When you run your own business, keeping track of the numbers matters – but how you do it is up to you.
Some people stick with spreadsheets, others move to proper accounting software. If you’re not sure which route to take, this guide will help you weigh the pros and cons of both options.
Many sole traders begin with a spreadsheet.
A few columns for income, another for expenses, maybe a tab for mileage or invoices. It’s quick, familiar, and it does the job – at least while things stay simple.
However, as time progresses, the amount of ‘paperwork’ you have to keep on top of will inevitably grow. And, arguably, the more successful you are, the more ‘mess’ you might make.
If you’re not fully organised, you might miss a payment, lose track of a few receipts, or realise you don’t know for sure if you’ve set aside enough tax self assessment.
That’s usually the point where people start thinking about switching to proper accounting software. There’s no single correct answer.
It comes down to how you prefer to work, the complexity of things, and whether you need to record the basics or want your accounts to provide you with valuable insights.
If the world of accounting is still entirely new for you, have a look at our beginner’s guide to self-employed accounts. It covers the basics before you need to worry about tools.
Spreadsheets: fine if you know what you’re doing
Spreadsheets are familiar. Most people have used Excel or Google Sheets before. You can open a blank sheet, start logging your sales and costs, and create something that works for you. If you like to be in control, that can be a good thing.
They’re free, flexible, and you can set them up exactly how you like – even if that means it’s only really understandable to you.
Plenty of sole traders use them to track income, list expenses, maybe create a rough profit and loss summary once a year. It’s not pretty, but it can be enough if you’re not VAT registered, not sending loads of invoices, and you’re organised about your tax.
The problems don’t usually appear until something changes – maybe your income jumps, or you start missing things because it’s all too manual. That’s when the cracks start to show.
Where spreadsheets can let you down
There’s no real safety net. If you forget to log something or make a mistake with a formula, it’s easy for things to go wrong. And you might not notice until the numbers don’t add up at the end of the year.
It’s also harder to share your records with an accountant.
Most people build their spreadsheets in their own way, so unless someone else has helped you set it up properly, it can be hard for others – like an accountant – to make sense of it later.
There’s no built-in way to handle things like:
- Bank transactions syncing automatically
- Chasing up unpaid invoices
- Keeping tabs on tax you’ll owe
- Filing VAT or getting ready for Making Tax Digital
And unless you’re really careful, it’s easy to end up doing extra admin – such as copying figures between sheets or checking that you’ve categorised things consistently.
What accounting software offers
Dedicated tools do more of the work for you. Most of them will connect to your bank account via Open Banking, allowing your transactions to be imported automatically. You can create invoices, set up reminders, and track who’s paid and who hasn’t.
Some even give you a running estimate of your tax bill.
They also keep everything in one place. Your income, expenses, invoices, bank feed, and reports all live and are easy to access from one online platform.
That means less duplication, fewer errors, and a much smoother year-end process if you have an accountant (accountants have back-end access to all of your data).
If you’re VAT-registered or approaching the threshold, software becomes especially useful.
Most providers already support Making Tax Digital for VAT, and they’ll be ready when MTD expands to Income Tax from 2026.
Take a look at our guide to accounting software for sole traders for a full breakdown of features and pricing.
How much does it cost?
Unsurprisingly, the cost of software depends on the complexity of your needs, as well as the provider you choose.
However, based on our experience at ByteStart, most tools cost between £10 and £15 per month if you’re a sole trader (the costs are higher for limited companies).
Some of the popular ones include:
- Xero – used widely by contractors, freelancers and small businesses
- QuickBooks – good for sole traders and MTD-ready
- See our full comparison for more tools
If you use a dedicated accountant, check if they include software as part of the package. Several of the firms in our accountant comparison guide do, which can save you the monthly fee entirely.
Should you switch?
If you’re still in your first year and things are straightforward, a spreadsheet might be fine for now. However, once you start spending more time checking things than actually running your business, it’s probably time for a rethink.
You don’t have to make a big leap overnight. Most tools offer free trials, and you can keep your spreadsheet going in the background until you’re sure.
Once you’ve tried it, the benefit usually becomes clear – mainly when your tax return doesn’t involve three evenings of panic and backtracking through your emails.
Final word
Spreadsheets are still helpful. You might use one for tracking mileage or forecasting income, even after switching to proper software. There’s a time and place for them.
But if you’re looking for a way to save time, cut down on errors, and stay on top of tax without the stress, accounting software is probably the way to go. It’s a small cost for something that can take a lot off your plate.
Just make sure you pick a tool that suits your working style – and one that’s already set up for Making Tax Digital. You’ll thank yourself later.
From £37.50/m
From £49/m