Small Business Accountants

Moving to the Cloud: Excel to Accounting Software

Moving UK small-business bookkeeping from Excel to accounting software such as Xero, FreeAgent, or QuickBooks cuts manual data entry, enables bank-feed automation, and keeps the business compliant with Making Tax Digital. The migration usually involves setting the opening balances at a cutoff date, importing the chart of accounts, connecting bank feeds, and running both systems in parallel for one month to verify accuracy before retiring the spreadsheet.

By Jordan Macey MAAT Reviewed by Noor Fiaz Updated 16 Apr 2026 4

Key takeaways

Making Tax Digital for VAT already requires UK VAT-registered businesses to keep digital records and submit via approved software, which spreadsheets alone cannot do.
MTD for Income Tax Self Assessment starts on 6 April 2026 for sole traders and landlords with qualifying income over £50,000, making software effectively mandatory.
The migration from Excel is usually done at a clean cut-off date, with opening balances, chart of accounts, and supplier/customer lists imported before live transactions begin.
Cloud accounting software automates bank feeds, receipt capture, invoicing, and VAT returns, saving most small businesses several hours a week compared with spreadsheets.
Running Excel and the new software in parallel for one month is the safest way to verify reports match before switching the business over fully.

Introduction

With the rollout of <a href="https://www.gov.uk/government/publications/making-tax-digital-how-vat-businesses-and-other-vat-entities-can-get-ready/making-tax-digital-how-vat-businesses-and-other-vat-entities-can-get-ready" target="_blank">Making Tax Digital (MTD)</a> in April 2019, it has become mandatory for all VAT-registered businesses to keep their financial records in digital format, and submit their VAT returns using MTD-compatible software. While you can continue to <a href="https://www.gov.uk/government/publications/making-tax-digital-how-vat-businesses-and-other-vat-entities-can-get-ready/making-tax-digital-how-vat-businesses-and-other-vat-entities-can-get-ready#using-spreadsheets-for-your-business-records" target="_blank">use spreadsheets for your business records</a>, you'll need bridging software to make them MTD-compatible. Here's a quick explanation of the term: bridging software is a tool that takes data from your spreadsheet, and "translates" the information digital in the correct format to HMRC's system.Sounds complex? Perhaps it's time to look into online accounting solutions that can manage your VAT processes within a single system.

Reaping the benefits of online accounting solutions

In addition to being MTD-compatible, online accounting software offers important benefits to small business owners and self-employed persons.

These include:

Immediacy: Your accounting data entry is kept up-to-date, which means that you’ll get an accurate view of your business finances at any time.
Accuracy: The software performs the calculations, thereby reducing the occurrence of human error.
Mobility: You’ll be able to access your accounts, and perform a wide range of functions over multiple devices and locations.
Actionable reports: Unlike spreadsheets, reports can be quickly generated on accounting software due to its built-in reporting and analysis tools.
Organisation and centralisation: Beyond accounting, your software is able to perform multiple functions, such as inventory management, payroll, customer relationship management and more.
It also ensures that all your data and information is stored securely within a single system.

If you’re ready to make the switch, read on for our top tips for making your transition to the cloud a smoother process:

Tips for switching from spreadsheets to online accounting

1. Pick the right time to transition to cloud accounting

The end of the financial year seems to be the obvious option for making the switch to an accounting software.

However, the year-end can be a busy time for small businesses—and this can make it challenging for business owners to allocate sufficient time to prepare their data and test out the new system.

As such, a better option could be to make the switch during your slower months. This can be the month-end, quarter-end or an accounting period that offers a clean cutoff date between the two systems.

2. Decide between moving your accounting history or entering opening balances

Should you import all your historical data, or start anew with opening balances? This can be complex, so if you’re unsure, it’s best to consult an accountant.

In most instances, it isn’t necessary to move your entire accounting history to your new software, as it’s unlikely that you’ll need to refer to past information often. Typically, it’s recommended that you export your accounting history to a backup file, and transfer only uncleared transactions to the new software.

3. Prepare your data

Different accounting software support different formats, and your software of choice will have specifications for text limits, column headings, how the date is formatted, and more.

