Online accounting review: FreeAgent/IRIS OpenBooks
Nigel Harris presents an update on FreeAgent Central, one of the pioneers of online accounting in the UK with an application tailored for freelances.
FreeAgent Central was one of the pioneers of online accounting in the UK and has successfully carved out a niche with IT contractors and one-man companies. More recently it was adopted by IRIS as its online solution for its accountant clients and co-branded IRIS OpenBooks ‘powered by FreeAgent’.
The two services are virtually identical, the main difference being that FreeAgent can be used directly from the company’s website (£15 + VAT pm sole trader/£20 pm partnership or LLP/£25pm limited company), while IRIS OpenBooks is resold by accountants who can buy subscriptions for their clients at a sliding price starting at £15 per month (down to £6 pm for firms with more than 200 OpenBooks clients). Accountants can either resell the application to clients at a price of their own choosing, or bundle it with bookkeeping or other services. The flat monthly fee includes unlimited users.
Target market Designed for freelances and particularly popular with the IT contracting community, FreeAgent is now also marketed through IRIS as an online accounting hub for accountants to support their clients.
Cost FreeAgent starts from £15/month for sole traders, rising to £20/month for partnerships and LLPs and £25/month for limited companies. The OpenBooks offering costs £15-£6/month depending on the number of users; how the sum is charged is at the accountant’s discretion.
● Simple wizard-driven set-up with good default chart of accounts, which can also be edited
● Supports unlimited user numbers, with nine different access levels
● Customisable Overview screen with innovative Tax Timeline that shows due dates and amounts for VAT and PAYE, and estimates of CT and proprietor’s personal tax liabilities
● Comprehensive and competent VAT features, with the option to file returns online from within the system
● Quotes can be automatically converted into invoices
● Projects module lets users gather time and costs under one heading and calculate profit per project; timesheet facility makes it easy for users to invoice clients on a time or time and costs basis; expenses and mileage can also be logged and charged to client
● Excellent dividend payment/administration tools and Smart User Payments designed to make life easy for one-person contractors
● Can handle multi-currency estimates and invoices and calculate gains and losses based on daily exchange rate feeds
● Export to Excel option makes local back-up easy
● Tools for accountants: IRIS users can import client’s OpenBooks trial balance into IRIS Accounts Production and monitor client accounts from an Overview dashboard.
● Basic system includes Payroll module at no extra cost; handles director’s PAYE and NIC deductions and can cater for extra employees too.
● While FreeAgent home screen is configurable, the Overview in IRIS OpenBooks is fixed
● In spite of multicurrency capabilities, there is no support for foreign currency bank accounts or costs
● Banking section assumes the user will work with electronic data feeds, so manual commands are buried under a More option
● Aside from the trial balance reports don’t have any print or export options
● Tax Timeline is not definitive, for example with limited Capital Allowances, but still useful as a rough guide
- FreeAgent is quick and simple to set up, following a five-step setup wizard that asks all the key questions.
- The default chart of accounts is useable and easily edited or extended later.
- A business can create unlimited users with one of nine different access levels to control who can access what and their ability to enter or edit transactions.
- VAT options include cash or invoice accounting and Flat Rate Scheme.
- The home screen, or Overview can be customised with widgets such as a profit and loss account for the year so far, bank accounts (with colour bank logos, picked up from the sort code when you create a new bank account), open or overdue bills, and an innovative Tax Timeline which reminds you of key company and personal tax dates, VAT and PAYE falling due based on FreeAgent calculations to date, plus estimates of future liabilities for Corporation Tax and the proprietor’s personal tax from the data held within the system. The latter may not be 100% accurate but gives a valuable early warning of future tax bills.
- Widgets on the Overview screen can be moved and rearranged in FreeAgent but for some reason are fixed in IRIS OpenBooks.
- Contact data – eg customers and suppliers – can be imported from most email software although entering them manually is not terribly onerous. Accounts can be created on the fly as new invoices are entered.
- An unusual option from the Home screen is the ability to Export your data in Excel format, allowing the user to make their own complete backup and store it on their own computer. Of course, FreeAgent takes regular secure backups of all client data too.
- Like many online services, FreeAgent adopts non-accounting terminology, so sales are entered under the Work menu while purchases and expenses are posted under Bills.
- The Work menu gives access not only to conventional invoicing but also estimates (which can be converted into invoices), projects and time tracking. Projects enable users to gather time and costs under one heading and calculate profit per project. All invoices and user notes are kept together for future reference.
