Why Xero and FreeAgent are the best accounting software options for small independent businesses

Why Xero and FreeAgent are the best accounting software options for small independent businesses


Hands up who thought they’d be googling accounting software when they started a business? 

Choosing the right software is important, since bookkeeping is an essential part of your business and software is an essential part of bookkeeping – but we know the last thing you want to be doing after a long work week is samping different software products. 

We’ve done that work for you! Let’s skip straight to our recommendations so you don’t need to scroll.  

  • The most common software options you’ll see talked about for small businesses are Xero, Quickbooks, Sage and FreeAgent. These are the ones you’ll likely have seen adverts for on the subway, on TV and billboards. You’ll find plenty of pro/con articles online comparing their features, but skimming through those is labour intensive in itself.
  • Of those top products, Xero and FreeAgent are our recommended options for limited companies. We’re a Xero first practice. 
  • These are also our preferred tools for more complex sole traders and partnerships (e.g. VAT registered, sell via Shopify etc).
  • The software market for more straightforward businesses that need to do self assessments (e.g. consultants, coaches) is developing rapidly, with products from digital banks, such as Starling; Mettle combined with Freeagent; and businesses like Coconut our current favourites. [Link to Digital records for self assessments when written]

 We exclusively use these two products with our limited company clients, and here’s why:


Why Xero?

Out of the two software solutions, Xero is our preferred option because:

Small business owners find Xero easy to use and understand 

Bookkeeping isn’t as simple as just clicking a button. If it was, we’d be out of a job! But whether you’re doing most of it yourself or getting regular help from an accountant, you need an app that’s user friendly and easy to navigate. Any software that makes life more stressful can get in the bin, quite frankly. 

One of our first objectives in helping our clients implement technology is to keep HMRC and companies happy. To make sure all those boring compliancy bits are running smoothly. 

Xero (and its accompanying product Hubdoc) makes it easy to do your part in keeping your financials up to date (and complying with the powers-that-be) including:

  • Uploading and managing expenses 
  • Creating and sending invoices
  • Processing your supplier invoices so you know who to pay when 
  • Reconciling the bank 


These are the bare minimum things you’d expect from all the major software options, but Xero’s design and functionality stands out. 

Take bank reconciliation as an example. Here’s a video on how easy it is.

In Xero it’s clearly easy to see the match between your bank statement and your records. 

The bank statement lines from your bank account are on the left against transactions in Xero on the right. In addition, you can clearly see what the expected bank balance is, so you can quickly see if there is a discrepancy between what Xero thinks your bank balance is and what it actually is. 

On first appearance, some of the other systems look like they function in a similar way, but the accuracy check between your bank and your digital records is hidden. 

Seems like a small nitpicky thing, I know. but in our experience, this lack of visibility can cause errors and is expensive to fix. 


You can build custom reports in Xero to help you achieve your goals

As your accountant, one of our favourite things about Xero is its reporting capabilities. You can get a detailed understanding of how your business is performing today and use reports to plan for the future. 

Let’s say you have a goal of expanding your cafe space and you want to know if it’s possible in the next three years. We can work together to create forecasts to show you the financial stepping stones to getting there. These can then be input into Xero and custom reports built to help you identify if you are on-track and take quick action if not. Your numbers can help you actualise your dreams. 

Or maybe you are a charity or not-for-profit and have to report to funders on how you have spent their restricted funding to you. Again you can build custom reports using their trackers function and use these to help you keep track of your spending per funded project. 


Xero has the highest level of integration with other software 

We work with independent businesses, mostly in the creative and hospitality industries. They’re using all kinds of apps to help them run their business, from order management systems and payment providers to project management and sales software. 

Xero connects to hundreds of third party apps – browse the list here. This means you can spend significantly less time uploading data from one software to another. Unless you love spending your evenings manually syncing your shopify transitions with your accounting software – whatever butters your toast. 

Equally, in the process of using Xero you may discover new game-changing tech you can apply to your business. 


Don’t just take it from us. Hear from our clients.

Here’s Steven, one of our clients who runs a vintage clothes retailer, talking about his experience of Xero:

Before signing up to Xero we were doing things the old fashioned way; spending a week or two pouring over a years worth of spreadsheets and paper receipts before our tax return was due. Xero integrates with all our business banking, payment gateways and POS system and is also our payroll software. This means when we’re selling online and instore all the important information is in one place, this automation makes it so much easier to use our numbers to keep a more accurate month to month picture of our finances.

Xero has a straight forward layout which means its not too hard to get hang of basic tasks. This means when I log in to do the monthly payroll it is fairly quick an easy to do the months accounting jobs, I can get back to running our business and avoid having a mountain to climb before the year end submission deadline”  

Why FreeAgent?

FreeAgent is our second preferred option for a simple reason: it’s free if you have a business bank with Natwest/RBS or use their new digital bank, Mettle*.

*Note: Mettle is also free – take a look. Thinking about choosing a bank account for your business? Here’s a blog we wrote on that: How do I choose the right bank account for my business?

FreeAgent is great value for money for limited companies with this banking connection. It has some great standard features that make the bookkeeping admin easier to manage yourself. 

That’s the catch. We only recommend FreeAgent for less complicated limited companies who are doing their own bookkeeping. Here’s why:

  • Less integrations: It doesn’t connect to as many 3rd party apps as Xero, meaning the opportunity to automate more of your bookkeeping may not be there.
  • Less reporting possibilities: It doesn’t give the same level of reporting features as Xero or the same level of flexibility to build your own reports. 

To be clear, we still advise Xero if you’re doing your own bookkeeping. But for limited companies where these specific set of conditions apply, it’s our approved runner up. 

“Upon your great advice, I got a Mettle bank account and at the same time a FreeAgent account. Took me a while to set up FreeAgent properly, but I absolutely love it and it makes my life so much easier”  Self employed Interior Decorator. 


We use Xero for all our bookkeeping clients, and only recommend FreeAgent for DIY

The Fearless Financials team are all highly experienced in Xero. Focusing on one accounting tool allows us to keep our skills razor sharp and provide the most efficient and specialised service to our bookkeeping clients. For many of our clients we’re doing the bookkeeping on their behalf, giving them total peace of mind that their finances are handled. 

If you are doing things yourself at the moment, help from the team is available to you. We have a range of support, including partner packages with less ‘bells and whistles’ where we guide and reassure you through the bookkeeping process. Here’s more on how we work.

If you want help to get Xero working for your business or you need to talk to someone about all the bookkeeping stuff, the easiest way is to fill in our questionnaire.