Best Accounting Software for Small Businesses

What’s an Accounting Software?

An accounting system or software is a computer program that records and processes accounting transactions, including general ledger, accounts payable and receivable, trial balance and payroll. Although businesses, especially large enterprises can develop their own systems tailored according to their own unique requirements, most businesses prefer to use third-party software. That’s mainly because it makes more financial sense for businesses, especially small businesses. They usually don’t have the budget and expertise to develop in-house solutions or use a locally modified third-party program to address specific requirements.

Types of Accounting Software

Accounting systems can be divided into two main categories i.e. cloud-based or online and locally installed or desktop software. Each type has its own advantages and disadvantages. Online or cloud-based systems are accessible from anywhere using a variety of devices, while desktop software is installed on a local machine. Many desktop software also offers cloud capabilities, but they might not be as flexible as their fully cloud-based counterparts.

A cloud-based subscription model might not be the best financial choice in the long run as recurring costs can add up to a large sum of money, while desktop solutions cost a lot of money upfront. That’s why businesses should consider their own requirements and growth potential before choosing between cloud-based and desktop accounting system.

Accounting systems can also be classified as personal accounting, low-end market, mid-market, high-end market, horizontal market, and hybrid solutions. SaaS (Software as a Service) accounting software are paid subscriptions (usually on a monthly basis) and suit organizations who prefer recurring installments instead of paying large sums of money upfront. This post primarily focuses on small businesses so the accounting systems have been selected accordingly.

Core Modules of Accounting Software

Although accounting software can vary greatly in complexity and cost, most accounting systems comprise of core modules that deal with particular accounting functions including:

  • General Ledger
  • Accounts receivable and payable
  • Billing
  • Purchase and Sale Order
  • Inventory
  • Bookkeeping

Non-core accounting modules include

  • E-payment processing
  • Debt collection
  • Employee-related expense management
  • Payroll
  • Timesheet
  • Transaction reconciliation
  • Late payment reminders

Why Small Businesses Need an Accounting System?

Every business needs to stay organized, whether large or small. Although in theory preliminary planning and budgeting is possible using spreadsheets alone, things soon start to get messy as a business continues to operate and grow. Paperwork and spreadsheets can quickly get out of hand and become almost impossible to navigate. Keeping track of changes also become a daunting task when you have to deal with thousands of entries, while any wrong entry by mistake can wreak havoc.

An accounting system helps save money, time and space and allows businesses, especially small businesses to stay productive and improve efficiency. Not only an accounting system can get more people involved, but it also provides accurate snapshots of how a small business is performing. Chances are great your competition is already using an accounting system, so it makes sense to stay competitive.

The main reason small businesses hesitate to deploy an accounting system is probably that they think it’s too complicated to install, configure and operate. However, things have changed a lot with the advancement in technology, while accounting software is now also more affordable than ever. Gone are the days of complicated programs as now small businesses have a lot of affordable options to choose from.

Whether you are a sole proprietor, in a partnership or running a trust, investing in an accounting software can greatly help you run your business more efficiently, which ultimately results in increased revenues and productivity.

Let’s have a look at some of the best accounting software for small business that offers great value for the money and is suitable for a variety of businesses. Free accounting software has also been included for businesses who are really tight on budget but still want a reliable solution to improve accounting processes.

1. Intuit QuickBooks Online Accountant

Online Accountant enables small businesses to migrate their accounting into the cloud, which relieves them from having to maintain everything locally. Being a cloud-based system, the software is accessible from anywhere and allows users to get started in very little time.

Pricing for Online Accountant starts from $5/month for self-employed/sole proprietors (currently at 50% discount) and go all the way up to $30/month for larger businesses. The Essentials package offers a great balance between price and features and is priced at $17/month. Selecting the right package depends on the features and capabilities you need, but most small businesses should be fine with the Essentials package that includes:

  • Income and expense tracking
  • Tax management
  • Invoicing and payment reminders
  • Reporting
  • Customized reports
  • Cash flow tracking
  • Estimates
  • Sales and sales tax tracking
  • Bills tracking and management
  • Recurring payments
  • Multiple users
  • Role-based access
  • Employee time tracking
  • Manual work hours
  • TSheets integration

The Plus package costs $30/month and also includes project tracking, inventory tracking, budget management, and 1099 contractor management.

