Choosing the Right Small Business Accounting Software

• Accounting software helps you track your accounts payable and expenses in one place.
• Accounting software packages vary in size, capabilities and integrations.
• When selecting accounting software, you should evaluate all offerings, including compliance, reporting, tracking and available add-ons.
• This article is for small business owners or financial officers looking to incorporate accounting software into their operations.

One of your top priorities as a small business owner is keeping a close eye on the money you bring in and pay out. This is why it's critical to have the right accounting software. You need a program that helps you accomplish your daily accounting tasks, including recording payments, tracking expenses, invoicing customers and reconciling transactions. Your accounting software should also help you manage your business's financial health, allowing you to generate reports that analyze your business's performance from multiple angles.

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We'll examine the factors involved in choosing accounting software for your small business and look at some excellent options. 

Primary factors to consider when choosing accounting software

Choosing the best accounting software for your business is challenging. Every program includes a different set of features, and most offer multiple pricing plans that vary in functionality, number of users and other aspects. 

To simplify your search, keep three primary factors in mind when selecting accounting software for your business.

• Cost: Would you prefer inexpensive, basic accounting software or an application that costs more but includes extra features?
• Usability: How many users must access the software? Do you prefer a cloud-based system you can access anywhere or desktop software? Do you need your accounting software to have a mobile app? What capabilities do you need the app to have?
• Features: What do you need the accounting software to do? Do you need both accounts receivable and accounts payable tools? Which accounting reports do you need to generate? Do you need it to track inventory? Do you need it to include ancillary services, such as time tracking, project management,and payroll?

Tip: If you already know what you need and only want to see our recommendations, see our page for the best accounting software for small business.

Benefits of accounting software

Hiring an accounting professional or bookkeeper, or using an outside accounting firm, isn't always financially feasible. If your business is small, you may handle the accounting yourself with the right accounting software. 

Here are some advantages of using accounting software instead of hiring an accounting professional.

• Time savings: You won't have to wait for someone else to complete the accounting tasks you require. With accounting software, you can do it yourself, with all the tools you'll need close at hand.
• Automatic records: As new transactions occur, accounting software will dynamically create and maintain a comprehensive record of your organization's financial dealings to remain compliant with government and industry rules and regulations.
• Higher accuracy: Accounting software reduces the chances of human error. This is because software can connect directly with your bank accounts, pulling transactions and other data to create detailed insights without the risk of typos or copy-and-paste errors.
• One place for all financial tasks: Many accounting software vendors offer additional services, such as payroll and tax compliance, that can be conducted, tracked and monitored from the same platform.
• Optimized payroll: With the right accounting software, you can automate your payroll activities so that benefits and taxes are calculated to provide accurate, prompt payment for every employee.  

Key takeaway: Accounting software makes it easy to handle your financial tasks and is less expensive than hiring an accountant or bookkeeper.

How much does accounting software cost?

Accounting software varies in cost, depending on its features, the number of users it supports and other factors. Many of the best accounting software companies offer cloud-based software as a service rather than software licenses, so they charge a monthly subscription fee.

Accounting software as a service is usually quite reasonable. These packages usually offer multiple plans with paid tiers typically ranging from $10 to $40 per month. Organizations that have unique needs or require accounts for multiple users will have custom pricing plans, but even these plans are affordable. Of course, discounted rates are often available if you're willing to pay for the software annually rather than monthly.

More expensive plans often include advanced features such as expense reports and sales tracking, recurring invoices, project tracking, billing, automatic past-due reminders, team functions, advanced reporting capabilities, inventory tracking, and purchase orders. Many accounting software companies offer integrations to augment the software's capabilities or connect it to other business programs, sometimes at an additional cost.

Several companies offer a trial version of their accounting software, though they usually have basic features or limit the number of users, clients or transactions. Some free accounting software providers make their money from the add-on services they offer. These programs are helpful if your business is very small or you want to take the software for a more extended test run than the trial period allows.

Key takeaway: Accounting software costs vary by the level of service you choose, the capabilities you need, and whether you choose cloud-based or desktop software.

What usability factors should you look for in accounting software?

To find the best accounting software for your business, you need to decide how and where you want to use it and if anyone else will be using the system. Here are some factors to consider.

