You would never fly a plane without knowing how much fuel was on board, right?
So why run your side business or small business without knowing how much money is coming in and going out each month?
Small business accounting software helps entrepreneurs keep track of their money efficiently, and the good news is that expense tracking is easier than ever. Online accounting software can help you organize your organization and monitor the financial health of your business, and there are many options to choose from to ensure proper tracking of income and expenses.
“There isn’t one best accounting software,” says Dr. Tim Yoder, Certified Public Accountant (CPA) and accounting expert. “Every business needs to assess its needs and budget to choose the best software for them.”
Finding the best accounting software for your small business can be overwhelming as many services now offer additional features such as time tracking, accounts payable services, recurring invoices and financial reporting tools. Which features suit you best?
We asked several financial experts to estimate which small business accounting software they recommend and why. Here’s what they had to say.
Best Accounting Software for Beginners: QuickBooks Online
“[QuickBooks Online] is my top choice for accounting software for beginners because it has a huge selection of QuickBooks ProAdvisors to help you,” says Yoder. “It offers a very simple Simple Start that doesn’t overwhelm you with features. As you become more familiar with it, you can upgrade all the way to QuickBooks Online Advanced, which can be used for fairly large businesses with up to 25 users.”
QuickBooks allows you to give your accountant direct access to your account with their own login and password, and this login does not count towards your number of assigned users. Very small businesses and medium-sized businesses use QuickBooks Online to perform their day-to-day business accounting and bookkeeping.
Best Accounting Software for Freelancers: FreshBooks
“FreshBooks is known for its ease of use, with a clear interface that makes it easy to track expenses and bills,” said Bryan Sharpe, senior accountant at Solar Panels Network USA, a company that offers solar panel installation services. “FreshBooks also offers a number of useful features, such as the ability to track time spent on projects, send automatic payment reminders, and generate detailed reports.” It is important to keep abreast of creditors and debtors if you are a freelancer; FreshBooks makes the process simple.
Best Accounting Software on a Budget: Wave
“The big advantage of Wave is its free accounting, billing and receipt scanning services,” said Mark Stewart, internal CPA for Step By Step Business, a small business training platform. “This program supports the accounting needs of freelancers.” Stewart also notes that Wave allows you to run multiple businesses on one account.
Best accounting software on your phone: Zoho Books
“For small business owners who want to do 100% of their bookkeeping with their mobile device, Zoho Books is the best choice,” says Yoder. “Although there is an online desktop interface, you can perform all accounting functions through the mobile app.” The option to have both small business accounting and purchase invoice management all in one place makes Zoho Books a popular choice, especially for business owners who are also responsible for inventory tracking.
Best Accounting Software for Ease of Use: Xero
“The [Xero] application has a very clean interface that is easy to understand,” says Stewart. “It can also help your company fulfill its payroll and payroll tax obligations. Xero is cloud-based, provides a secure space to store your information and has a mobile app for easy access.” Small businesses that also need to tackle payroll may want more comprehensive accounting software to better see everything in one place.
What to Look for in Accounting Software
The most comprehensive accounting software for you will be the one that you find easy to use and has the extra features you want. Small businesses are unique; if you mainly send custom proposals, billing tools can be more valuable to you than another company that mainly sells physical products in an online store.
“Many accounting software programs have great features that businesses can take advantage of,” said Nathan Watson, CEO of vegan hair product company Lion Locs. Watson says that relying on his small business accounting tools has helped his company significantly improve work processes, especially during tax season.
Do I even need accounting software for a sole proprietorship?
The advantage of accounting software is that you can focus on what you do best in your business, instead of keeping track of numbers all day long. Once you’ve linked your accounts and set everything up in your accounting software, you shouldn’t have to spend more than a few minutes a month managing transactions. Skip the advanced features, but don’t give up money tracking altogether.
The advantage of good accounting software is that you can log into your account at any time and get a good idea of how money is coming in and out of your business, which can affect future investment decisions you make.
Tracking your expenses as an entrepreneur builds financial discipline and helps ensure you don’t put yourself in a corner with regard to cash flow.
Do I need accounting software if I don’t have an LLC?
If you have a side business or small business, but have not yet registered an LLC or C corporation, you will be classified as a sole proprietor when you go to file your taxes. In a sole proprietorship, you are taxed on income minus expenses and must prove that you had expenses by showing receipts.
Related: LLC or S Corp? The tax decision new entrepreneurs have to make
You are certainly welcome to manually keep track of your ancillary or small business expenses, but when tax time rolls around, filing your taxes will become much easier if all your transactions have already been filed and categorized in an online accounting software. You’re also less likely to miss out on potential tax deductions that help keep more of your side business or small business income in your pocket.
Accounting software can be a splurge if you’re just starting out with an afterthought or small business. However, a bird’s eye view of your numbers can help you see what’s working and make smart decisions. Get crystal clear insight into your numbers and you have a roadmap to scale your business as far as you want.