are among those currently missing, as are foreign banks.

If your account uses two-factor authentication, you'll have to generate a login code every time you sync its transactions with Xero. Otherwise, they'll be synced automatically every day. If your bank doesn't come up when you search Xero's list, you can just select "Add it anyway", enter your sort code and account number, and manually upload your statements in CSV format.

If you have a foreign bank account, you'll have to extract the account number and sort code from its IBAN to set it up, after which you can just upload statements as for any other non-connected account.

With your accounts added, you're next prompted to enter your balances as they were on the date that you want Xero to work from - the beginning of the current month by default. For foreign currency accounts, you'll have to - slightly obtusely - double-click on the balance field and then add both the balance and confirm the exchange rate you wish to use.

Once you've imported some bank transactions, Xero's tutorial wizard sends you to reconcile them: match them up to your expenses and invoice payments. Unlike some rivals, such as QuickBooks, Xero doesn't try to automatically classify transactions based on their description or the company involved, which means that your first reconciliation could be quite time-consuming.

Xero review: Invoicing

The next stop on the guided set-up process is particularly useful: adding unpaid invoices and bills to pay. This is an important step when moving your business to any new accounting suite, but it's nice to have it made explicit. To complete the invoices, you'll also need to enter your organisation's contact details as prompted.

You can either enter all your outstanding invoices manually or download a CSV template to help you upload them en mass. To help balance your books, you should also add any invoices that have been paid within the period covered by the bank transactions you imported earlier.

Note that, when using the template, you have to enter a unit number and amount for each invoice rather than simply entering the total in order for the import to complete. While you can conveniently opt to save imported client details when doing a bulk invoice import, if you're going to create your initial invoices manually, you should set up your Contacts and invoice template - in your Organisation settings - before.

Helpfully, Xero also provides a free portal that your customers can use to view and even pay their invoices immediately via PayPal.

Xero review: Staff, payroll and tax

If you have employees, you'll be prompted to add them and set up your payroll accounts towards the end of the guided account configuration process - Xero Payroll costs 1 per employee with a minimum fee of 5 per month.

Once you've entered each staff member's basic data - name, date of birth, address and binary gender - you're prompted to fill out a standard range of information, from employee number, start date, NI number and national holiday group before you can go about setting up their tax and pension data.

Xero can help you calculate and submit PAYE tax, national insurance contributions and pension filings in the process of managing and paying your staff. There's a full range of human resources options here, including a request system for time off, complete with support for statutory shared parental leave.

When it comes to VAT, Xero will automatically put together your return based on your month's transactions and, at the click of a button, file it with HMRC.

Xero review: Time, inventory and expenses

Once you've created a payroll calendar for your employees, they can submit timesheets that can be used to calculate pay and integrated into optional project management systems. Xero also supports inventory tracking; you can monitor stock levels of items you buy and sell automatically as you enter bills for your purchases and invoice customers for your sales.

There's a full expenses system - a bolt-on feature charged at 2.50 per user per month - which allows your staff to easily submit claims. You can set it up to use Xero's receipt analysis, where staff take photos of receipts for their expenses and these are sent back to Xero for automatic analysis. Alternatively, if you'd rather not have the processing done on Xero's end, you and your staff can enter the information manually.

As with most online services, there's an app marketplace, featuring a range of free and paid-for tools to help you connect to third party services, including payment providers, CRM, timesheet and project management tools. You can also connect other Xero services, notably Projects and WorkFlowMax for project management.

Xero review: Interface

While Xero's main dashboard and menus are clear, as are some of its overview pages such as the Payroll interface, many of its configuration pages look a little outdated due to tiny fonts and text entry areas. They're not particularly comfortable to work with on a standard 1080p monitor, let alone higher-resolution displays.

Elsewhere, we found visible raw HTML code visible in an inventory tracking sheet. Another problem is the service's use of Flash - long depreciated and disabled by default in most browsers - to produce graphs and charts for its sales summary reports.

By comparison, the Xero mobile app looks great and is really easy to use. It doesn't give you access all the features of the web app, but provides you with key tools to monitor your business's financial health, add contacts, record bills and receipts and create quotes and invoices on the move.

Xero also runs free webinar tutorial sessions that you can sign up for, covering everything from linking your bank accounts to HMRC's new Making Tax Digital scheme and how it works with the software.

Xero review: Verdict

Xero is a solid and reliable accounting tool - if not always a particularly attractive one, largely due to inconsistent formatting that sometimes looks a little poor on modern displays. We liked the attention to detail in the guided setup process, as well as the integrated inventory system, although Payroll is a bolt-on extra.

Xero among the more expensive accounting tools you could subscribe to: it costs more than Sage and includes fewer quality-of-life flourishes than comparably-priced rival Quickbooks. The Starter plan is particularly limited by an improbably low allowance of monthly invoices.

Xero's good at what it does, and is particularly well tailored to sales-oriented businesses that need basic stock management built in, but it's not our favourite cloud-based accounting solution.

Verdict

Xero is very capable, with a wide range of features and excellent support. However, its top subscription tier is among the more expensive you'll find and its interface feels a little old-fashioned due to small font sizes and the use of Flash for some graphs.

Intuit's QuickBooks cloud-based accounting software is a well-regarded industry leader, and it's keeping up the with times by supporting HMRC's Making Tax Digital (MTD) scheme: the new portal that all UK businesses with turnover above the 85,000 VAT registration threshold will have to use from April 2019.

There are three different QuickBooks subscription tiers, which between them cover the needs of most small-to-medium businesses. At the entry level, with a standard price of just 8 per month, the Self-Employed tier includes a selection of tools especially built for contractors, such as integration with HRMC's tax self-assessment support, mileage deductions and the ability to separate personal and business transactions from imported banking information. It doesn't support either MTD or multiple currencies, which could be a problem for self-employed people with a high turnover or international customers.

However, in this review, we're focusing on larger small-to-medium enterprises, which means we'll be looking at the higher tiers, which are compatible with Making Tax Digital. These are QuickBooks Essentials, with up to three registered users and a standard price of 18 per month, and QuickBooks Plus, with gives you five user seats and is priced at 27 per month (outside of special offer periods).

As well as MTD support for calculating and filing VAT, both of QuickBooks' higher tiers provide bill and payment management, multi-currency support, employee time tracking and payroll. All tiers allow you to invite your accountant to access your books free of charge.

Like many international Software-as-a-Service providers, Intuit's main data centres are located in the USA, covered by the EU-US Privacy Shield data export framework.

Intuit QuickBooks review: Setup and navigation

QuickBooks gently guides you through setting up your account, inviting you to submit details of your company and select the features you think you'll need - from construction industry tax tracking to retail sales management.

With that done, you're presented with the services' main interface, along with some suggestions to help you get started. These allow you to invite your accountant to access your account, set up your invoices, connect your bank, customise your profile and set up VAT. If you want to track time - useful in professions ranging from law to editing to technical support - you're also invited to add the TSheets module to your account.

After you've configured everything, the QuickBooks Dashboard provides an at-a-glance overview of the state of your finances, including invoices due, your total expenses, sales charges and a profit and loss overview.

Key features are available from everywhere in the QuickBooks web app. At the top right of the interface, a plus sign gives you quick access to the creation interfaces for all kinds of invoices, reminder, receipts, timesheets, deposits and more. A help button at top right can connect you to both detailed tutorials and human support.

Intuit QuickBooks review: Customisation

There are loads of options to set up your account the way your business needs it, available in the Account and Settings options - your company name at the top of the page takes you there with a single click. In the Sales tab, you can change your invoicing terms, add shipping data, set a custom invoice numbering scheme and enable stock tracking - for QuickBooks Plus customers.

Here, you can upload a logo, update your contact details, company type, tax number and Companies House Registration Number. All this is automatically put onto your invoices.

Via the Banking tab, you can import data from your bank accounts in a number of different ways. The most convenient is via QuickBooks' account connection feature, which automatically links up with your bank account.

Most major UK, European and US banks are represented, including a number of digital challenger banks, although some of the most recent, such as Shine and TransferWise, aren't yet supported.

This includes personal accounts, even in QuickBooks' Essential and Plus tiers, which could be useful for VAT-registered sole traders or those in the process of moving to limited company status with legacy bank accounts to keep track of. However, if you use two-factor authentication for your account, you'll have to manually log in every time to import transactions.

Accounts without 2FA can automatically feed their transaction data into QuickBooks once you've set up the link. To connect banks that operate in foreign currencies, you'll first have to enable multicurrency mode in your Company Settings' Advanced tab.

If your bank isn't supported, you'll have to manually add your account and import transactions. You can do this in the Accounting section, by opening up your Chart of Accounts, clicking the New button on the right and entering your bank's relevant details.

To add transactions, you'll have to download them in CSV, QFX, QBO or OFX format from your bank. With that file to hand, you can go to the banking tab, select File Upload from the pull-down on the Update button, choose the relevant file and follow clear instructions to appropriately configure your transactions for QuickBooks. Once that's done, the account appears under Banking so you can easily go through your transactions.

This was by far the fiddliest part of the QuickBooks experience, and we'd appreciate a clearer account setup path for both unlisted banks and users who'd just rather not directly connect their bank account and prefer manual file uploads.

Intuit QuickBooks review: Doing business

With your accounts set up and your transactions imported, you're prompted to review and reconcile your bank transactions. QuickBooks makes a good stab at categorising content, particularly when you deal with well-known companies such as Google, but you'll probably want to add some new categories and manually assign smaller clients and businesses to an appropriate category.

To make this easier for future transaction reconciliation, you can create rules from your choices, so for example, you can set all payments to your ISP to be automatically categorised as telecoms expenses and put into the correct VAT category.

