When you start a business, one of the first questions is: how do I handle my accounts? You'll hear people recommend accounting software. You'll also hear people say 'just get an accountant.'
The truth? It depends on your business, your budget, and how comfortable you are with numbers.
Here's what each option does, when to use them, and how to decide what's right for you.
What accounting software does
Accounting software (like Xero, QuickBooks, or FreeAgent) helps you track your day-to-day finances. It connects to your bank account and records income and expenses automatically. You can create invoices, track what customers owe you, categorise spending, and see basic profit reports. Most software also prepares VAT returns and gives you a clear view of your cash flow in real time.
In short:
Software keeps your books organised and gives you visibility over your finances.
It doesn't think for you, it just records and reports.
What an accountant does
An accountant is a person who reviews your finances, prepares your tax returns, files your accounts, and gives you advice. They understand tax rules, compliance deadlines, and how to structure your finances in a tax-efficient way. They'll check your records, spot mistakes, and make sure you're claiming expenses correctly. If something changes, like bringing in a co-founder or registering for VAT, they'll explain what you need to do.
In short:
An accountant adds expertise, accuracy, and peace of mind.
They're someone you can ask questions and who makes sure you're doing things right.
When software alone is enough
You might be fine with just software if:
- You're a sole trader with simple finances
- You're confident tracking income and expenses
- Your turnover is low and your tax situation is straightforward
- You're comfortable filing your own Self-Assessment
Many freelancers and micro-businesses start this way and only bring in an accountant later.
💡 Tip: Even if you use software alone, consider paying an accountant for a one-off review at year-end to check you've done everything correctly.
When you need an accountant (with or without software)
An accountant becomes essential if:
- You've registered a limited company, compliance gets more complex
- You're not confident with tax rules or HMRC deadlines
- You want to save time and focus on running your business
- You're growing, hiring, or bringing in investors
- You want strategic advice on tax planning, dividends, or business structure
Most limited companies benefit from having both software (for tracking) and an accountant (for filing, compliance, and advice).
The best approach: software + accountant
For most startups and small businesses, the sweet spot is using both. Here's how it works:
- You use software (like Xero or QuickBooks) to track your daily finances.
- Your accountant connects to the software and reviews your records regularly.
- At year-end, they prepare your accounts, file your tax returns, and make sure everything is compliant.
- Throughout the year, they answer questions and give advice when you need it.
This way, you stay organised, and your accountant has clean data to work with, saving everyone time and money.
What about free software?
Some accounting software offers free plans for very small businesses. These can be useful when you're just starting out, but they're often limited. You might not get features like invoicing, multi-currency, or VAT support. If your business is growing, it's usually worth paying for proper software, the cost is low compared to the time it saves.
Can software replace an accountant?
Not really. Software is excellent at tracking and reporting, but it can't give you advice, spot tax-saving opportunities, or explain complex rules. It also won't catch mistakes, especially if you've categorised something incorrectly or missed an expense. Think of software as a tool and an accountant as the expert who uses that tool to help you.
How to choose accounting software
If you're going to use software, pick something that:
- Connects to your bank automatically
- Works well with your accountant (most accountants prefer Xero or QuickBooks)
- Handles invoicing, expenses, and VAT if you need it
- Has a simple interface you'll actually use
Most platforms offer free trials, so you can test a few before committing.
How to choose an accountant
Look for an accountant who:
- Works with startups or small businesses in your industry
- Uses cloud-based software (so they can access your records easily)
- Communicates clearly and doesn't speak in jargon
- Offers proactive advice, not just reactive filing
- Has transparent pricing and explains what's included
💡 Foundrs can help: Once your company is set up, we can connect you with trusted accountants who specialise in startups, so you find the right fit for your business.
What if you can't afford an accountant yet?
If budget is tight, start with software and keep your books as organised as possible. When you can afford it, bring in an accountant even for a one-off year-end review. They'll check your work, file your returns, and give you confidence that everything is correct. As your business grows and your finances get more complex, you can move to ongoing support.
In Summary
Accounting software keeps your books organised and gives you visibility.
An accountant provides expertise, compliance, and strategic advice.
For most limited companies, the best approach is using both: software for tracking and an accountant for filing, compliance, and planning.
Choose what fits your budget and confidence level now, and scale up as your business grows.
Foundrs helps you start your company the right way, and when you're ready, we'll connect you with the tools and people who can help you stay organised and compliant.