Easy integration

Even the world's most feature-packed, reasonably priced accounting applications won't do your business much good if they don't integrate with your existing solutions, such as sales platforms, shipping systems and even payroll applications. By choosing accounting software that works with your existing solutions, you won't have any compatibility issues leading to potential time-consuming errors. 

Multi-user access

Most accounting programs allow you to invite other users to the system and control the data they see and the tasks they access. For instance, you may wish to give your business partner and accountant full access while allowing your employees to use the system only to track their time and invoice customers. 

Some systems allow you to invite multiple users at no additional cost; others provide free accountant access but require you to subscribe to a higher pricing plan or pay extra to add other users to the system. Some solutions offer "unlimited" payment plans to accommodate growing businesses while providing robust account options. Understanding your company's access needs will guide you toward the right decision.

Multi-business support

If you own more than one business, you may want accounting software that supports multiple small businesses under one account at no additional cost. Otherwise, you'll pay extra to set up separate accounts for each entity.

Cloud-based software and mobile access

Most of the top accounting systems are cloud-based so that you can access your account anytime, anywhere from any computer with internet access. This ease of access helps you run your business remotely, whether you're at home or on vacation.

Many also offer mobile apps to help you monitor key information and accomplish core tasks on the go, which is especially helpful for teams working from home or in the field. Some packages offer separate apps for employees with basic features, such as tracking time and submitting expense receipts.

Mobile app capabilities vary, so if mobile access is an essential feature for you, ensure the accounting system's app has the functionality you need. You'll also want to ensure it works on your preferred platform, as some are compatible only with iOS, while others can be used with smartwatches in addition to phones and tablets.

Key takeaway: When choosing the right small business accounting software, consider how you need to access the software. For example, would you utilize mobile apps or require remote access through cloud software?

What are the top accounting software providers?

There are a few leading accounting software providers that offer stellar service. Which provider you should choose comes down to a few key factors, but the better-known names are reputable and offer reliable service. 

These are some of the best-regarded accounting software providers:

• QuickBooks
• FreshBooks
• Sage 50cloud
• Wave Accounting

QuickBooks

QuickBooks is one of the leading accounting software providers in the world, and with good reason. Renowned for stellar products and accounting support, QuickBooks is a fantastic all-in-one accounting solution for small or growing businesses. 

QuickBooks comes with a nice variety of features that can handle most businesses' needs, including payroll, estimate creation, organizing receipts and even cutting-edge automation technologies – all to keep your accounts up to date and error-free.

Prices range from $12.50 per month for a single user up to $90 per month for up to 25 users. But unless you're running an accounting firm, you probably won't need to create accounts for too many employees, so you can keep your monthly costs manageable. 

For more information, read our QuickBooks Online review.

FreshBooks

Another great option for accounting software is FreshBooks, which is filled with features to keep your finances in order. Because FreshBooks uses a payment model based on how many billable clients you have, rather than how many users need access, it's an ideal service for contract workers or ultra-small businesses. 

Organizations with up to five clients can expect to pay $6 per month for FreshBooks' services. For $20 per month, an organization could subscribe to a service plan to accommodate an "unlimited" number of clients. 

With FreshBooks, services include expense tracking, estimate submissions, automatic recurring bills, vendor management and more. It gives any small business a fantastic return on investment and can easily scale as your business grows.

Our review of FreshBooks has more details about how this software stacks up.

Sage 50cloud

The most significant selling point of Sage 50cloud accounting software is its easy integration with Microsoft 365 enterprise software. Sage 50cloud has a robust and intuitive dashboard so you can easily understand and analyze your accounting activities, all from a central hub. By capitalizing on the cloud architecture of Microsoft 365, 50cloud can access and organize your data to simplify all your accounting activities.

Pricing for Sage 50cloud is available on annual plans only, but each plan comes with features such as cash flow analysis, inventory management and 24/7 support to remove any hurdles from your accounting software. If you're using Microsoft 365 as your preferred enterprise software solution, this is a great accounting software solution.

Read our review of Sage 50cloud accounting software for more information.

Wave Accounting

For a business that needs a free, easy-to-use accounting solution, Wave Accounting is a great place to start. Although Wave Accounting is free, it offers an excellent array of features and functionality to help organize and streamline any business. With Wave, any business can set up basic accounting with ways to optimize operations. 