Once you've created some invoices, you'll also be able to reconcile incoming payments against money due from your clients. You can also import invoices - along with bills, bank data, client and supplier contact information, your chart of accounts and more, via QuickBook's Import Data features. Template files are provided to make the process as painless as possible and you can also import contacts from a Gmail or G-Suite account.

You're prompted to customise your invoices early on, thanks to the guided setup process. You can choose from a number of different invoice templates and tweak your fonts, colours and logo size, as well as optional elements such as a detailed VAT summary, deposits and discounts. You can also configure how invoice emails to your client will look and set up PayPal as your online payments processor to prompt rapid payment.

We were particularly impressed by QuickBooks's clear differentiation between products and services when it came to creating new items in our invoices, which makes it particularly well suited to the needs of service industry businesses.

Intuit QuickBooks review: Scaleable features

Both the QuickBooks Essentials and Plus tiers have full payroll features, including automatic tax and employer's pension contribution calculations for convenient submission to HMRC.

There are two different payroll options, which both cost 1 per paid employee, per month, but provide different features. QuickBooks Payroll is the simplest of these, including a single payment schedule - monthly or weekly - for all staff, a single auto-enrollment pension plan and automatic payroll data submission to HMRC.

The alternative PaySuite module requires a bit more hands-on management, but supports multiple payment schedules and pension plans, court-ordered salary deductions, and salary sacrifice schemes for pensions, give as you earn, cycle to work and more.

TSheets Time Tracking is an external Intuit product, for which you'll need to set up a separate account, but which integrates seamlessly with QuickBooks. It's free for a single user but additional TSheets user accounts are billed separately or as a block, so bear that in mind if you want to allow staff to track their own time. Features include payroll, billing, scheduling and project management support.

QuickBooks also provides a library of free and paid-for add-on apps and modules that give you extra features or allow you to conveniently connect third-party services. These include payment providers, online storefronts, planning and CRM suites.

There's a TSheets mobile app to help you and your staff track time, as well as both Android and iOS apps for QuickBooks itself, with different versions of self-assessment registered self-employed users and VAT-registered small businesses. These provide access to a wide range of features, allowing you to generate invoices, photograph receipts and keep on top of your business on the move.

Live and on-demand educational webinars are available to help you learn your way around QuickBooks, covering both general training and specific topics such as how to work with Making Tax Digital.

Intuit QuickBooks review: Verdict

QuickBooks is incredibly polished and comfortable to use. It has one of the best interfaces we've seen in an online accounting suite, doesn't provide any unexpected surprises and has a wealth of features, many of which you can neatly hide away if you don't need them.

We were slightly frustrated by the process of manually adding bank accounts without an online link and would prefer a clearer path and more complete documentation to help with this. Similarly, we'd have liked more options to mix-and-match features such as sole trade self-assessment support, MTD and multicurrency features. UK data centres would also have been a plus.

QuickBooks is nonetheless an absolutely top-notch accounting suite. The higher tiers are expensive, but the service's ease of use and broad range of features make it an excellent investment, and six-month discount offers are frequently available to new subscribers.

Verdict

QuickBooks packs in loads of features, has optional payroll charged per employee rather than in blocks, and a huge library of modules and extensiosn to connect third party services. The real stand-out feature here is a user interface that both looks polished and is very clear to use. It's not the cheapest accounting suite out there, but it's certainly one of the best.

Cloud-based accounts are increasing in popularity and there are many services from which to choose from. While a lot of these are US-based, there are some from the UK and further afield.

Choosing the right cloud-based accounts software for you is not an easy task. The capabilities vary greatly from company to company. Some target the sole proprietor, freelancer or contractor while others aim to be a one-stop shop for SMEs

Some offer ancillary services such as expense tracking, invoicing, and even human resources functionalities.

We look at the options available in cloud-based accounts software.

Wave Accounting

URL: https://www.waveapps.com/

Price: From free

Wave Accounting has been designed for micro businesses - those with ten employees or less and as such, it's been designed to fit in with very small budgets. The basic version is completely free and that includes more premium features that other accounting apps charge for. For example, double entry accounting is supported in the free version - a service you normally have to pay for when using Wave Accounting's rivals.

If you want people to be able to pay you online, you'll have to pay fees to the company and this is how it makes its money. You can also add on extra modules, including the ability to manage payroll for $20-$34 a month, although this feature is only reserved for US-based companies at the moment.

Wave's user experience is really top notch, with an easy to use app across all devices. It also supports multiple currencies, so if you're paid in dollars but want to account in pound sterling, you can do so.

Like other accounting apps for small businesses, you can use Wave Accounting for your entire accounting process, including invoicing, linking your bank and PayPal account to import transactions automatically and generating reports.

Sage One

URL: http://uk.sageone.com/

Price: Cashbook: £5 per month; Accounts: £10 per month; Payroll: from £5 a month

Sage is well known in the UK for its accountancy software and Sage One is its foray into the cloud.

It offers a number of packages aimed at the sole trader up to the larger SMB. Sage One Cashbooks costs £5 per month and has a simple graphical interface for entering income and expenses. This is aimed at sole traders and cash-based businesses.

Sage One Accounting has features aimed at larger businesses and costs £10 per month. This package supports multiple currencies, can raise and send invoices, track quotes as well as manage and submit VAT returns.

The interface makes it easy to use and is logically laid out. You don’t particularly need knowledge of the previous software versions to figure out how to use this.

QuickBooks Online

URL: http://www.intuit.co.uk/

Price: Self-employed package costs £4.80; Simple Start is £5.60 per month; Essentials costs £10.50 a month; Plus package costs £15

QuickBooks Online has offerings aimed at different types and sizes of business. It sports a colourful dashboard and users can quickly get up to speed entering details such as suppliers, creditor, expenses and invoicing.

The service will tailor itself to the industry you work in and the welcome guide helps in sorting out any queries you might have in using the service.

It supports a number of third-party apps to extend its usefulness. Support for online payment services PayPal and Stripe are built-in.

FreshBooks

URL: www.freshbooks.com

Price: Sprout costs $14.95 per month; Seedling costs $24.95 per month

This online accounts software is aimed at small businesses and comes in a range of packages to suit users with differing numbers of billable clients.

The service offers step-by-step guides to get users up and running. There are also online videos to show things in more detail, such as invoicing.

Clients can be important via CSV and vCard formats and can import from QuickBooks.

It can also send recurring invoices, create credit notes for advance payments and overpayments, and review all the invoices created.

It also has mobile apps that include a time tracker to log billable hours as well as the ability to create invoices and estimates while with clients in the field.

Xero Premium

URL: https://www.xero.com/uk/

Price: Starter: £4.50; Standard: £10 per month; Premium: £12.50

Offering a complete package for small businesses, Xero offers plenty of information about accounting and allows external accountants access to your books.

The Starter version allows users to create and send five invoices, so most firms will go for the Standard version or Premium version. The Premium version is necessary if you do business internationally.

It includes live bank feeds via Yodlee, mobile apps for iOS and Android, and integration with a wide range of external applications and services.

There is also an add-on directory featuring over 350 services and applications that work with Xero.

Kashflow

URL: https://www.kashflow.com/

Price: Starter edition: £5.00 per month; Business edition: £10.00 per month; Business and Payroll: £15.00 per month

Quite possibly the only cloud-based accounting package started by a former drug dealer, Kashflow should not be overlooked. The firm was bought out by Iris a few years back and has gone from strength to strength.

As well as services for SMEs there are also packages aimed at accountants. The interface is simple but possibly dated as the package has added few features in the intervening years.

That said the loyal fanbase loves the package and it is easy to set up. There is guidance whenever a user accesses a new part of the service for the first time.

It integrates with more than 40 add-ons and 17 payment processors (such as PayPal, Shopify and Salesforce).

FreeAgent

URL: http://www.freeagent.com/

Pricing: Sole Trader: £19 per month; Partnership: £24 per month; Limited Company: £29 per month

The UK-based service has grown beyond these shores and now offers US and Universal packages for those wanting to do accounts anywhere in the world.

It sports a simple, jargon-free interface that will appeal to freelancers and small businesses. The service allows access to unlimited number of users, both inside and outside of your organisation. FreeAgent settings allow you to customize each user’s access level.

It boasts excellent support for filling out the dreaded tax return and makes it easy to not only send invoices but also keep track of payments and reporting income and expenses.

Crunch

URL: www.crunch.co.uk

Pricing: Standard: £64.50 per month; Plus: £96.50 per month; Premium: £126.50 per month

Crunch is not just a cloud-based accounting package, there is also a fully-fledged accountancy firm behind the scenes as well. This means (as you can probably guess) that you can get access to real-life accountants for the not insubstantial monthly fee.

The standard service offers the basics such as accounting, VAT, year-end accounting and directors' payroll. The Plus service adds employee payroll, IR35, secure bank feeds, filing of annual returns and self-assessment. The Premium includes bookkeeping.

The interface is tabbed with different sections and signing lands you on the home page, which is a dashboard that gives you an overview of important information about your firm.

As mentioned earlier, there are a host of accountants that are there to help out if you need anything and will oversee your accounts too.

Xero's subscriber base has risen by 60% year-on-year in the last 12 months with its worldwide subscribers hitting more than a million and making it one of the cmost successful cloud accounting platforms in Europe.

In fact, the company added 79,000 subscribers in the UK over the year, taking its total user base to 212,000.

The company has managed to cut its overheads by decreasing the amount spent on sales and marketing, reducing cash outflow to NZ$4.4 million (£2.34 million), while subscription revenues increased by a whopping 44% to NZ$290 million (£154 million) in the 12 months. Overall revenues were up 43% compared to 2016, the company revealed.

“It has been a milestone year for Xero, achieving operating cash flow break-even in the second half of the financial year, and doubling subscriber numbers in less than two years to pass the one million subscriber mark, while completing our major re-platform to Amazon Web Services," Xero's CEO Rod Drury said.

