Making Tax Digital (MTD), penalties for late filing, VAT registration status and the number of transactions are all worthy of consideration when trying to answer the question “Do I need software for a small business?”

What is meant by a small business?

Firstly, what is meant by the term small business?
At a simple level, a small business – ignoring sole traders - can be viewed as one of the following:

1. A micro-entity best described as a company with two of the following features:

a turnover of £632,000 or less
£316,000 or less on its balance sheet
10 employees or less

2. A small company best described as a company with two of the following:

a turnover of £10.2 million or less
£5.1 million or less on its balance sheet
50 employees or less

Is your small business VAT registered?

Turnover, of course, will be the main driver behind being registered for VAT or not. In turn, this might be influential in deciding whether to use accounting software or not.

Can I use a spreadsheet?

There is absolutely nothing wrong with using a spreadsheet to run your accounts. Other than the time taken to create and maintain it, a spreadsheet is effectively free. However, are you sure that the spreadsheet is free from error and do you have a means of complying with MTD requirements if applicable?

App based accounting software

There are some very good app/smart phone based accounting and invoicing apps available on the market nowadays. They will often enable you to deal with VAT and payroll too in one neatly wrapped package. These tend to have a free trial period followed by a subscription.

Office based accounting software

This is perhaps when it starts to get more serious. There are several packages aimed squarely at small businesses via a subscription. Like their app-based cousins these aim to wrap VAT, payroll, MTD, banking reconciliation and cashflow features in to one neat package. There are some free packages available too.

So - do I need accounting software for my small business?

The size of your small company, turnover and perhaps personal preference and experience will be the deciding factor. Making Tax Digital is ultimately likely to be a requirement for all VAT registered businesses and could, eventually, mean that some sort of software will become a must. Those not registered for VAT may still have a choice!

About the Author

Kevin Wallis

Operations Director

One of the Directors of Optima, Kevin is responsible for the day-to-day running of the company. He is also responsible for the company’s Corporate Governance, financial planning and budgetary control, resource planning and our compliance with Health and Safety laws. He is, to say the least, analytical and highly organised. More about Kevin.

Ask Kevin about Software Solutions / APL Consultancy / APL Legacy Systems Support

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