- FreeAgent can handle multi-currency estimates and invoices, automatically calculating unrealised and realised currency gains and losses on invoices, based on daily exchange rate feeds. However, there is no support currently for foreign currency bank accounts or costs.
- Time tracking uses a simple timesheet to produce basic time reports that make it easy for users to invoice clients on a time or time and costs basis.
- Bills (purchase invoices) can be recharged to customers, and a scanned copy of invoices can be imported to the application’s online filing system.
- Expenses and mileage can also be logged, analysed to a project and then recharged to the client with minimal extra effort. Mileage calculations are automatically adjusted once 10,000 miles have been logged in the year.
- The Banking section seems to be set up to work with imported electronic bank statements as the default since the screen for manually entering transactions is hidden away under the More option. However, once you know where to look, entering a range of Money In or Money Out postings is very straightforward. FreeAgent is one of a number of online systems that has chosen to put bank receipts and payments on the same data entry screen – you simply choose the appropriate transaction Type from a dropdown list.
- VAT seems to be handled competently. Users have the option of filing returns online straight from FreeAgent. Once a return is filed, whether online or manually, this and all previous return periods are locked and the system prevents transactions being entered with a date earlier than the lock date. A return filed from within FreeAgent cannot be “unlocked”, which provides a strong control over the integrity of VAT records. If access rights allow, users may be able to enter or edit bills, bank transactions and expenses in a locked period but the system automatically brings these items into the next unlocked VAT period.
- A basic set of reports is provided: profit and loss account, balance sheet, trial balance, aged debtors and creditors, journals and a full nominal ledger. However, other than the trial balance, which can be exported as a CSV file (primarily for import into IRIS accounts production), none of the reports have any print or export options so the user can only print them from their browser. All reports offer full drill down to transaction level.
- IRIS users can import a client’s trial balance into OpenBooks from IRIS accounts production
- The My Money tab does some very clever and unusual stuff. Under Dividends a limited company user can create and print a dividend voucher. However, by using Smart User Payments they can be even cleverer by entering their required payment and letting the system calculate unpaid mileage claims, expenses and salary, deduct these, leaving only the balance to be paid as a dividend. Clearly designed for one-man IT contractors and similar users, this is a well-conceived and neatly delivered routine that would save a lot of complex spreadsheet calculations for a small company user looking to save time and effort.
- Unusually for accounting systems of this type, a fairly comprehensive payroll system is included in the price. The Payroll module works out the PAYE and NIC deductions for the whole tax year and displays the results on screen. Individual pay amounts can be amended and payslips printed or saved as PDFs. The Salary option shows the net pay due for each payday in a selected period or year. What is not obvious is that additional employees can be added to the system simply by setting them up as additional users – which can include users with zero access rights to FreeAgent.
- The Taxes tab predictably includes VAT reporting and details of PAYE deductions payable each month. However, it also includes a unique Corporation Tax option (or Self Assessment in the sole trader/partnership versions) which does a basic tax computation to give the business owner some indication of their likely tax bill for the year. Capital allowances options are a little rudimentary and don’t cover all types and options. However, if set up in conjunction with a user’s accountant this feature would save a lot of those “any idea what my tax bill is going to be?” phone calls to the accountant.
FreeAgent and IRIS OpenBooks represents the ideal solution for one-man IT contractors and freelancers. The service has been fine tuned to meet the needs of that sector, but more recently features such as user access controls and stock management have been added to cater for 1-10 person microbusinesses and product-based businesses.
For a business with employees the built-in payroll function makes this an extremely cost-effective package. As an accountant I was disappointed at the lack of export or print options in the reporting section; surely not that difficult to add, but apparently something for which there is no demand at the moment. If the majority of users are in fact one-man businesses perhaps on-screen reporting is adequate in most cases.
This is obviously not an issue for accountants using IRIS Accounts Production either. Accountants looking to manage clients using online accounts will find that IRIS OpenBooks provides a dashboard overview of all the firm’s OpenBooks users, with the last login details and latest bank balance shown against each client. Unlike services such as KashFlow, IRIS makes no charge to firms for this dashboard facility.
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AccountingWEB’s Head of Insight has been with the site since 1999 and likes to spend his time studying accountants’ technology habits. When not nerding out, you can find him exploring obscure indie music and searching for the perfect organic sourdough loaf from his base in Brighton, UK.