"We continue to recruit exceptional talent, and I’m proud our team has executed on all fronts to again achieve strong results for this financial year and build new foundations for additional waves of growth in the future.”

The next chapter in Xero's story will focus on developing new technologies to automate parts of its core platform. To do this, it will focus on producing predictive software using machine learning and the data it already holds about its customers.

“Recording more than $1.4 trillion worth of incoming and outgoing transactions in the last year, Xero manages a unique global graph of business transactions, enabling the development of machine learning to create new experiences for small businesses," Drury said.

"We believe the application of machine learning and AI to accounting will unlock significant productivity for our accountants, bookkeepers and small business customers."

An Oracle employee who claimed the company was falsifying accounts to make its cloud business look better has been sacked and now faces legal action against her lodged by the company.

Svetlana Blackburn said upper management were trying to force her to change the numbers to make its performance specifically related to Oracle's cloud services operation look better than it was.

She said she was expected to add millions of dollars of extra revenues for their expected business "with no concrete or foreseeable billing to support the numbers," while she claimed other executives decided to take matters into their own hands, adding falsified accruals to the accounts.

Following the claims, Blackburn was sacked by Oracle, despite her receiving a positive performance review just two months before. However, Oracle has claimed she was generating incorrect reports herself to impress her superiors, rather than doing it in response to pressure from the management.

Now Blackburn is trying to sue Oracle for unfair dismissal, while also saying the company violated the anti-retaliation provisions of the federal Sarbanes-Oxley corporate governance and Dodd-Frank financial reform laws. She's demanding the company pays her punitive damages, double back pay, and other remunerations.

However, Oracle is telling a different side of the story and intend to sue her in response.

"We are confident that all our cloud accounting is proper and correct," Deborah Hellinger, Head of Global Corporate Communications at Oracle told IT Pro.

"This former employee worked at Oracle for less than a year and did not work in the accounting group. She was terminated for poor performance and we intend to sue her for malicious prosecution."

07/12/2015: Toshiba could face a fine of $60 million (39 million) after committing accounting fraud that misrepresented its financial health by more than a billion dollars.

Over a period of seven years, the Japanese tech giant claimed its profits were $1.3 billion higher than they really were.

As a result, Japan's Securities and Exchange Surveillance Commission has recommended the $60 million penalty to the country's Financial Services Agency (FSA). It would be the largest accounting violations fine in Japan's history.

Toshiba has already set aside 8.4 billion Yen ($68 million) to pay such a fine, which would have to be approved by the FSA, but it comes as 50 shareholders filed a lawsuit today demanding $2.45 million damages from the company, three former CEOs and two former CFOs.

They are pursuing the claim because Toshiba's share value dropped dramatically after the scandal came out, declining 40 per cent since April.

It comes after the company revealed $318 million losses for the year to March 2015 after it was expected to post a 1.2 billion profit.

07/09/2015: Toshiba has posted losses of $318 million and drastically reduced its earnings for the past seven years after a scandal in which it was found to have overstated years of profit-making.

The announcement has been delayed repeatedly after numerous disclosures of far-reaching irregularities in its accounting, amounting to $1.3 billion of overstated profits over seven years.

The 140-year-old firm said its annual loss for the year to March 2015 stands at $318 million, a catastrophic outcome after experts had predicted a 1.2 billion annual profit.

Toshiba's president and vice-president left the company earlier in July after an independent panel found the company had overstated profits for the past six years, around triple an initial estimate from the company.

The firm was forced to issue an apology and said it will now move to avoid further irregularities in its accounting procedures.

Toshiba said that while the US economy had lost some momentum in the second half of 2014, the UK had witnessed a strong performance and the Eurozone had sustained a gradual recovery.

It added that despite China's slowdown, solid growth was seen in South East Asia and India.

The firm has now set up a "management revitalisation" committee to undertake negotiations on a new management team. Former Shiseido president Shinzo Maeda will be the head of a revamped 11-member board, the majority of which are external directors, the company announced.

"Toshiba will not announce an FY2015 forecast at this point, as the company continues to carefully evaluate the operational impacts of inappropriate accounting," the firm added.

It said its plans now will include speeding up business selection and concentration, reformulating its business and financial structure with appropriate measures.

Toshiba could now face a fine from regulators over the financial scandal, which is the biggest in Japan since 2011 when Olympus was discovered to be involved in a $1.7 billion scheme to conceal over 20 years of investment losses.

This article was originally published on 7 September 2015 but was subsequently updated to reflect the latest developments (most recently on 7 December 2015).

Sage is synonymous with accounting software, often of the terrifyingly complicated large business variety. Fortunately for small enterprise users who want to handle their own accounts for most or even all of the year, Sage One Accounts Extra, is priced at £20 per month (ex VAT) yet provides a wide range of features, from automatic bank activity retrieval to foreign currency support.

Sage One Accounts Extra: signing up

Sage guides you through a step-by-step sign-up process, starting by asking your business’s name, its type, and then having you select what it does from a wide range of categories, which it’ll use to help customise your experience. The list covers everything from mobile home retailers to IT service providers. We found some oddly specific levels of detail in some areas, while others, such as advertising copywriting services, aren’t even covered. We found a few Americanisms in the list, so if you can’t find your trade, it’s worth trying international synonyms.

The guided setup then takes you through adding your address, selecting the VAT scheme you’re signed up to, adding your business’s start date, end of financial year, and the date from which you’ll be using Sage One. All of this can be changed later if need be.

A Getting Started section prompts you to create customers, link your bank accounts, set up suppliers, and set up the chart of accounts, which defines and lists all your assets, revenue, and expenses using precise categories. We were pleased to find plenty of guidance and in-line help links, which take you directly to detailed documentation about how each feature works.

Sage One Accounts Extra: getting started

Sage’s customer creation form is tremendously detailed, allowing you to define payment terms individually, as well as keeping track of their bank details, VAT number, and as many contact names and delivery addresses as you need. You can also bulk import contacts from a CSV file. Sage only supports its own CSV field format, but if you’ve been using a spreadsheet or a different accounting package then you can download a template file that makes it easier to transfer your customer data. We’d have liked a wider range of contact importation options, though, such as support for Google or Outlook contacts.

While small businesses with short client lists may be better off simply entering everyone manually, the CSV template will be essential for larger companies making the switch to Sage. Another critical tool for those transferring the accounts of an established business is the Customer Opening Balances page, which makes it remarkably easy to enter what you’re owed, and by whom.

With that done, we linked our bank accounts. Unlike rival Intuit QuickBooks Online, but in common with most online accounting services, Sage One uses third-party service Yodlee to connect to and import data from your online banking service. Yodlee supports a huge range of banks and account types. That includes PayPal, personal accounts that use physical secure keys to generate one-time login codes, and international banks around the world. Once linked, you can download your transactions from a given date, your balance is imported, and you can then enter your ledger balance and other account details. Accounts can also be created and updated manually if your bank, building society, or credit union isn’t supported, or if you prefer not to use Yodlee.

Setting up your suppliers and the money you owe to them works in exactly the same way as entering your customers, although we were surprised that there isn’t a specific entry in the default chart of accounts for internet and telephony services. Fortunately, the next step in Sage One’s suggested configuration process allowed us to deal with exactly that. Adding new nominal ledger accounts is easy, and you can also remove existing categories from the chart. For example, a company that doesn’t have or plan on buying motor vehicles can deselect, but not delete, those ledgers.

Further customisation options allow you to add your own logo and default notes or terms and conditions to your invoice template. We were slightly annoyed to find that, after clicking through to the Defaults page to adjust the standard invoice payment terms, we weren’t automatically returned to the invoice customisation page. This is common throughout Sage One Accounts Extra, but with save buttons at the bottom of every page, it’s easy to make sure you don’t lose anything by clicking away.

You’re also prompted to set up or import entries for your products and services, while larger companies can create codes for their different departments to help them analyse income and expenditure. International firms can enable foreign currency transactions with live exchange rate calculations. The summary screen’s other tabs allow you to view graphs depicting sales, purchases, cash flow and future cash flow forecasts, putting an overview of your business at your fingertips.

Once you've created an invoice it can be printed or emailed as a PDF

Sage One Accounts Extra: getting down to business

Once you’ve been through all the suggested steps in the Getting Started section, Sage One Accounts Extra is ready to roll. You can generate invoices and credit notes quickly and easily for both Sales and Purchases. We’re fans of the clean, simple interface that works exactly as you’d want it to, from allowing you to add new customers as you go, to generating PDF invoices that you can print or email out.

Unlike many rival accounting services, Sage doesn’t support any credit card processors apart from its own SagePay service. However, if you use a different payment processor, it’s still easy to include links to them in your invoice emails.

The Settings pages include such vital options as the ability to lockdown and close your accounts at the end of the financial year, but you’ll find some other handy advanced features there, too. We very much appreciated the ability to sync our Google Drive and have PDF copies of all invoices stored there for record keeping purposes. You can invite multiple users to access your account, with configurable privileges, so you, your staff, and your accountant can all access exactly what they need, although only two people can have admin level accounts at a time.

Few things are causing as much irritation for small businesses as the VAT MOSS scheme, which is designed to ensure that appropriate VAT is paid across the EU. Unfortunately, like most of its competitors, Sage One Accounts Extra isn’t really equipped to handle the scheme, instead providing some clear but disappointingly labour-intensive instructions for a workaround. This involves ensuring that your foreign clients are billed in your, rather than their, currency, and creating a separate invoice for their VAT, which you have to calculate manually. While we’ve yet to see a truly elegant solution to recording and paying EU VAT, Xero Premium does a better job.

