Founders buy software the way they buy stationery in week one — enthusiastically, and mostly before the need exists. The honest version of this list is short, and half of it is free.
Software
The startup software stack, honestly.
Accounting software, a bank account that feeds it, and receipt capture. That is year one. Here is what arrives later, and what most founders buy far too early.
The short answer
For most UK startups the whole stack in year one is: accounting software (FreeAgent or Xero), a business bank account that feeds it, and receipt capture. Payroll software arrives with your first employee; cap table and share scheme tools arrive with your first investor. Everything else is optional and most of it is bought too early.
The stack that actually matters
In the order you need it
- 1Accounting — FreeAgent or Xero, from day one
FreeAgent is included free in every one of our packages, worth up to £330 a year. Xero suits more complex businesses — multi-currency, inventory, bigger teams needing different permissions. Both file under Making Tax Digital, and we set up whichever genuinely fits rather than whichever suits us.
- 2A bank account that feeds it, same week
A live bank feed is the difference between twenty minutes a week and a lost weekend in January. See business banking — including, plainly, who the free option does not suit, because it rules out a good number of funded startups.
- 3Receipt capture, immediately after
Photographing a receipt at the moment you get it is the highest-return habit in small business admin. Both FreeAgent and Xero do it in the app. You do not need a third tool for this.
- 4Payroll — at your first hire, not before
Real Time Information submissions every payday and auto-enrolment duties from day one of employment. We run payroll from £8 per employee per month, £25 minimum, which is usually cheaper than software plus your own time.
- 5Cap table — at your first investor, not before
A spreadsheet is fine for two founders. Once there is a round and an option scheme, the register has to agree with Companies House — which is work we do rather than software you buy.
- 6Forecasting — whenever cash gets tight enough to matter
A spreadsheet you understand beats a tool you do not. Start with our free cashflow template and only buy something when it genuinely cannot cope.
What we would not buy yet
Common early purchases that can wait
- A CRM, until you have enough customers that you are actually losing track of them.
- Expense management software, until you have staff spending money that is not yours to watch.
- Project and time tracking, unless you bill by time —— in which case it is essential rather than optional.
- Anything sold on the basis that it will —“save you money on tax—” without a named relief attached to it.
- A second accounting system to sit alongside the first. This happens more than it should and it never ends well.
Questions
Straight answers
What accounting software should a UK startup use?
FreeAgent or Xero for almost everyone. FreeAgent is included free in our packages and is excellent for a company with straightforward needs and a UK bank feed. Xero is the better answer once you have multi-currency, inventory, a larger team needing different permission levels, or an investor expecting a particular reporting stack. We set up whichever genuinely fits rather than whichever suits us.
Do we need anything beyond accounting software in year one?
Usually a business bank account, accounting software and a way to capture receipts. That is it. Payroll software becomes necessary at your first employee, and share scheme or cap table software when you have investors or options. Everything else can wait, and buying it early is a common and expensive way to feel productive.
Is free accounting software good enough?
For a genuinely dormant or pre-trading company, often yes. Once you are trading, registered for VAT, or filing under Making Tax Digital, you need something that keeps digital records properly and files. The cost of the software is trivial next to the cost of reconstructing a year of records, which is what free tools tend to end in.
What about cap table software?
Not until you have something to track. A spreadsheet is fine for two founders and no investors. Once you have a funding round, an option scheme and a register that has to match Companies House, dedicated tools earn their keep — and so does having somebody keep the statutory registers in agreement with them, which is part of what we do.
