Which accounting software should UK businesses use?

Designed around UK rules, not bolted on later

Some low cost or generic systems treat UK requirements as an addon. In practice that can mean awkward VAT screens, messy “workarounds” and reports that need manual rework for UK GAAP.

QuickBooks and Xero both have UK specific versions and have been shaped heavily by the UK market. Their default reports, VAT treatment and year-end tools are designed to support UK accountants and HMRC, which reduces the amount of adjustment your accountant has to make.

Stable bank feeds and powerful rules

A “bank feed” is simply an automatic connection that pulls transactions from your bank into the software each day. On weaker systems, feeds drop, duplicate or miscode items, and you end up with a muddle that nobody quite trusts.

QuickBooks and Xero both provide:

• direct feeds from the main UK banks, so transactions usually appear daily;
• memorised rules (for example, “any transaction to this supplier is categorised to 'Software' plus 20% VAT”);
• simple screens to match card, PayPal and payment processor entries.

Once the rules are set up correctly, you can clear a week’s worth of transactions in minutes, and your bookkeeper can keep everything up to date without scrolling through long CSV files.

Cleaner VAT, MTD and CIS handling

VAT and CIS are where we see the biggest quality gap between “good enough” software and professional grade platforms. Mistakes in these areas can lead to HMRC queries, underpayments or overpayments that take months to sort out.

• Both QuickBooks and Xero are HMRC recognised for Making Tax Digital for VAT and support standard VAT, cash accounting and flat rate schemes when configured correctly, with a clear audit trail.
• Each platform has dedicated CIS features so you can calculate CIS deductions, track CIS suffered and, where needed, file CIS returns electronically to HMRC.
• Xero also offers a CIS contractor add on and integrates well with specialist CIS and project apps if your setup is more complex.

Cheaper systems often make CIS and VAT feel like an afterthought. That might be tolerable for a very small non VAT trader; it is not acceptable if you have grown beyond that level.

Day-to-day bookkeeping in QuickBooks

QuickBooks is strong at turning messy real world transactions into tidy records:

• Bank feeds: robust connections to major UK banks, business credit cards and payment providers, reducing manual imports.
• Rules: you can create simple rules to categorise recurring transactions (for example, software subscriptions, fuel, tolls), including the VAT treatment.
• Receipt capture: QuickBooks’ mobile app lets you photograph receipts; it reads the main details and suggests categories, which we can then review and tidy.

Once this is set up, you are no longer faced with a pile of unexplained bank entries each quarter. Instead, most of the routine work is handled by rules and reviewed by a professional.

Invoicing, payments and credit control

In QuickBooks you can:

• create branded invoices with your logo and payment terms;
• set up recurring invoices for regular clients;
• see at a glance who owes you money and for how long;
• record part-payments, deposits and overpayments cleanly.

The most important point is not the look of the invoice but the way it connects to bank receipts and VAT. When used properly, QuickBooks makes it clear which invoices are still outstanding and which can be written off after a sensible period.

VAT, MTD and CIS in QuickBooks

QuickBooks’ VAT module is structured in a way that accountants actually use:

• you choose the right VAT scheme, and the software keeps track of it;
• every transaction carries a VAT code, so the return is built automatically;
• you can drill down from each VAT box to the underlying transactions.

For CIS, QuickBooks allows you to:

• record CIS suffered on your sales invoices and payments you make as a contractor;
• track CIS deductions so refunds and offsets tie back to statements;
• produce clear reports and, where appropriate, submit CIS returns online.

This is a major reason we favour QuickBooks for contractors and CIS heavy businesses over more basic software.

Analysis, classes, locations and projects

QuickBooks includes tools such as classes, locations and a Projects module (on the appropriate plans). Used properly, these allow you to see profit and loss by department, location or project without exporting everything to spreadsheets.

For many service businesses and contractors this level of analysis is more than sufficient. If you know you will need very formal segmented reporting as you grow, we will also consider Xero’s tracking categories alongside these tools.

Who QuickBooks suits best

• Contractors and CIS workers: strong CIS support and straightforward bank rules.
• Service limited companies: easy invoicing, recurring billing and VAT.
• Small landlords: rent and expense tracking without needing a separate property system.