Sage has recently released a new mobile app, designed to put the essential details of your business at your fingertips. Its primary function is to make it easy to generate invoices and expenses when you or your staff are working on the move, but it also provides full access to your contacts book, product and service list, and an overview of outstanding invoices. Sage’s support for multiple users means that everyone who needs to be able to create invoices can have an account that allows them to do so.

As well as linking up with Google Drive, Sage One can integrate with a wide range of business services and applications, including Sage’s own Payroll service, priced at £5 per month. Supported third-party services include inventory control from Manu Online, booking and appointment systems such as BookingBug, and OneSaas’s integration service, which is designed to connect external sales platforms such as eBay and OpenCart to your accounting service.

Verdict

In terms of configuration and overall user-friendliness, Sage One is hands-down one of the best accounting SaaS around. However, if you sell digital products in the EU, be aware that its VAT MOSS handling doesn’t provide specific features to help you calculate VAT rates in each country, unlike rival Xero. Xero also includes Payroll features in its top £30 per month service. Although it’s more expensive than Sage and its interface doesn’t feel quite as polished, it’s currently more useful for users with international clients. If you only work in the UK, however, Sage One Accounts Extra is hard to beat for ease of use and features making it great value.

Xero is one of the big names in online accounting, with its primary focus on providing a complete accounts system for small businesses. As well as a wide range of tools, Xero provides plenty of information and advice about accounting, as well as making it easy to give an external accountant access to your books.

It’s available in Starter, Standard and Premium versions. The Starter version, priced at $20 (£13) per month, is limited to just five invoices, five bills and 20 bank reconciliations every month. If you’re running a micro-business with just a handful of clients that you invoice monthly, then it could be a good option, but most UK businesses will want the Standard package, which costs $30 (£20) per month and doesn’t limit your invoices, bills or reconciliations. If you do business internationally, then you’ll need the Premium version, which costs $40 (£30) per month and is the only subscription that gives you multi-currency support.

Beyond these differences, all three versions work in the same way and have the same features, including live bank feeds via Yodlee, mobile apps for iOS and Android, and integration with a wide range of external applications and services. You can give an unlimited number of users access to your account, and give each various permissions. By default, your master account has sole access to user management, payroll admin, and the ability to edit bank account details for customers.

You can also invite your accountant and give them an Advisor account, which they can use to access additional functions such as the ability to publish annual reports and lock accounts to prevent transactions from being added retroactively, such as after the close of the financial year. Although Xero strongly recommends involving an accountant in your workflow, you can assign Advisor access to anyone, including your own main account.

Configuration

When you first connect to Xero, a video tutorial and a series of prompts helps get you up and running quickly. The first step is to link a bank account. Like most online accounting tools, Xero uses Yodlee to link to a wide range of banks and automatically import your transactions. If you use foreign-denominated accounts, you’ll first have to add the relevant currencies via the settings screen before you can link accounts denominated in those currencies. Xero keeps track of the exchange rate between your native currency and any foreign currencies you’ve added.

If your bank isn’t supported by Yodlee, you’ll have to import statements manually. Xero supports adding personal bank accounts, allowing as sole traders, for example, to add any personal accounts they might also use for business purposes. Be aware that, when setting up automatic feeds from your accounts, you’re giving Xero and Yodlee your online banking login details, and that they are not liable for anything that might go wrong as a result of doing so. The system is used by many businesses, but you should make sure that it’s appropriate for both your business and allowed by the terms and conditions of your bank account.

Whether you link your bank or manually upload data, you’ll probably want to start by entering the balance on the day you begin using Xero and only importing transactions from that point onwards. Otherwise, you’ll have to immediately reconcile all your old transactions. There are circumstances under which you might wish to import all your old transaction and accounting data, but a clean start generally means much less work in any accounts package. You should take the time to open the main Settings tab and use the Conversion Balances option to enter the current balance of each account. As transactions are imported from your bank account, you’re prompted to reconcile them against your transactions in Xero, linking them to a contact name and account from your Chart of Accounts.

Accounts, payroll and invoicing

Your Chart of Accounts (COA) is the backbone of your business’s bookkeeping, whether you’re a sole trader service provider, or an international company with multiple departments and income streams. Xero’s default Chart of Accounts lists not only the bank accounts you added in the previous step, but also a wide range of income, expense, asset, liability and equity categories, from cleaning services to corporation tax, each of which has a code that you can assign to related invoices and bills. You can customise your COA according to your business’s needs and it’s possible to import a COA in CSV format, although you’ll have to make sure that it’s set up correctly for Xero’s requirements. Working with your COA within the interface is easy, and you can add and remove categories as required by your business.

Xero has a powerful payroll system, which supports detailed payment period and holiday calendars, easy insertion of your PAYE and other reference information from HMRC, support for pension auto-enrolment, and pay item categories including benefits, deductions and reimbursements, with the ability to add your own custom entries to each category and associate them with a COA entry.

During the configuration process, you’re also prompted to customise your account and paperwork by adding your business’s logo, business type, and contact information. The invoice customisation screen compares poorly to the WYSIWYG experience of products such as Zoho Invoice, but covers the basics, such as allowing you to make the unit price and quantity fields invisible. You can also download DOCX template files and use Microsoft Word to create fully customised invoices. Xero supports a range of online payment services, including PayPal, Stripe, and GoCardless, and your invoice emails can include links to these for easy payment by your clients. You can also link to a custom payment URL if you use a different payment provider.

Contacts, add-ons and mobile

Further guided configuration steps prompt you to add contacts. Xero’s own contact importation standard is very specific and requires you to download and populate a CSV file - simply exporting your existing contacts from most services won’t work. There are third party apps that allow you to, for example, connect your Google Apps for Work or Outlook contacts, but Xero doesn’t direct you to any of these when you’re in the process of adding contacts, and the apps proved to be limited and awkward to use during our tests. As it stands, Xero is in serious need of better contact integration.

Whether you import contacts or populate your list by hand, Xero’s contact entries are richly detailed, allow you to link default sales and purchase accounts to individual contacts, and add appropriate European tax rates for each client, making it easy to conform with the recently introduced VAT MOSS system for sales across the EU.

Xero’s add-on directory includes over 350 services and applications, the choice can be bewildering, but add-ons are categorised by type and industry, and can be searched by keywords, making it easy to find the right tools for the job. Many of these services are paid-for SaaS in their own right, such as Zapier, which allows you to import data from one cloud-based service to another, while some popular free web apps such as Evernote also provide integration, in this case by allowing you to create invoices from notes and vice-versa. A number of industry-specific services can be linked, too, such as the Vinsight winery management tool, and cloud-based property management suite Re-Leased.

The mobile app allows you to configure a four-digit password for fast, secure access. The app has a slick, simple interface that allows you to view the status of your bank accounts, quickly create invoices and expenses claims, and view your contacts. You also use the app to access anything stored in the Xero’s shared File Inbox document storage directory, making it easy to view documents relating to a client account while you’re on the move. It’s more polished than the mobile apps of many rivals services, making Xero a strong choice for businesses whose staff need to invoice on the move.

Xero is easy to use but provides heavy-duty features, and is well suited to small businesses that work with an external accountant. Xero can even help you find an appropriate accountant via its directory. We were pleased with the ease of linking our accounts, getting started with our invoicing, and reconciling transactions. The mobile app is also excellent. However, we’d have liked integrated options for importing contacts from Outlook or Gmail, as are found in rivals such as Intuit QuickBooks Online, as well as easier invoice customisation. Setting up Xero is also more complex than dealing with some rival products, particularly those aimed at micro-businesses, but plenty of documentation is available, and once it’s up and running, Xero is low-maintenance and extremely capable.

Verdict

Xero is easy to use but provides heavy-duty features, and is well suited to small businesses that work with an external accountant.

Anyone who's ever run a business of any kind will be familiar with accounting packages such as Sage or QuickBooks. Today, there are more options when it comes to in-house accounting packages – and plenty are cloud-based.

Crunch Accounting is one of those, but what's interesting is that they're not just a SaaS company.

As Crunch's Jon Norris put it to me: “Crunch was initially going to be a cloud bookkeeping software service (a la FreeAgent or Xero), but during market research before we launched it was decided that wouldn't address many of the issues business owners have accountants (price, speed etc.) - it needed to be a whole new service. Hence now we're a fully-fledged accountancy firm, and we also build our own software”.

That's the background, then, but now let's go, on to the package itself. As we've established it's an online service and it's available in three flavours:

• Standard: £64.50 per month (inc VAT) - Covers your basic small business requirements: basic accounting, VAT, year-end accounting and directors' payroll. IR35 (the rules relating to one-person companies working for single clients), secure bank feeds, self-assessment and bookkeeping are the main optional bolt-ons (there are a few others too – check out the Web site for full details).

• Plus: £96.50 per month (inc VAT) - All the features of standard with more options includes employee payroll, IR35, secure bank feeds, filing of annual returns and self-assessment. Bookkeeping is an optional extra.

• Premium: £126.50 per month - As Plus but with bookkeeping included.

Most small and medium businesses will go for the Plus service, though if you're a one-man band with a couple of directors and no employees then Standard may well be sufficient.

These are the options for the service, so let's look at the service itself. The GUI is tab-based, with sections named Home, Sales, Expenses, Banking, Pay Yourself, Company Tax, Accounting, Your Crunch and Self Assessment. When you sign in you'll land on the Welcome page of the Home tab, which sits alongside your Dashboard – an overview screen that shows you all the key information about your company.

The layout of the GUI is numpty-proof. The placement of the key buttons is consistent between tabs so there's always a button-cum-pull-down for adding new stuff at the top right and a “Get help with this” button at the top left. You're also subtly walked through what you need to do in each feature: the screens are forms rather than wizards, but a rather clever type of form.