You need to ensure that your data is free of error, and saved in the required format. Test this out by starting by transferring the first few rows of data, and check that your format is correct before you proceed with transferring the remaining data.

But before you transfer your data, it’s important that you take the time to review and clean up your current accounting records. This includes duplicate vendor records, inventory errors, lost records, calculation errors and more.

There are three steps to the cleanup process:

Perform a thorough review: Review your chart of accounts, customer list, vendor list, inventory list, employee lists and other lists you may have to correct any duplicates or discrepancies.
Do an audit: Audit accounts on your trial balance.
Seek advice from a professional: By engaging an accountant to review your work, you’ll ensure that proper accounting procedures and regulations are being followed for your business, as well as gain advice on how you can keep your books clean moving forward.

4. Keep both systems running

Run your old and new accounting systems concurrently for a period of time, until you can be sure that your new system is running smoothly.

Depending on the size of your company and the complexity of your systems and processes, you may need to run both systems for a few days, a week or even longer.

5. Make time to learn and test out your new accounting software

It’s essential that you carve out time from your schedule to get familiar with the new accounting software.

Review the training materials or guides published by your accounting provider, and don’t hesitate to get in touch with their support team if needed.

There will be new features and functions that you’re completely new to—but the more you invest in learning about the software, the more benefits you’ll reap for your business.

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Frequently asked questions

Why should a UK small business move from Excel to accounting software?

Accounting software automates the tasks Excel does manually: bank feeds import transactions, invoicing chases unpaid bills, VAT returns calculate output and input tax, and reports update in real time. It also keeps the business compliant with Making Tax Digital for VAT and the incoming MTD for Income Tax rules. Excel spreadsheets can work for the smallest businesses, but errors, version control, and MTD compliance all become harder as the business grows.

Which accounting software is best for a UK small business?

The main UK options are Xero, FreeAgent, QuickBooks Online, and Sage Business Cloud. FreeAgent is popular with freelancers and limited company directors and is free with some business bank accounts. Xero is strong for growing businesses and integrates with the most third-party apps. QuickBooks has a broad feature set and competitive pricing. Sage suits businesses with stock or multiple entities. All four are MTD-compatible.

When is the best time to switch from Excel to software?

The cleanest time to switch is the start of a financial year or the start of a VAT quarter. That minimises the opening-balance work and lets reports cover a clean period in the new system. Mid-year migration is also possible but requires extracting year-to-date figures from Excel as opening balances in the new software. Many businesses time their switch to coincide with an upcoming MTD requirement or VAT registration.

How do I migrate my data from Excel to accounting software?

Start by setting a cut-off date and preparing a trial balance in Excel for that date. Import the chart of accounts, customer and supplier lists, and opening balances into the new software. Connect the business bank account via bank feed for automatic transaction import from the cut-off date onwards. Run one month in parallel, reconcile the two, then fully retire the Excel book. Most software providers have import templates and migration guides.

Will I lose my Excel records after switching?

No. Keep the Excel workbook as a historical record, and export it to PDF or a read-only format for safe archiving. UK limited companies must keep accounting records for at least six years, and sole traders for five years after the 31 January self-assessment deadline, so the historical Excel data serves that compliance purpose. The new software holds the live records going forward, and most platforms let you upload PDFs of the old Excel as attachments.

How much does UK accounting software cost?

Cloud accounting software for UK small businesses typically costs £10 to £40 per month. FreeAgent is free for customers of NatWest, RBS, or Mettle. Xero starts around £15 per month on the Starter plan and rises to around £40+ for Standard with payroll. QuickBooks Online starts around £16 per month. Most accountants are able to provide discounted rates to their clients through their practice subscriptions.

Does accounting software replace the need for an accountant?

No. Software handles day-to-day bookkeeping and VAT submissions, but a UK accountant still adds value on statutory year-end accounts, CT600 corporation tax returns, self-assessment, tax planning, and responding to HMRC enquiries. Software and accountant work together: clean records in the software save the accountant time at year end, and the accountant picks up adjustments, depreciation, prepayments, and complex transactions that software cannot handle alone.