Wave allows you to link multiple bank accounts or credit cards, while essential financial tools allow you to generate reports to observe your financial performance, whether it's month over month or year over year, and provide significant financial insights about your business's overall health.

You can learn more in our Wave Accounting review.

Cloud-based accounting software vs. desktop software

While you may assume that your chosen accounting software's cloud-based and desktop versions perform the same functions, the two platforms can have significant differences.  

The desktop version of an accounting software package is typically a one-time purchase. On the other hand, cloud-based software usually runs on a subscription model. Often, desktop accounting software can access data saved to that computer only, missing out on the updated features and functionality that come with cloud-based options. Unlike cloud software, however, desktop accounting software is not dependent on an internet connection for access.

Cloud-based software syncs directly with your bank accounts and can be accessed from anywhere. It offers regular updates with new features to optimize functionality. Additionally, cloud-based data storage offers top-level security, so you can rest assured that your sensitive financial information is protected.

Key takeaway: There are considerable differences between desktop and cloud software, but user access is vital. Desktop software is available only on the computer on which it was installed, while cloud-based software is accessible from anywhere you have internet access.

Which accounting features do you need?

Accounting software offers many features and tools to help you manage your finances. It should cater to your business's needs, making it easy to accomplish routine accounting tasks. It should also help you see the big picture of how your business is performing.

Here are some of the features accounting software should have to help you save time and better manage your finances.

Basic accounting features

Most small businesses can make do with basic accounting functions like invoicing (both by email and snail mail), income and expense tracking, financial report generation, and customer management. 

However, if your business sells more than just a few products, you'll also want the software to track your inventory, manage vendors and assist you with purchase orders. If your business provides services, you want a program that makes it easy to track time and invoice billable hours.

Timesaving automation

Some accounting software can be set up to send recurring invoices and past-due notifications automatically, saving time on invoicing and accounts receivable tasks. Other products can save time reconciling accounts by suggesting transaction matches. And because the data is automatically entered and managed, errors are virtually eliminated. 

If your business provides customers with quotes or estimates, look for a program that can archive and convert these documents to invoices in just a few clicks. If you carry inventory, look for a system that reorders products by automatically creating purchase orders when items drop below a set threshold.

Tax preparation

Make your life (and your accountant's life) easier with accounting software that features automatic tax calculations, multiple tax rates and tax reporting. You should also be able to give your accountant access to relevant data within the system or easily email all necessary data and files to them. Better yet, with an automatic paper trail for corporate finances, you can easily stay compliant and up to date with any rules and regulations for your industry.

Accounting microservices

Certain dedicated accounting microservices, such as payment processing and payroll services, make it easy to accept payments online and pay employees. Although these services usually cost extra, they're convenient to use, and the costs may be comparable to what you'd pay for these services elsewhere. The appeal of this approach is that you can mix and match services to create an accounting solution tailored to your specific needs. [Related: PayPal Alternatives for Accepting Online Payments]

Third-party integrations

Accounting software can make it easier to run your business by integrating with the programs and services you already use, automatically sharing data between systems in real time. Popular integrations include point-of-sale systems, payment processing, advanced inventory management, e-commerce, ERP, CRM, email marketing and Google apps.

Key takeaway: As you evaluate accounting software, review the program's features, add-on services and third-party integrations – looking particularly for integration with your bank. You may also want to determine if the software can help you easily calculate and pay taxes.

Questions to ask when evaluating accounting software

When you've narrowed down your choices to a few options, sign up for the free trials so you can see for yourself whether the accounting software has the features you need, is easy to use and saves you time. 

Call the software companies and gauge the quality of their customer service so that you can be confident that you'll receive the support you need if you experience an issue with the program.

Here's a list of questions to ask when you call to help you select the right accounting software for your business:

• Is your software a good fit for my industry?
• Do you offer customized solutions to fit my business's needs?
• How many employees and clients can your software accommodate?
• How can your software help me comply with GAAP, tax laws and financial regulations?
• How is my data backed up? Can access be restored immediately after an outage?
• What security measures do you have in place to keep both my business's and my customers' data secure?
• What is the total cost? Are there any setup or cloud storage fees?
• What types of tech support and customer service do you provide? (For instance, does the provider offer your preferred form of contact, such as via phone or live chat?)

Eduardo Vasconcellos and Stella Morrison contributed to the writing and research in this article.