When you create an invoice you're presented with the New Invoice form but it won't enable the buttons that let you do stuff lower down the form (such as adding line items) until you've completed key fields at the top (the client name, for instance). It's a refreshing way of providing a wizardry walkthrough for data entry but without the annoying Next-Next-Next of a traditional wizard.

I won't bore you with the detail of every tabs because many of them are obvious – the Sales tab includes client details, payment details and invoicing, for example, and the Banking tab includes all the features you need to reconcile your bank accounts (you can upload statements as CSV, by the way) and shuffle money between them.

There are a couple worthy of mention, though. First is the “Your Crunch” tab, which lets you tweak the system to your personal preferences (company logos, invoice footers, PAYE reference and the like), export data, enter employee data and interact electronically with certain third parties. This latter feature is called “Crunch Connect”, and includes funky stuff like the ability to integrate the system electronically with your bank accounts (only HSBC, NatWest and RBS at present though), upload PDF bank statements instead of faffing about with CSV, and even mileage monitoring via integration with an iPhone/Android app (“MileCruncher”).

The other notable tab is subtly named “Accounting” but it includes a bunch of the stuff that the average small business owner would find tricky to produce by hand – P&L summaries, and balance sheets being the obvious two; there's also a handy section for bad debt and year-end stuff.

As I alluded to at the beginning of this review, the software package is backed by an accountancy firm and there are some features in the portfolio that are handled by a person rather than the software.

So in the Self Assessment tab, for example, you'll there's no electronic on-line tool but a price list for the company's Self Assessment completion service where they honestly point out: ”The price increases the closer we get to the [31 January] deadline, due to time constraints”.

It's worth noting at this point that the on-line help team are pretty effective too: I fired up a chat session and threw in some questions about the self-assessment process around eight in the evening and the advisor responded in less than half a minute.

What do I think of Crunch overall, then? In short, I like it a lot. It's been designed very well and it does pretty much everything I'd want were I still running my own business – including, by the way, important things like understanding the VAT regulations for supplying the Channel Islands from a UK business. Yes, I'd like to see them expand stuff like the range of bank account integration but I'm sure that'll come over time and of course they've already done some nice add-ons like the mileage calculator.

In fact I think the only thing that disappointed me is that they don't have a self-submission Self Assessment system. The Crunch SA service is £75+, whereas back in the days when I was a UK taxpayer I'd pay 25 quid for TaxCalc and it would work everything out and submit it electronically for me. Of course, getting a software package accredited by HMRC for upload is a non-trivial task, but I'd love to see them do it at some point.

Incidentally, one thing they also told me when I spoke with them is that they have, in their words, “a few big changes” going in imminently; watch this space, then.

Verdict

A comprehensive online accountancy service backed by real accountants.

When it comes to choosing an accounts package to run your business, most people are fairly conservative: choosing a product that either they are familiar with or one that their book-keeper or accountant recommends. In the UK, without doubt, the market leader in accounting software for the SMB sector is Sage, but until recently it did not have a cloud offering. Its range of software consisted of traditional Windows programs which are installed locally on the machines that need it; network versions were available to share data and can have multiple people enter information. But unless you went for the complication of VPNs then sharing over remote sites was not an option, and even then a network disconnect could leave your accounts in a mess. The development of cloud accounting solutions is a growing one and one that Sage has been late coming to. With cloud accounts not only can several people input data at different locations and the data can be held securely backed-up but it is possible to share access easily with your accountant or bookkeeper to sort out the mess you have made!

Familiarity or time for a change?

When choosing a cloud accounts package, familiarity is a strong mover, but just because Sage One carries the Sage name does not mean that it is anything like its previous products. This is not necessarily a bad thing as the company has designed it to be easy for non-accounts trained people to enter data, together with the ability for more skilled users to access the ‘backend’ and do such things as journals which are much beloved by such types. Let's compare this with the competition. Intuit Quick Books also offer a very similar system with its cloud offering, while Xero’s cloud accounting product looks very modern and slick but the pricing is a little confusing as it is based on file storage as well as facilities. We are also not sure that anyone can make a guess at how much disc space their accounts records will take, so it would be a case of budget for the worst and hope for the best. FreeAgent is perhaps one of the most complete UK-friendly cloud account products out there, but because of this enormous capability it is necessarily quite complicated for the non-accounts person to understand, this criticism can also be said of ClearBooks Sage has taken a different approach and tried to make its system very simple to use, while still retaining the flexibility required for a modern day accounts system. Having said that, there is a huge difference between the user interface’s simple approach used in their Cashbook at £5 per month and Accounts at £10 per month against the extremely full featured Accounts Extra at £20. To be honest the main screen in Accounts Extra is probably enough to scare most people off! But this package does offer Quote generation and tracking, journals and a number of reports that are not available in the lesser products.

In this review we are mainly considering the top offering from Sage although for a lot of businesses, the standard Accounts at £10/month is more than enough. Your bookkeeper or accountant can also subscribe to a version designed for them at a very low cost per month which enables them to have full access to any of their client’s accounts thus giving them the ability to set up nominal codes, alter reports and add journals. It is fair to say that most accountants in the UK are happy with Sage products and this is a big plus point for choosing it over the other offerings.

Limitations

One drawback with Sage One is that, although you can choose from four Invoice layouts and customise these with your own logo, none of them are designed for windowed envelopes although Sage says that it may incorporate this at a later date and of course being a cloud product every subscriber will get access to this and any other updates. All these systems offer the ability to email Sales invoices to customers as well as statements, however Sage One, unlike some of the USA-centric offerings, only attaches a pdf of the invoice, whereas some of the American ones offer a secure web page where the customer can pay the invoice as well. Nice, as anything that makes payments easier must be a good move, although the extra commission costs on such transactions would limit its use for many businesses.

The other issue is obviously the security of your accounts data. Sage uses Amazon Web Services for its hosting and of course this can be at the control of the US authorities, although, in its terms and conditions, Sage does state that all “customer data”, that’s your accounts, is protected and not available to their third-party partners, which is the least we can expect, but using a cloud solution means by its very nature that your data will not be no longer be held exclusively within your office. For most business this should not present a problem but it is a consideration for many. Sage One Accounts is very suitable for a small business that wants a simple interface to day to day tasks such as entering invoices or payments whilst leaving the more complicated accounting tasks to their bookkeeper using the Accountants version. But if you are looking for a full featured cloud based accounts package then Sage One Accounts Extra is the one to go for.

Verdict

The UK market leader of accounting software, Sage, has produced a very competent set of cloud based solutions. But there is a big difference in the various options.

Almost half of accountancy clients are demanding a cloud-based service, according to a recent poll. The research found that 48 per cent of clients wanted to have the accounts available in the cloud and, in turn, this was driving adoption among UK practices.

The study, carried out by OnePoll on behalf of Xero, found this figure had more than doubled over the last year (23 per cent). In all, 65 per cent of accounting practices said they have adopted cloud-based accounting software or plan to soon.

According to the research, many accountants believed offering cloud accounting would help put them ahead of the competition (42 per cent) and cut overheads (41 per cent), such as the cost of travelling to clients’ offices and manual admin tasks. Over a quarter (26 per cent) said they were aware of the broader shift towards cloud accounting and didn’t want their practices to get left behind.

Compared with last year, adoption of cloud within accountancy has increased, with 34 per cent of practices having switched to cloud accounting compared with 28 per cent surveyed last year. The number of practices planning to adopt rose by five per cent, from 26 per cent in 2013 to 31 per cent in 2014.

Concerns over security have waned with 13 per cent of accountants concerned about security compared with 27 per cent of those polled in 2013. Similarly, there was a drop in the number of accountants who felt the technology wasn’t as good as desktop software at 14 per cent, compared with 23 per cent last year.

“Cloud accounting is having a massive impact in the UK, particularly within small businesses,” said Xero managing director Gary Turner. He added that using a cloud-based accounting package gave users real-time information and insight to make better business decisions.

Accountancy software firm Sage has unveiled its latest Software-as-a-Service (SaaS) offering that the company claims marks a significant milestone in its move to become a cloud player.

The service, which is aimed primarily at SMBs and sole traders and their accountants, builds on the Sage One platform, which was launched in 2011.

New features include automatic currency exchange calculation, VAT calculation for transactions with non-UK and Ireland based businesses, greater control over who can manage payment and receipts, quick transaction input processing, and cash flow statements and forecasting.

Furthermore, multiple users can access and use the service at the same time, which was not possible before.

This is not the first update to the cloud-based Sage One service, which has already seen additional features, such as Payroll and optional add-ons introduced over the course of the past two years.

However, Nick Goode, head of Sage One Europe told journalists that Accounts Extra represents “the next generation of Sage as a business” and told Cloud Pro Sage One as a whole had been architected to facilitate the Newcastle-based firm’s global expansion.

As with the rest of Sage One, Accounts Extra is hosted on Amazon Web Services (AWS) Infrastructure-as-a-Service (IaaS) facilities with European customers’ data being hosted in the company’s Dublin and London data centres.

Goode told Cloud Pro that part of the reason the company had chosen to use AWS was due to its high availability and resilience.

“Data sovereignty, security and availability are top priorities for us because they are the top priorities of our customers,” he said.

“We are not worried that Amazon is going to go down or disappear, and we have full safe harbour agreements in place with them,” Goode added.

The cloud has boosted its fan base in the form of the accountancy profession, with more than half of accountants saying they intend to use cloud to improve their business’ profitability and efficiency.

Reducing internal overheads, such as travel and data input costs (48 per cent), improving service and increasing customer satisfaction (44 per cent) and providing a point of competitive difference (30 per cent) were all cited as key drivers in the study conducted by Censuswide on behalf of accountancy Software-as-a-Service (SaaS) firm Xero

Demand from clients (23 per cent) was also a contributing factor in the decision to move to the cloud, according to the research.