2. FreshBooks

FreshBooks offers cloud-based and one of the most user-friendly accounting applications for small businesses. Android and iOS accounting apps allow team members to stay productive while on the go and perform a variety of tasks, including invoicing, expense management and time tracking. The solution is designed keeping the needs of small businesses in mind and aims to make billing painless.

What differentiates FreshBooks from most other accounting software is its user-friendliness as not only it’s simple and intuitive, it also offers powerful features that help automate tasks in just a few clicks. Being a cloud-based solution, FreshBooks is accessible from anywhere, anytime and using any device, including mobile devices. The software makes invoicing, expense tracking, time tracking and collaboration easier, while easy-to-understand reports are simple, yet powerful enough for accountants.

Pricing starts from $15/month (Lite package) and includes 5 clients, unlimited invoices and estimates, time and expense tracking, online credit card payments and expenses import from bank accounts. Plus package costs $25/month and in addition to Lite features includes 50 clients, automatic payment reminders, late fee charging, recurring invoice scheduling, and proposals. The Premium package ($50/month) offers the same features as the Plus package and supports 500 clients. All plans include:

  • Customizable invoices
  • Estimates
  • Credit card payments
  • Time tracking
  • Automatic import of expenses
  • Project Budgets
  • Dashboards
  • Reporting

3. Xero

Xero is a great option if you are looking for powerful, yet easy to use software for Mac, iPad, and iPhone. Not only it’s easy to use and affordable, but it also offers a ton of powerful features and integrates seamlessly with over 700 other business systems and apps. Round the clock support via live chat and email ensures that someone is always there to help in case you find yourself in trouble.
The accounting software is designed to help small businesses get a real-time view of the cash flow from anywhere. The time-saving features help small businesses focus on growth instead of worrying about accounting and finances.

Pricing starts from $9/month (Starter) and includes 5 invoices and quotes, 5 bills and reconciliation of 20 bank transactions. The Standard package costs $30/month, does not impose restrictions on the number of invoices, quotes, bills, and bank transactions and also includes payroll for up to 5 people. The Premium plan costs $70/month and supports multi-currencies and payroll for up to 10 people (Payroll for up to 20 and 100 people costs $90 and $180 respectively).
All the plans include:

  • Team member invitation
  • Financial performance reporting
  • iPhone and Android apps
  • Quotes
  • Invoicing
  • Dashboard
  • Connection with bank accounts
  • Integration with over 700 apps
  • 24/7 support
  • Future updates
  • SSL encryption

4. Wave Accounting

Wave Accounting is one of the best free accounting software that covers everything small businesses need to stay on top of things. Instead of charging users monthly fees, Wave Accounting makes money by offering other services related to accounting and finance such as payroll and online payments. The software is totally web-based so users don’t have to install anything and can access their data from anywhere using any device. Native apps for Android and iOS make it easier to invoice and scan receipts using mobile devices.
Users don’t have to enter credit card details for using the software unless they want to use the Payroll service or other paid services. The free software includes accounting, invoicing and receipt scanning, which is what most small business and sole proprietors need to manage day-to-day accounting. The key features include:

  • Accounting
  • Unlimited bank and CC connections
  • Unlimited income/expense tracking
  • Multiple businesses in 1 account
  • Unlimited guest collaborators
  • Invoicing in any currency
  • Estimates
  • Accept CC and bank payments
  • Invoice templates and personalization
  • Unlimited receipt scanning
  • Offline receipt scanning
  • Automatic recording of receipts in the accounting transactions

5. GnuCash

If you are looking for a free and open source accounting software for your small business, GnuCash is a great option that runs on Linux, Windows, and Mac, while the Android app helps users stay productive while on the go. It comes with almost all the features small businesses need to efficiently manage tasks including double-entry accounting, income/expense tracking, financial reporting, statement reconciliation, and statement reconciliation. Based on professional accounting principles, it can also be used to track stocks, bank accounts, bonds, and mutual funds. Its key features include:

  • Double entry system
  • Android App
  • Checkbook style register
  • Enter split transactions
  • Autofill transactions
  • Summary bar
  • Scheduled transactions
  • Reporting and graphs
  • Statement reconciliation
  • Income/expense account types
  • Customer and vendor tracking
  • Invoicing and billing
  • Accounts receivable and payable
  • Payroll management
  • Budgeting
  • QIF and OFX Import
  • Check printing

There are many packages and options available to handle your small business accounting needs.  You can also consider hiring an accountant to help you manage your books as well if your too busy to do it yourself.  There is no doubt though a good solution will be a key part of helping you to manage your business.