Updated on: Dec 3, 2023
Update: This article has been refreshed with the rebrand of our cloud accounting software to Joy Pilot.
Today I wanted to take a look at online accounting software for contractors, freelancers, and small businesses and how this can make their life easier. The online accounting software packages that are available for contractors have increased hugely over the last 20 years, and it’s only been within the last five or ten years that solid accounting software options have been available for contractors and sole traders.
For those of you who already use our accounting service, you will know that we offer our own cloud-based accounting software package called Joy Pilot for free to all of our clients. Our clients started using this software back in 2005, and we have been developing it ever since.
So, it goes without saying when I prepare a blog article with this sort of title, you can be fairly certain that I will recommend Joy Pilot as the one and only option.
To be fair, not only have we been a leading provider of accounting services since 2005, but we’ve also been building and developing our own online accounting software for the same period of time. This puts us in a unique position where we can customize the accounting software for both our end clients and also for our accountants to use.
So what I’m really going to do today is take you through the features of our Joy Pilot accounting software and explain to you why it’s better than any other product you can buy.
Online Contractor Accounting Software
Let’s just quickly cover the basics. Joy Pilot is a cloud-based accounting software that is always on and operates 24/7. It has been built to service the niche market of contractors and small businesses. Our aim with this software is to make it as intuitive to use as possible so that people who are new to bookkeeping for their own business can be brought up to speed quickly.
The software is available to use on a monthly subscription basis. Yes, we provide it for free to all of our clients who use one of our monthly accounting packages, but it’s also available for a very small monthly fee as a software-only product.
Invoicing Your Clients
The most critical part in any small business is being able to create professional invoices and send them to your end client. Invoices are a way of recording the work that you have performed, putting a monetary value on that work, and then sending it off to your client for them to pay. Once money arrives in your business bank account from your client, the invoice can be reconciled as paid. That’s it on the invoicing side. It is simply a means to collect money for the services that you perform for your clients.
When creating an invoice through Joy Pilot, the entire contents of the invoice are created on a single page. There are several fields you can use to record purchase order reference numbers, contact details, or any other specific information you would like your client to be able to easily access. Our invoice numbering is smart. Yes, your invoice numbers are incremented by 1 for every invoice you create, but it doesn’t matter if your invoice number format is 0001, NR-1001, or XX3-TX-0001. Our software knows how to get the last numerical part of your invoice and increment it by 1. It may sound quite simple, but you’ll be surprised how many online accounting software packages get confused with unusual invoice number formatting. This flexibility is especially useful for project accounting.
When creating your invoice, you can also select to have the invoice automatically emailed to your end client once you have created it. Not only that, but you have the option to cc yourself on the email, and you can also send a copy of the invoice to any other email addresses that you like. When you do this, the email arrives into the recipient’s inbox addressed only to them. This means your invoice recipients all get separate emails, and the privacy of each recipient is retained.
There is also a nice way to easily add billable expenses onto your invoice. These will have been expenses that your business has already incurred, and it is simple to select them and add them to your invoice.
Your invoice can be made up of an unlimited number of line items, and you can also add attachments to it. And although most of our clients create their own invoices in GBP currency, there are numerous other currency options available, not to mention the useful feature of being able to create recurring invoices.
Recording Business Expenses
The expenses page is the most commonly used page in our online accounting software. This makes sense because there are usually far more expense transactions recorded for your business than any other type of transaction. And regardless of whether you work in engineering, IT, healthcare, or the construction industry, you will always have business expenses to record.
When recording your expense, you can select the currency of the expense, whether it is billable or not, record the name of a firm you purchased the item from, and then there are the usual line items you can add if you bought several things on the same purchase transaction.
To record expenses in your online accounting software is fairly straightforward across just about every accounting product, but our clients have one further option available to them that very few software accounting products provide.
What we found is our clients would often only update their expenses once a month or once a quarter, so they may need to add dozens of expenses at a time. We have two different ways for our clients to do this: (a) they can add the expenses from a bulk update page where dozens of expenses can be added from the same screen at the same time (b) alternatively, expenses can be uploaded via a CSV file which is particularly useful where hundreds of expenses need to be added all in one go.
Another benefit offered by our Joy Pilot online accounting software is that expenses can be easily marked as paid for personally or from the company bank account. This method eliminates the need for any form of expense approval process for reimbursement because the vast majority of our users simply work for themselves and would be approving their own expense claims. This makes it extremely easy to see what expenses have been paid for from the business bank account and what expenses are due to be reimbursed to the business owner.
We have integrated payroll into our online accounting software, which runs a monthly payroll and reports via RTI filing to the HMRC. The vast majority of our users pay themselves the same salary every single month. In this case, all they need to do is enter the amount of monthly salary that they would like to pay themselves, and our payroll software will do the rest.
Every month that payroll is run (automatically), each user will be emailed the details of their monthly payroll so they know how much net pay to transfer from their business bank account to their personal bank account. If there are any taxes that are due to the HMRC, they will also be notified of this.
The tight integration means the running of payroll for our clients’ businesses is extremely straightforward. It fully complies with all HMRC RTI filing requirements and has been built to operate under a ”set and forget” model. This is an important aspect that sets our software apart from our competitors.