Of those who had made the switch from on-premise systems to the cloud, 42 per cent said it had boosted the standards of the services they provide and increased satisfaction.

A further 39 per cent said their organisations had become more efficient and 38 per cent said it had helped open up new revenue streams and increased overall income.

The global financial crisis of 2007-08 and its subsequent effect on the economy were also cited as a reason for moving to a cloud-based system; 57 per cent claimed increasingly tight client budgets are causing major challenges and the reduced costs associated with the cloud can help alleviate that.

Nevertheless, 28 per cent of those surveyed had not yet adopted a SaaS solution, saying they were waiting to see if online software takes off industry-wide before making the switch.

“While the research reflects the growing appetite and need for cloud-based systems in accounting, it also shows that some practices are holding back because they’re yet to recognise the technology’s potentiall," said Gary Turner, managing director at Xero UK.

“With the rise in clients’ use of mobile technologies and the repercussions of the downturn still being felt, the opportunities cloud-based technology offers modern practices are extremely important, particularly when it comes to opening-up new service lines. In enabling them to become more competitive, it could even help safeguard their future survival.”

Accountancy Software-as-a-Service (SaaS) firm Clear Books has developed its own cloud-based crown funding toolkit in order to carry out a ‘do it yourself’ IPO.

The organisation, which provides services to small businesses and sole traders, has issued a share offer to raise £839,913 having recently re-registered as a public limited company (PLC).

Clear Books claimed it turned to the idea of raising money from customers and ‘fanvestors’ following the reluctance of banks to invest in or lend to small businesses in the current economic climate, as well as what it claims are the short-term agendas of venture capital firms.

The company also rejected traditional crowd funding sites as they charge upward of five per cent in fees, adding that full stock market listing fees are even higher. According to the firm, the total fees associated with its own IPO will be one per cent.

The Cloud Funding toolkit, as it has been dubbed, accepts share applications online and also takes payment for shares, as well as providing access to an investor module where share certificates can be downloaded.

The toolkit also automatically accounts for the transaction in the investor’s Clear Books account, assuming they are a customer.

The company has also said it is considering making the tool available to its own customers if they wish to carry out a similar ‘DIY IPO’, although it has not made a firm decision on this yet.

Tim Fouracre, CEO of Clear Books, said: “We have always developed internal tools to run our own business more efficiently and then made this software available to our customers to benefit from too.

“We have done this with accounting, payroll, human resources and document management. So helping our small business customers raise funds is an exciting opportunity to help small businesses in the UK grow faster.”

Accounting firms are beginning to embrace cloud, but not with any great enthusiasm.

While the rest of the world is beginning to turn to SaaS-delivered software, just 11 per cent of accountancy firms are using cloud systems according to a new survey from Thomson Reuters. And just 23 per cent of non-adopters are ready to make the move to cloud, which contrasts starkly with the wider world where about 70 per cent of companies will be using one type of cloud.

The main objection was not security, the normal inhibitor when it comes to cloud, but concerns about working practices: a quarter of the respondents said they saw no need to change from their existing set-up, while eight of the accountants surveyed said it would mean a “big change” in the way they did business. These also cited a lack of awareness about where to start on a cloud project.

The accountants hadn’t forgotten about security, though, it was also cited as a factor that concerned potential adopters.

Accountants better get used to change, according to Thomson Reuters.

“The cloud forms an important part of the future IT strategy of many UK accountancy firms, according to the results of the survey,” said Andrew Flanagan, managing director, professional market for the tax and accounting business of Thomson Reuters. “The main reason practices are looking to move to cloud- based solutions is to allow employees to work remotely; for example, from client’ premises and to enable use of new mobile devices.

“ In years to come, it seems inevitable that virtually all software and data will be ‘in the cloud’, mirroring the move from paper to electronic data - a new way of working that has occurred over the last few decades, but with the increasing pace of technology development it is likely to happen faster, ” he added.

Business software vendor Sage has opted for Windows Azure to deliver its Sage 200 Online cloud service.

Aimed specifically at medium-size businesses, this is the second accountancy Software-as-a-Service (SaaS) offering from the Newcastle-based vendor after Sage One, which was launched in 2011.

However, while Sage One was built on the Amazon Web Services platform, the company has instead plumped for Windows Azure to host Sage 200 Online.

Stuart Lynn, CIO at Sage, told journalists at a media event to mark the launch that Azure had been an obvious choice when deciding to take Sage 200 to the cloud.

“Sage 200 just seven years ago was written from the ground up on the Microsoft .NET platform, which at the time was the most modern technology you could develop on,” explained Lynn.

“So who better to help us take a Microsoft .NET product [to the cloud] than Microsoft?”

According to Lynn, the company decided to build Sage Online as a ‘true cloud’ product, rather than rehashing the existing on-premise product, which has been updated as Sage 200 v2013, for the cloud.

However, in doing so, they have not sacrificed interoperability and Sage 200 add-ons and customisations will work with its new cloud-based product, he claimed.

Another element of change for Sage Online is the company has had to change its business in order to take account of the ‘on-demand’ nature of cloud computing.

“Building the software is one thing, but you have to then service it, so it has to run 24/7, 365 [days of the year], so we have people working now 24/7, 365 in our service management teams,” said Lynn.

“When we developed software and it went out on a CD that was the end of our story, really. We then supported the business partner through our partner service teams but now we are accountable for making sure our software is available,” he added.

Sage 200 Online and Sage 200 v2013 are both available immediately.

For some time now I have felt that KashFlow is in need of adult supervision. Duane Jackson, CEO has done a great job in building up a business from nothing with minimal investment and a lot of help from Lord Young. But it has needed more seasoned hands to take the company to the next step. It is a credit to Jackson that he has understood his limitations and appointed Raj Patel, the former CEO Exact Software as vice chairman.

Richard Holway, veteran analyst of the British software space sums up the position nicely:

“I’ve followed KashFlow for many years. They really have given Sage, and other established companies in the market, a run for their money. It’s difficult enough to grow a company from scratch to £1m, but even more difficult to make the transition from ‘startup run by the founder’ to the next stage. The appointment of highly experienced new executives to join Duane Jackson is extremely good news and bodes well for the future of KashFlow and its customers”

What does Patel have to say?

"With incumbent players struggling in a changing macro-economic environment where new businesses are formed every day, a huge growth opportunity emerges. Duane was one of the first IT entrepreneurs to envisage and capitalise on it. With its track record, innovative products, superior customer engagement and growth plans for the coming years I am convinced KashFlow will further its lead. I am excited to be able to play a role in this journey and look forward to working with our team, our customers and our partners in making what has already been great journey even greater."

All fairly standard PR stuff except for a couple of small points.

• Patel has skin in the game having made an investment in the company, rumoured to be £1 million.
• While continuing to hold the CEO role, Jackson is stepping back, ostensibly to invest more time (and presumably some money as well) into Prince's Trust related startups.

I'm not so sure about this second point. Founders often bring things to the table that no professional manager (because that's what Patel is) can provide. In this case, Jackson has been the perennial thorn in Sage's side that Jackson has mercilessly exploited, largely to the company's benefit but also providing talking points around which the whole industry has coalesced. It is not clear from this announcement whether Jackson will continue to have the interest to keep stirring the pot.

However, KashFlow and the industry can perhaps draw comfort from the fact that most investors now see Sage not as a growth company but one that can be milked for dividends and the impact of share buy-backs. Or at least that is the hope. In a detailed report from Numis, we see proof positive of what I have been saying for years: Sage is on the skids and has no real cloud strategy. Numis hope that Sage will wake up to the problems and force march its customers to a subscription model.

"One possible way to migrate customers to a ‘compulsory support’ model is through migration to cloud delivery, where recurring monthly payments now seem to be accepted as the norm. Since cloud delivery potentially relieves the customer of the costs and effort of maintaining their own infrastructure, at negligible marginal cost to Sage, this delivery model enables a repricing that benefits both Sage whislt still, overall, saving money for the customer. We think the dynamics of this are little different to the support modelling we showed earlier, in Table 5, albeit at a higher price to reflect the extra value from Sage hosting the application for the customer.

"Interestingly despite the scale of opportunity here, Sage has been, in our view, extremely poor at quantifying this or providing any useful statistics to the investment community. Indeed, our analysis suggests that Sage’s own figures, as presented at its capital markets day, potentially understate the upside from an all-subscription model."

I hate to say it but while the diagnosis might be right this analyst prognosis reflects a very poor understanding of cloud market mechanics. Numis is making the massive assumption that Sage's brand tied to its bulk will provide enough inertia to carry the day. That is far from a given. Does anyone remember McCormack and Dodge? Walker International? Back in the day these were two powerhouse accounting software vendors that are no longer with us. They absolutely dominated the marketplace but were squished by a technology shift that gave birth to SAP, Oracle, Great Plains and ... Sage. As I look over the landscape I see the same history repeating itself. Today we have KashFlow at the SME end, NetSuite in the mid market and Workday at the top of the enterprise market powering along. Sage? In decline.

To put this into perspective, Workday IPO'd last month at a whopping $8 billion valuation and a 75 per cent premium on the strike price. That's after seven years in existence, 350'ish customers and much less than $200 million in annual revenue. Sage's valuation today? £4.17 billion or roughly $6.7 billion after 30 years in the business and millions of customers who are being soaked for increased fees with little to show in return. Go figure where the future lays. I know what I think.

Over the past seven years, I've been watching as first KashFlow, then FreeAgent and finally Xero came to market with solutions aimed at solving the financial headaches experienced by many small businesses. Others have come along but it is clear these three are establishing themselves as leaders, albeit serving different customer needs. They stand in stark contrast to Sage's on-premise and cloud offerings: they are all growing wildly while Sage shrinks.

