‘Online accountants’ – What you need to know

The term ‘online accountant’ is banded about quite freely these days, but in this new Digital era we find ourselves in – what does it actually mean? We’ve laid down a few home truths below to help make sure you’re armed with all of the facts.

What is an ‘online accountant’?

Put simply – accountants who are using cloud-based accounting software as the basis for their service offering. These software products mean that the accountant has remote access to all of the financial data to be able to submit VAT returns, create financial statements, submit Corporation tax returns and all the other compliance tasks you would need to do to keep HMRC and Companies House happy.

The client usually connects their bank account to the software, and via an expenses management system provides their receipts and invoices to support their income and valid business expenses. Almost all of the accountant’s work can be done remotely, and the relationship is largely ‘online’ or over the phone where needed. The beauty of the cloud-based software is that the client also has their own access and visibility over their numbers and records.

What’s the difference between an ‘Online Accountant’ and a traditional accountant?

Traditional accountants, would be asking the client to send them their bank statements, and copies of all invoices and receipts. They would input this onto their own clunky server based accounting software which the client has no visibility over, presenting them with accounts and tax returns once prepared.

The traditional methods are generally more manual, take longer, and you’ve guessed it – lead to higher fees. This was the only option 10 years ago, but the recent technology advances have enabled the automation of the bookkeeping and accounting tasks right through the whole process. Accountants who are using the new tools to their advantage can make efficiencies, save time, reduce their overheads and ultimately reduce their fees. The automation of some of these tasks also improves accuracy by cutting down on human error.

So what does this mean for the client?

The technological advances in this space in recent years, have had a big impact on the way small businesses work with accountants. Having your software automatically pulling in your bank transactions, combined with a paperwork management system like Receipt Bank – will significantly cut down the time you need to spend doing this stuff. Imagine printing off your bank statements, printing off all of your invoices and receipts, ticking them off and having to put the whole bundle in the post – no thanks!

You as the client also now have the added benefits of being able to view your financial performance in real time (as long as the bookkeeping is kept up to date) You’ll have better visibility over cash flow, and you should be better equipped to make more informed decisions.

It all seems too good to be true…

… Maybe it is. Be wary of the bigger firms advertising very low monthly fees – there are a few potential issues here you need to think about.

Service levels – There’s no such thing as a free lunch! Watch out for very low fees. Generally speaking with a larger outfit the less you pay the worse your service level is going to be. You may find you are waiting for days for responses to your questions, if you call you might always speak to a different person which doesn’t help you get your questions answered. They won’t keep your bookkeeping up to date, and you may find returns are submitted late. Frustratingly it’s also sometimes difficult to talk to an actual accountant, lots of ‘account managers’ not so many accountants!

Packages on very low monthly fees will also usually try and keep all communication to email which can lead to inefficiencies.

Extra Fees – Secondly watch the ‘extra fees’. The monthly cost may start low but then creep up as more and more additional fees are added for things you may have thought were included. Always make sure you understand what’s included and what’s not at the outset.   

Could I do it all myself?

The software is intuitive, and it is designed for people who are not accountants to be able to use it. So in theory you could go it alone. You will struggle to prepare your financial statements, as that gets a bit more technical – unless you’ve got your double entry accounting down to a fine art! If you end up with a tax audit, or need to explain things to HMRC you may also find yourself in hot water.

For a relatively low cost, and a good night’s sleep, you’ll get the peace of mind it’s being done right. You can use the time you get back wisely! Also – It will take you a lot longer to do it if you don’t really know what you’re doing.


There are loads of products out there now, but some are definitely better than others. We’re a Xero partner and all our clients are on Xero so we’re a bit biased there – but in our view it’s genuinely the best software for small businesses. Quickbooks is also good, and better than Kashflow and Freeagent.

Some of the larger online accounting firms have developed their own software which you’ll be forced to use if you sign up with them. We struggle to understand how they can compete with a global software company like Xero. You won’t get the updates as frequently, you’ll find it’s clunky, and you’re screwed if you want to switch accountants. Trust us here, it just won’t work as well!

Xero also integrates with loads of other applications (expenses management, CRMs, Inventory management, booking/ invoicing systems) which makes it a really useful platform to help grow your business on all sides.

PennyBooks advice

You want to be 100% sure you’re working with accountants who are using the right tools and making the technology work. This ultimately saves them time allowing them to reduce their fees, but it also saves you time and hopefully takes some of the pain out of the process.

But you still need to build a good relationship with your accountant. If you use them right, you can make them work for you and get some good advice from them! You need to be able to pick up the phone or jump on a video call when you have questions and be confident that you can get them sorted.

Like all these things it’s a balance, but the relationship element is important and not to be overlooked!

To find out more on how PennyBooks can help simplify your accounting needs, book a free call with one of our directors today!


James Watson