Take Home Payments
From a limited company perspective, there are four different ways that a business owner can take money out of their business bank account. They are (a) salary (b) dividends (c) loan (d) reimbursement of expenses.
Our online accounting software makes it extremely easy to record how the withdrawal of funds from your business bank account should be handled. The benefit here is that you can record these take-home payments without having to immediately match them to a bank transaction. This means always keeping your accounting records up to date without necessarily always keeping your bank reconciliation up to date. In many cases, this helps save time and means you don’t need to do a full reconciliation of your bank account to understand what funds have been withdrawn from your business already.
Keeping your Business Accounting Records Private
A lot of our clients are contractors who find work through a recruitment agency and often what this means is their temporary workplace has both contractors and full-time staff in the same building. Some clients found that when they were logging into their online accounting software on a Friday afternoon to create their invoice, they were wary of their account information being on the screen in front of them and potentially in view of their colleagues.
One simple thing we did with our software was the introduction of a privacy feature. When the privacy feature is turned on and when a client logs into their accounting dashboard page, all of their accounting and financial information is blurred. They can easily navigate other parts of their software to create an invoice for example, but the privacy screen gives them peace of mind that their business finances are kept private.
Filing VAT Returns
Joy Pilot has been filing VAT returns via Making Tax Digital (MTD) since this was first introduced. In fact, our software was the first product in the world to file a VAT return to the HMRC via MTD.
It goes without saying that if your business is VAT registered then your online accounting software needs to be able to handle VAT filing via MTD. So just saying, ours does (but we were also the first which makes us even better).
Approval of Accounts and Tax Return Filing
If you are a limited company contractor, you will be aware that every year your business needs to file a set of annual accounts with Companies House and the HMRC. It must also file a corporation tax return to the HMRC every year. One benefit of building our own accounting software is that the process of review and approval is done through Joy Pilot.
So if you have a set of annual accounts that are due, we will prepare these accounts and upload them to Joy Pilot for your review and approval. Not only can you view them, but you can also download the accounts, and approve them by digitally signing right there within our online accounting software. This is a unique benefit we are able to offer our clients. They also get to view all their historical annual accounts and this feature is also extended to handling personal tax returns.
Quick question. If you are a limited company contractor or sole trader, does your online accounting software automatically assess your personal tax liability for the current tax year based on your business profitability and drawings to date? Joy Pilot does. One issue we constantly found was that clients were surprised by the amount of personal tax they had to pay based on the amount of dividends they had taken for the year. To resolve this issue, we set up a personal tax planning page which calculates the tax that is due on your salary and dividend income. You can also add any other forms of income to help make the calculation more accurate.
But we didn’t stop just at personal tax. At any point in time, your limited company contractor can find out how much corporation tax and VAT they owe, and what their personal tax liability is likely to be for the year.
Here, I’ve just touched on some of the main features of our accounting software and how this can help contractors and small businesses to better manage their business and bookkeeping. Our online accounting software is constantly evolving and we make several software updates every week. Some are minor background improvements, while others are more extensive, such as the introduction of bank feeds several years ago and the work we are currently doing with AI to make the bookkeeping experience even easier.
We are a passionate small group who have been working on making the lives of contractors and small businesses easier since 2005 with plain English accounting advice supported by a super-friendly online accounting software package.
Five Frequently Asked Questions
What is the best accounting software for freelancers?
Joy Pilot is the greatest accounting software for freelancers. It has been developed continuously over a period of almost 20 years and, over that period, has constantly evolved. It has always been built with the niche of freelancer and contractor accounting in mind, so it has everything you need wrapped up in a way that is easy to use and understand.
What features should accounting software for freelancers have?
The three most commonly used features of our software are (a) creating invoices, (b) recording expenses, and (c) recording payments to yourself. To make life easier, the accounting software should handle multi-currency, bank feeds, integrated payroll, VAT filing via MTD, and have an easy-to-use bank reconciliation interface. Reporting should be simple, easy to understand, and useful.
How does accounting software help freelancers?
Accounting software helps freelancers stay on top of their business bookkeeping. The easier it is to use, the less time is required to keep your accounting affairs up to date. This is an important reason why we have always built Joy Pilot on the basis that all new features must be simple to navigate. We have found that if the bookkeeping is fast and effective, then contractors are more likely to keep this up to date. Better record keeping means better access to up-to-date financial records and reporting.
Do freelancers need accounting software?
Ten years ago, I would have said no. You could have just used an Excel spreadsheet and kept your business banking affairs very simple. However, nowadays, our clients tend to have multiple business accounts and sometimes work across different currencies. Add that to the increased use of company credit cards and you begin to see that record keeping via Excel can quickly become unmanageable. Not to mention that accounting records for VAT-registered businesses must now be electronic. So, these days, yes, I would say freelancers need online accounting software.
How can I manage my freelancer taxes with accounting software?
I’m glad you asked. Joy Pilot does a terrific job of calculating and monitoring your taxes, whether they are Corporation Tax, VAT, or personal tax. If your record keeping is up to date, then our tax calculations will also be up to date and this is how you can manage your tax affairs. Keep accounting records, record your transactions accurately, and you’ll always be able to keep on top of your taxes.