None of the three are what you would call mega-vendors. The cloud model means that without hundreds of thousands of users, they won't become billion pound businesses any time soon. But in all cases, they have rethought what accounting means in the context of cloud operations and 21st century business needs. That is impacting the professional accounting market. Today, I see more and more practices recognising that real-time shared access to financial data has a positive impact on their ability to provide better services. Just what's needed in a recessionary economy. All three vendors have active and enthusiastic user communities and enjoy impressively low churn rates. Here's my take on each going in chronological order.

KashFlow - is led by Duane Jackson who makes no bones about where he sees the main market competition. Almost from the get go, Jackson has consistently tried to annoy Sage, often successfully, with witty campaigns that point to Sage weaknesses. Possibly his best effort came when Sage attempted to launch a cloud offering in the UK in 2009 that was fundamentally insecure. That product was quickly killed off. Today, much of Jackson's attention is still on Sage but now he's growing a company that needs adult supervision. To that end, KashFlow has hired a senior industry person (as yet unannounced) to take on day to day operations. I'm also told that Jackson has sold a part of his majority holding for a 'seven figure sum' but still maintains control.

KashFlow offers a broad accounting system that appeals to many types of small business user and especially those that only need something relatively simple. You could describe it as 'book-keeping plus.' KashFlow pitches itself as being very easy to use and customers I have spoken with say they love it. Practitioners are equally happy. KashFlow has many points of automation. For instance you can set it up to automate billing. Useful if you send an invoice for the same amount each month. KashFlow also understands the type of inbound invoices you receive so that it can auto allocate to the correct general ledger account code. Unusually, KashFlow allows users to create custom fields for billing. An example might be 'purchase order number.' And of course you can bill in any currency you like. The currency conversions are taken care of automatically.

Very early in its existence, KashFlow made the decision to present developers with open APIs. At one time I was sceptical about some aspects of this from a security standpoint. My position has softened, largely because we've not heard about any data breaches. What's more, KashFlow has expended a lot of effort refactoring to build out multi-user permissions that will allow customers to control access to the system. The implications are that in the long term, KashFlow customers will be able to give permissions to both customers and suppliers. That's a very good thing.

On APIs, KashFlow has a large set of integrations and add-ons. The list is extensive including payroll and payment processors - key requirements for any business. The company is also re-engineering its codeline to be more easily adapted for mobile operations. Again, this is a good thing because it should mean the company can devote more resources to feature build out rather than code maintenance. One thing that is lacking for which KashFlow says it will have an answer: automated bank feeds. These provide an easy way for users to get their bank data into the system quickly and accurately. KashFlow offers simple pricing: £17.99 a month.

FreeAgent - is led by former fighter pilot and code geek Ed Molyneux with two other principals, Roan Lavery (designer) and Olly Headey (enterprise geek.) Unlike KashFlow which is wholly self funded, FreeAgent has taken several rounds of private funding, including what was a 17 percent stake by IRIS, the professional accounting solution provider. That has also allowed it a fresh route to market. A recent deal involved an IRIS practice onboarding 1,200 of its clients. From what I hear, all three routes to market: IRIS, Barclays MWB and direct are firing on all cylinders. While the company is not releasing figures, my understanding is that their growth over the last couple of years has hockeysticked. Earlier this year, FreeAgent acquired a vendor in the US as a way of establishing a beach head in that country.

FreeAgent was established as a response to a common problem: the need to submit spreadsheets to the accountant for later accounts production. FreeAgent concentrates on the freelance services market (web designers, freelance coders and so on) although a partnership with Barclays MWB has seen it expand into other services areas.

From the word go, FreeAgent wanted to solve common problems that these types of business encounter. That means they tend to appeal to a smaller market but one they understand intimately. The main problem the founders saw was that freelancers almost never know what their tax position looks like while at the same time they tend to be project-based. Consequently, FreeAgent delivers a tax estimate rather than a definitive value and project estimates can be turned into invoices, including rechargeable out of pocket expenses. That provides the start of a conversation with accountants who are given permission to access customer accounts. Buttressing that, FreeAgent is being engineered to automate as much of the routine accounts processing tasks as possible while presenting an intuitive interface and experience back to the end user.

FreeAgent is obsessed with good design which permeates everything they do. In recent times that has led to both a UI refresh that was well received by users alongside a refresh in the underlying technology base. As a vendor that is technology led, it has established Geek Fridays where coders get to try out whacky ideas, some of which end up in the production roadmap. This allows for real innovation that only a vendor can bring to the table.

On the roadmap, FreeAgent says it is improving the recently released online invoice payment facility with more gateways including those for the US market. The company will also bring a mobile version to market and is developing what it calls The Stream - a new, and innovative way to interact with important accounts data in a timeline presentation.

While FreeAgent also offers an API, it has a much shorter list of solution partners than KashFlow. It is rolling out automated bank feeds via a Yodlee integration. As you might expect, it has an integration with Barclays Data Services. Where FreeAgent slips behind the others is the lack of true multi-currency. The good news is that back end development for this feature is under way. Other integrations now or on the map include Basecamp, Harvest and multiple payment processors. Pricing is tiered, depending on which solution you need but starts at £15/month when you buy direct.

(DISCLOSURE: While I have no financial holding in FreeAgent, my long-term partner does hold a share in the company)

Xero - is arguably the big dog of the three in the sense that globally, it has over 100,000 paying customers at an annualised run rate of around $NZ 34.5 million That's more than double the number from a year ago. It is much smaller in the UK and in volume is smaller than FreeAgent or KsahFlow. It is also the only one of the three that came to market as a public company with a current market cap of around $NZ 498 million. In the UK, Xero is led by Gary Turner, one of the most seasoned accounting vendor execs I know.

Like KashFlow, Xero started with the simple idea that accounting should be easy and well designed. Today the company describes its product as 'beautiful.' I'm not sure I'd go that far but it is very easy to understand and use and of the three is more 'accounting like' than the others. It therefore appeals to those that want more than KashFlow offers but do not want to be on a more vertical market solution like FreeAgent.

Xero built automated bank feeds in from the start, arguing this would be a significant differentiator. That gave them a five year advantage over competitors in both their home turf and the UK. Today, they have feeds from more than 5,000 banks around the world. That advantage will shrink as the technology needed to do the same is being rolled into other solutions. Functionally, Xero will argue it is ahead of the pack, especially as it has more development resources and baked in multi-currency early on. That is always debatable and dependent upon customer context but there is little doubt Xero makes for an easy Sage/Intuit/MYOB replacement for (mostly) service businesses.

Xero also has a distinctive go to market strategy that tries to bake in distribution via the professional accountant at an early stage. The practitioners I've met who use Xero say it is enabling them to develop entirely new business models. In one case I have seen a tripling of professional revenue in 18 months. This may mean fewer customers in the short term but it protects the enterprise value of those customers while allowing for a robust distribution model.

Xero has made a few acquisitions along the way. These have been designed to improve its ability to service the professional market and so foster an atmosphere that makes it the preferred solution for practitioner clients. This is a smart move because despite customer choice, many SMBs will so as their professional advisors tell them.

Where Xero has outshone the competition is in mobile offerings called Touch. Again this will only be a temporary lead as others play catch up. The trick here is to ensure a great UI exposing the kind of functionality users most need on a small format device. While Xero have concentrated on iPhone, (the latest release included bank view) Android development of Xero Touch is in place. Also coming soon is some beefed up online invoicing but details are sketchy. Elsewhere, Xero is adding US specific functional requirements like cheque printing. (Yes, they still print cheques and it is a core requirement over there.)

As noted elsewhere, Xero offers a significant number of partner add ons spanning the gamut of CRM, payment processors, point of sale, inventory management and many others. Pricing: Tiered and from £12/month.

Accountancy software provider IRIS Software Group has launched a cloud-based file sharing system designed for use by accountancy firms.

The vendor's IRIS OpenSpace system will allow accountants to work more collaboratively with their clients, the company said, and is being made available free of charge.

The product is also being touted as secure alternative to email, which is often the way accountants share files with their clients. The system also complies with the necessary UK data protection legislation, and is hosted on Microsoft Windows Azure servers located within the boundaries of the EU.

IRIS OpenSpace offers functionality for accountants that is not available through consumer cloud platforms, such as Dropbox, the vendor claims.

The system automatically alerts clients when new items, such as draft tax returns or financial statements, are ready for their review or input. Clients can also use the portal to securely upload documents required by their accountant, such as bank statements, payroll slips, receipt scans and trial balances.

For existing IRIS customers, the new platform will integrate with the firm's Accountancy Suite and PTP Accounts software.

Phill Robinson, CEO of IRIS Accountancy Solutions, said: “We believe this type of cloud-based product can transform the relationship between accountant and client.

"IRIS OpenSpace takes the best of consumer cloud applications and industrialises them for the accountancy sector. Security, integration with our own products and ease-of-use have been our priorities while building the service and we believe that it meets a previously unfulfilled need," Robinson added.

Earlier this week, FreeAgent announced it now has a native feed for Barclays Bank data. This means that Barclays customers using FreeAgent will see their data automagically sucked into the FreeAgent system with no human intervention. From the blurbs:

"...the new feature allows you to set up automatic daily feeds of transactions from your Barclays Business account directly into FreeAgent, without the need to mess around with electronic statements.

"Getting started is simple. You just hit the Enable Daily Feeds button when viewing your Barclays Business account in FreeAgent and once it’s all set up your transactions will be automatically loaded every day into FreeAgent."

Xero has had a similar facility with HSBC since 2009. Gary Turner, UK MD Xero claims the company has some 6,000 of its customers using this feed.

Xero has always claimed this as 'game changing' a term I find offensive at the best of times. These types of feed will be de facto standard in years to come. That means they won't be a competitive issue as between SaaS accounting vendors but they do mean that businesses will be much more efficient in handling transactions.

