Sole trader accounting software: Simple tools for your business

Published Monday 26 January 2026

Table of contents

• What to look for in sole trader accounting software
• Key features that matter for sole traders
• Why accounting software works better than spreadsheets for growing businesses
• Benefits of cloud-based accounting software
• How to choose the right accounting software
• Making accounting software work for your business
• FAQs on sole trader accounting software

Key takeaways

• Choose accounting software that automates daily tasks like invoicing, expense tracking, and bank reconciliation to save time and reduce manual data entry errors that can affect tax filings and business decisions.
• Prioritise cloud-based solutions over spreadsheets because they provide real-time financial insights, secure data sharing with accountants, and automatic backups while maintaining compliance and audit trails.
• Test software through free trials before committing to ensure it matches your workflow and technical comfort level, while considering growth potential for features like payroll if you plan to hire employees later.
• Look for essential features including simple invoicing, automated expense tracking, secure bank connections, tax compliance tools, and real-time reporting to get a complete view of your business health.

What to look for in sole trader accounting software

Choosing the right accounting software is about finding a tool that simplifies your work, not adds to it. As a sole trader, you need a solution that's easy to use, saves you time, and can grow with your business.

Look for software that automates daily tasks like invoicing and expense tracking. It should give you a clear, real-time view of your finances so you always know where you stand. Good software also makes tax time less stressful by keeping your records organised and compliant.

Key features that matter for sole traders

When you're running the show on your own, every minute counts. The right features can give you back valuable time to focus on your passion, not your paperwork. Here are some essentials to look for.

• Simple invoicing: Create and send professional invoices in just a few clicks, and get paid faster
• Expense tracking: Easily capture receipts and categorise expenses on the go, so you never miss a deduction
• Bank connection: Securely connect your bank accounts so transactions flow in automatically, making reconciliation easier
• Tax compliance: Prepare and lodge your Business Activity Statement (BAS) and other tax obligations with confidence; according to the ATO, lodging electronically may even grant you an additional 2 weeks to lodge and pay.
• Real-time reports: Get an instant snapshot of your cash flow, profit and loss, and overall business health

Why accounting software works better than spreadsheets for growing businesses

Spreadsheets fail as accounting solutions because they lack the automation, security, and compliance features that sole traders need. While Excel might seem cost-effective at first, dedicated accounting software can give you clearer, more reliable financial information:

• No real-time insights: Spreadsheets show static numbers without context, while accounting software provides live cash flow updates and visual reports that help you understand your business performance.
• High error rates: Manual data entry can lead to costly mistakes that affect tax filings and business decisions, while automated systems reduce the risk of errors through bank feeds and smart categorisation.
• Limited scalability: Spreadsheets can't handle payroll, automated invoicing, or secure data sharing, while dedicated software grows with your business needs through integrations, with some platforms offering marketplaces of about 700 apps for various industries.
• No security or audit trail: Anyone can alter spreadsheet data without leaving traces, creating compliance risks and potential fraud exposure, while accounting software maintains secure, tamper-proof records.

When you run your own business, using the right tool for the job matters. Choose accounting software early so you can work confidently as you grow.

Benefits of cloud-based accounting software

Cloud-based accounting software delivers the mobility and automation that sole traders need to manage finances efficiently. Key advantages include:

Multi-device access

Work from your laptop, smartphone, or tablet anywhere with an internet connection, eliminating the need for office-based software.

Streamlined features

Get essentials like invoicing, expense tracking, and tax reporting without paying for complex systems you do not need.

• Automated data entry: Bank feeds import transactions automatically while smart tools capture receipt data and send payment reminders, saving hours of manual work and helping to cut down on data entry errors
• Automatic updates and backups: Software updates happen automatically without disrupting your work, and your data stays secure with automatic cloud backups

Bank-level security

You get strong encryption and secure access controls for your financial data, giving you better protection than local storage or paper records.

• Secure data sharing: Grant your accountant or bookkeeper controlled access to specific areas of your accounts, so you can work together easily at tax time without compromising security
• Affordable monthly pricing: Subscription plans spread costs over time rather than requiring large upfront payments, which can help your cash flow as you grow

How to choose the right accounting software

Choosing the right accounting software requires evaluating your current needs and future growth plans. Follow these steps:

1. Research proven solutions: Ask other sole traders, accountants, and bookkeepers which software they recommend for businesses like yours.
2. Consider growth potential: Choose software that can handle payroll and multiple users if you plan to hire employees later.
3. Test before committing: Take advantage of free trials to ensure the software matches your workflow and technical comfort level.

Making accounting software work for your business

The right accounting software transforms how you manage your business finances, automating routine tasks so you can focus on growing your business. Whether you handle bookkeeping yourself or work with an accountant, cloud-based software provides the real-time insights and professional tools you need to make informed decisions and maintain compliance.

Ready to streamline how you manage your finances? Try Xero for free and see how the right software can change the way you run your business.

FAQs on sole trader accounting software

Here are answers to some common questions sole traders have about accounting software.

Do I need Xero as a sole trader?

Yes, Xero is designed to help sole traders manage their finances with ease. It helps you stay on top of invoicing, expenses, and tax obligations such as Single Touch Payroll (STP), which employers must use. That gives you more time to focus on your business.

Can I do my own accounting as a sole trader?

You certainly can, especially when your finances are straightforward. Using intuitive accounting software like Xero makes it simple to manage your books yourself. As your business grows, you can easily collaborate with an accountant or bookkeeper right within Xero.

How much does Xero cost for a sole trader?

Xero offers a range of plans to suit different needs. The Starter plan is a great option for sole traders and self-employed individuals, providing all the essential tools to manage your finances for a simple monthly subscription.