Do you know the big challenger to both Sage and Xero? It’s something called Paper.

Over 1 million businesses, about a quarter of all, use this method for their ‘accounting’. By paper I don’t mean Excel, I mean the real thing.

With half using Excel that leaves only about 30% using proper accounting software. So HMRC’s Making Tax Digital, starting in 2018 up to 2021, is in for a challenge, or perhaps it’s the business owner with the problem as MTD is hardly optional.

So should small businesses use accounting software?

It’s worth considering. The key benefits are a discipline, security, easier VAT returns and a lower cost year end. Plus hopefully some really useful information about how the business is performing, reported now, not 12 months late. Measure to Improve is a good maxim but first you have to Measure.

Paper is insecure, not confidential and easy to lose – not to mention time consuming, basic and not much use. Whilst Excel is better in many respects it can easily suffer from mistakes, like a row missed off in the additions. We’ve all done this at least once and it can be very embarrassing. We saw one recently where this mistake transformed the results massively and had badly misled the company, crucially delaying it from taking prompt corrective action to a major problem. Sadly that is still the one glaring fault with the overwise great Excel software – it’s not smart enough to warn you. An accounting system will avoid such a risk.

Nowadays software such as Xero is designed for users who know little or nothing about accounting - that’s principally why it’s been so successful and way ahead of Sage. Our experience is that it’s understood, easy, even sexy to use. Worth a look.