Today, however, that's not the case. From comments I have seen, customers are actively making buy decisions based upon the feeds that are automated combined with the service on offer. Example:

"This is great news, I'm emailing all of my clients now to tell them to change to Barclay's Bank. Very exciting."

However, not all are convinced:

"Great news that it is moving. For all those that suggested moving clients to Barclays please talk to Barclays users first you might not be so quick to jump ship. I don't have a client using them that would do it again."

Clearly Barclays has a credibility gap to cross.

Other players are not standing by. While not well known in the UK, Zoho has just announced Yodlee connectors for its Zoho Books offering:

“Our goal with Zoho Books is to make it the must-have accounting software for every SMB,” said Raju Vegesna, Zoho evangelist. “That means making Zoho Books powerful yet easy to use, so they can effectively track their business financials without wasting time and effort. The new automatic bank feeds feature reinforces that efficiency and effectiveness by reducing the burden placed on the user.”

In the US, InDinero does something similar. Net-net, bank feeds are seen as a way of removing friction from financial processes and cloud vendors are not hanging around while the banks make up their minds what to do about it.

But others have muddied the waters. In a thinly veiled attack on providers that use Yodlee, Duane Jackson, CEO Kashflow said:

The data doesn't come direct from the banks. It comes from a third-party called Yodlee. Yodlee don't have permissions from the banks either. They use a technique called "screen scraping". To do this, they require the user to hand over their internet banking log on credentials..."

"If someone robs £50k from your bank account through no fault of your own, you're protected, the bank assume liability. If you've breached your bank T&Cs by handing over your credentials to someone else then the liability is yours. You're not going to get your money back."

This is something of a straw man argument because to the best of my knowledge, there has not been a single reported case of Yodlee related fraud in the many years the company has been in operation.

Even so, the screen scraping technique is a brute force, belt and braces approach to a problem the banks should be solving. KashFlow thinks this problem can be solved by oAuth but if you read through the HSBC blurbs on this topic under HSBCNet, then it is clear there is much more to this than meets the eye. Ever it was so when it comes to bank security.

The broader issue though is the apparent unwillingness on the part of other banks to join the party. I know the software vendors are frustrated because it means their customers may be forced to make choices they otherwise regret. In the world of banking, the last few years have taught us that all banks are not created equal and the extreme risk aversion currently dominating the banking mood doesn't help.

I am aware this came as a shock to the Xero system since they enjoy good success in their native New Zealand in getting local banks to play ball.

My sense is that when the other banks start to see customers drifting away then they will act. I am aware for instance that FreeAgent has scooped up thousands of customers as part of its Barclays My BusinessWorks arrangement. By any measure, My Business Works has succeeded where past initiatives involving Sage have largely failed.

It is an open question as to how long it will be before the other main banks wake up to the inevitability of this kind of machine to machine integration. Anyone betting five years?

A cloud-based accounting system is claiming to be the first to integrate with Microsoft Outlook, allowing products and services to be invoiced and sold directly through the email application.

The app has been developed by Danish company iAdvice, which provides customised IT services for major enterprise resource planning (ERP) platforms, and is designed to integrate with software-as-a-service (SaaS) accounting platform E-conomic.

iAdvice developed the app based on their own needs and said it has increased the amount of work it is invoicing for by 20 per cent. Johnny Hansen, iAdvice chief executive explained how this was achieved by linking invoice information with the consultants’ Outlook email.

“We use the E-conomic system ourselves and noticed we weren’t invoicing for many smaller tasks because our consultants were not using the accounting system on a daily basis – they don’t register time in E-conomic but they use Outlook all the time,” Hansen said.

The e-cotime app is an additional menu item in Outlook that allows the user to select time in their calendar and a description for the work carried out, along with customers, orders and products. This information is automatically transferred to E-conomic, which makes it available to the accountant or bookkeeper for invoicing purposes.

Although the app is currently only available in Danish (but will be rolled out across Europe in the next few months), the SaaS accounting firm E-conomic said its development demonstrates recent cloud-based accounting growth.

With the development of new apps through its open application programming interface (API) increasing their number by over 40 percent in the last year, E-conomic is claiming the world’s largest selection of accounting apps integrated with its system.

“We have always held the view that data should be able to flow freely between business systems which is why we developed E-conomic with an open API”, said Anders Bjornsbo, UK operations director of E-conomic. “Consequently, other organisations have been able to develop apps which integrate directly with E-conomic – a trend which has significantly increased our customer base over the last 12 months.”

He said the E-conomic app store also has mobile apps, as well as apps that integrate with web shops, point of sale, scanners, customer relationship management (CRM) systems, payroll, banking, invoicing and stock control.

Another of the latest apps for E-conomic integrates online retail operations from the platform Carry The One with the SaaS accounts system.

Lech Madrzyk, chief executive of Carry The One said that, historically, small businesses that rely on online sales, have had to manually enter data into their accounting system. But its E-conomics app integration enables them to import sales from an e-commerce store directly into their accounting system.

“We saw integration with E-conomic as a fabulous opportunity as they are one of the very few SaaS accounting applications that have the functionality of full inventory and stock control options as part of their system – other online accounting providers tend to have very limited functionality in those areas, but they are essential for many businesses that sell online,” said Madrzyk.

One of the real surprises the last five years comes from watching the rise of SaaS/cloud accounting vendors.

When I first tripped over this category nearly six years ago there were only a very small number of players of any substance and pretty much nothing going on in the UK. That landscape has changed dramatically and today you can count on a slew of vendors who are gaining sufficient traction to make a difference.

In the UK, we have six players all vying for a seat at the winner's table: Xero, KashFlow, FreeAgent, BrightPearl, Twinfield and Liquid. To that list you could add Freshbooks, except that's not a full accounting solution but a very popular billing app. You could add in Crunch but that's both a software and services unit.

All have done sufficiently well that they have received fresh capital injections the last couple of years. Some, like Xero, have gone straight to the stock market, others have gone the more traditional private placement/VC route. That should tell you one thing - investing in SaaS/cloud accounting is seen as good business.

But, has it really changed the accounting game? You can argue that all the above mentioned players have disrupted the market currently dominated by Sage. But when you look closely at Sage's numbers you quickly discover that the combination of these new vendors have taken pretty much all of Sage's organic growth in its core market.

Sage will argue otherwise but my research tells a different story. What the new vendors are not doing is attracting a mass defection from Sage. Why? There are plenty of reasons on offer such as:

• People get used to something and keep going with it, even if it is not that good
• Accountants control the relationship with clients and tell them what they'll use - mostly Sage
• Potential customers don't feel confident using an accounting program
• SaaS/cloud remains suspect as a stable environment - witness the number of high profile outages
• Cloud accounting doesn't compete on functionality

The evidence coming from the vendors implies the reverse, hence why I am able to say that the combined strength of the new boys and girls on the block is eating into what should be Sage's new business. But that's about it - for the moment. Any additional gains are peripheral - a few hundred here and there and very little by way of mass defection. That may not be the picture in a few years' time but I believe all the above vendors are insufficiently advanced to take advantage of what should be happening. Why? Last week, Marc Andreessen, he who co-founded Netscape and has since become something of a VC pundit said this:

"My own theory is that we are in the middle of a dramatic and broad technological and economic shift in which software companies are poised to take over large swathes of the economy."

What does he mean?

"In today's cars, software runs the engines, controls safety features, entertains passengers, guides drivers to destinations and connects each car to mobile, satellite and GPS networks. The days when a car aficionado could repair his or her own car are long past, due primarily to the high software content. The trend toward hybrid and electric vehicles will only accelerate the software shift—electric cars are completely computer controlled. And the creation of software-powered driverless cars is already under way at Google and the major car companies... ...in many industries, new software ideas will result in the rise of new Silicon Valley-style start-ups that invade existing industries with impunity. Over the next 10 years, the battles between incumbents and software-powered insurgents will be epic. Joseph Schumpeter, the economist who coined the term "creative destruction," would be proud."

[My emphasis added] Apply that to accounting and what do you get? I have long argued that a truly disruptive small business accounting application does three things:

1. Makes it brain dead easy for businesses to keep accurate records
2. Adds value by providing actionable information from the underlying transactions
3. Transforms the professional accountant from being a person who crunches numbers and checks the books to one who becomes a genuine trusted advisor

Some of the vendors will argue they've already done that. Xero customers I recently filmed were unanimous in their praise for the way in which their accountants are helping them.

Maybe so but that's only a fraction of the story. The professional accountant still has to do a fair amount of work to turn Xero (or anyone else's) produced numbers into accounts that meet statutory and tax requirements. That's one of the reasons that Crunch has established itself as a software AND services businesses, offering a turnkey service. But that's a long way from being the fully automated, cradle-to-grave accounting solution I envisage. In my world the user barely touches the solution except perhaps to generate orders or invoices. Instead, they see actionable information pushed to them on any device when they need it.

At the other end, the professional accountant has an automated set of working papers with alerts for things they need to review. They have dashboards that show benchmarking data so they can assess how client groups are performing. They also have their own data that shows them how they are performing. Statutory information and working papers are available at a touch of a button, only requiring review for any alerted anomalies. Statutory returns are automatically generated, again with alerts so that there is advance warning of any likely problems.

In other words, we finally get to that point where the complexities of book-keeping and accounting are buried except for those that really need to see the data. As we enter the next phase of development in small business accounting solutions, it won't be the features and functions that win. It will be the extent to which solutions totally disrupt the accounting profession.

Most of the foundations have been laid by most of the players mentioned above. Some will argue my vision is too narrow.

Really? I reckon none of the vendors have more than 40-50 percent of what's really needed in my vision. Some will argue they can (almost) get there through add-ons. Not good enough. They'll need to own a lot more than they do today. When they've got to 80 percent then come back and tell me what's new and exciting.