QuickBooks is slightly less attractive if your structure revolves around very detailed departmental or multi-entity reporting; in those cases we also look at Xero’s tracking categories and consolidation tools.

Bank reconciliation and rules

Xero’s bank reconciliation screen is one of the cleanest on the market:

• incoming bank transactions appear on one side, suggested matches on the other;
• rules learn as you go, so repetitive items are suggested automatically;
• you can quickly flag items that need clarification or supporting documents.

For business owners, this keeps the daily or weekly tidy up work simple; for us as bookkeepers, it makes it obvious where attention is needed.

Tracking categories, projects and multi-currency

Xero’s hidden strength is analysis. It allows you to split results by “tracking categories” for e.g.:

• different locations or branches;
• types of work (e.g. consulting vs training);
• individual rental properties or units;
• teams or departments.

This lets us give you profit and loss reports by segment without needing a separate spreadsheet. If you work in more than one country or with multiple currencies, Xero’s multi-currency tools give you proper foreign currency balances and revaluations in the background.

QuickBooks also has capable multi-currency features, especially for service businesses and contractors. Where foreign currency and segment reporting are central to management decisions, we often find Xero’s approach more structured and easier to work with over time.

VAT, payroll and addons

Xero’s VAT tools are clear and consistent. It is straightforward to:

• set up the correct VAT scheme (standard, cash or flat rate);
• review which transactions are included in each return;
• keep an audit trail when corrections are needed.

For payroll, you can either use Xero’s own payroll or connect a separate specialist payroll system and post summary journals into Xero. The point is that Xero is built to sit at the centre of your finance systems and accept tidy information from the tools around it.

Who Xero suits best

• Growing limited companies: particularly where management reporting and departmental breakdowns matter.
• Multi-currency businesses: those dealing regularly in euros, dollars or other currencies and needing clearer FX reporting.
• Landlords with several properties: where you want profit per property without separate spreadsheets.

If you want a simple system and do not need this level of analysis, QuickBooks is often slightly quicker to work with. If you want more structured segment reporting, Xero is usually the better fit.

Limited companies

• Straightforward service companies: QuickBooks is often slightly quicker for day-to-day processing and CIS if relevant.
• Companies with departments or projects: Xero’s tracking categories and project tools make it easier to see which parts of the business are profitable.
• Companies with overseas activity: we often lean towards Xero because of its multi-currency reporting and tracking categories, although QuickBooks’ multi-currency tools are also capable.

Sole traders and partnerships

For sole traders and partnerships above the hobby level, both systems work well, but:

• if your work is mainly UK based and you want simple, fast bookkeeping, QuickBooks is often the most cost effective;
• if your turnover is higher and you want more detailed reporting or multiple users, Xero becomes more attractive.

Landlords

Landlords need clear rental schedules, expense tracking and sensible reporting for Self Assessment or company accounts.

• Single-property or small portfolio: QuickBooks is usually sufficient and simple.
• Larger portfolios or mixed commercial/residential: Xero’s tracking categories make it easier to see results by property or group of properties.

CIS workers, contractors and locums

• CIS subcontractors: QuickBooks’ CIS features and reporting are a very strong fit.
• Professional locums and contractors: either platform works; the choice usually comes down to how much reporting and analysis you want and which interface you prefer.

Choosing the right “start date”

We normally:

• pick a clear cut-off date (often the start of a new VAT period or financial year);
• export a simple summary of balances at that date (bank, customers, suppliers, loans, VAT etc.);
• recreate those balances properly in the new software as opening figures.

This avoids half your history sitting in one system and half in another with no clear bridge between them.

Cleaning up categories and VAT codes

A large part of our work when migrating is not just moving data, but improving it:

• tidying and simplifying the list of categories so they reflect real life;
• checking that VAT codes are being used sensibly, not randomly;
• removing “miscellaneous” categories that hide important costs or income.

The result is that your reports become more meaningful, and year-end work for your accountant becomes quicker and less expensive.

Connecting bank feeds and setting rules

After opening balances are set, we:

• connect each business bank and card account to the new system;
• set up bank rules for common suppliers and customers;
• test a few weeks of data entry so that the automation behaves sensibly.

This is the point at which clients usually feel the difference: days of manual data entry disappear, and the software starts doing real work for you.