Best Accounting Software for Small Business

There are many benefits for small businesses that choose their specific accounting software. These benefits include being able to track accounts receivable as well as accounts payable, having a clear understanding of their profitability and how they compare to the competition, and having ample preparation for tax season. Small businesses are more likely to use out-of-the-box software that doesn’t require too much customization. It’s only as the business grows that the accounting methods may need to become more sophisticated.

Luckily all the small businesses out there have a lot of options of whom they can turn to for their accounting software needs. The options vary in type, capability, and, obviously, price. Whether or not a company chooses one or the other depends on the type of industry as well as how many employees they have. This is a starting ground for choosing the best accounting software for your small business.

According to research done on 19 accounting software companies, the following top five pieces of software have been deemed the most suited for small businesses. The categories used to judge were cost, features, scalability, integrations, and, ultimately, ease of use. With plentiful competition, the following software programs have made a name for themselves as being the most effective. Looking at these criteria, we have compiled a handy dandy list for all you small business owners out there!

1.QuickBooks Online

QuickBooks Online is considered the best overall accounting software, which is why it is number one on the list. Most small business accountants in need of a reliable, trustworthy accounting software turn to QuickBooks Online for a reason. It provides all accounting features on one main dashboard, adding to the ease of use. This software is the most common because of many factors that make it easy to use, easy to excel with, and easily accessible.

Firstly, this software is cloud-based and can be accessed through a web browser or through a mobile app. They allow you a 30-day free trial before you can decide on one of its four subscription plans. These plans include Simple Start that can be purchased for $25 per month; Essentials for $40 per month; Plus that costs $70 a month; and Advanced, which is the most expensive, at $150 per month.

What is great about this software is that as your business grows, the software can grow with you. You are not set at the monthly subscription that you initially choose, and you can begin using more customization options as your small business excels. These customizations can be used to receive payments, capture an image of a receipt, track business mileage, and review reports, all necessary functions once a business propels itself into the competitive world of commerce.

When looking for payroll software specifically for small businesses, QuickBooks Online is a fantastic option. One of its key features, QuickBooks Payroll, completely integrates with QuickBooks Online, making the entire process quick and easy. It also allows integration with third-party apps like PayPal and Stripe.

As you progress through the four plans, more advanced features become accessible to you. Examples of these include inventory management, additional users, time tracking, and budgeting. Simple Start appeals most to service-based small businesses, Essentials and Plus are more for product-based small businesses that are looking to include more options for inventory and customizations, while the Advanced subscription allows for in-depth financial reporting that is powered by Fathom.

2.Xero

Xero differs from the others in a very specific way. It is considered the best accounting software for micro-business owners, and there is a reason for that. Xero is a fairly simple accounting software for small businesses. It has a clean and easily understandable interface, but it also completely integrates with third-party payroll services.

This accounting software was founded in 2006 in New Zealand and has grown rapidly to accomplish an audience of 2.7 million users across the world. It is most popular, though, in New Zealand, Australia, and the UK, but this doesn’t negate its growing popularity in the United States.

With Xero, there are three monthly subscriptions offered along with a full-service payroll add-on. These include Early which is priced at $11 per month, Growing which is priced at $32 per month, and Established which comes at $62 per month. The full-service payroll is offered for an additional $39 per month with an added $6 per employee. There are promotions for 50% off for two months if the prices seem a little rocky for your small business.

In choosing the right accounting solution for you, it is necessary to determine what software can do for you. Xero offers the Early plan, which is great for businesses that are starting out. Although it limits usage and only allows for entry of five invoices or quotes, five bills, and reconciliation of 20 bank transactions each month, it works best for a micro-business that has a high-ticket transaction rate but only a few per month. An example of this could be a consulting or service provider. On the other hand, the Growing and Established plans provide unlimited invoices, transactions, and bills with additional features depending on your needs.

A few pros of Xero are the fact that it is cloud-based, is a mobile app, has payroll integration with Gusto, can act as a third-party app marketplace, and has simple inventory management. Just as it has a few pros, its cons are its limited reporting, the fees charged for ACH payments, and its limited customer service.

3.FreshBooks

FreshBooks appeals to a certain audience for a certain reason. This is the best option for small businesses that are more service-based than anything. A small business accounting service that is crucial for those that are service-based is, you guessed it, invoicing. Knowing this, FreshBooks provides a multitude of customizations specifically for invoicing. This gives FreshBooks a leg-up when compared to other accounting software. It can send, receive, print, and pay invoices while handling the business’ bookkeeping needs.

FreshBooks began as a simple invoicing software in Toronto in 2003. As more features have been included, it slowly became a great accounting software for small businesses. With 500 employees and four different plans, FreshBooks is slowly but surely making its way up to compete with the big boys. FreshBooks also offers many discounts and promotions for its clients.

The four plans include Lite which can be purchased at $6 a month, Plus which costs $10 a month, Premium which is priced at $20 a month, and Select which is a custom service and, therefore, has custom pricing. The difference between these four plans largely depends on the number of clients that can be billed per month.

With the Lite plan, five clients can be billed per month. In Plus, up to 50 clients can be billed. With the Premium plan, an unlimited number of clients can be billed per month. With Select, there is no limitation on the number of clients billed, but there are unique features that are added with this plan that separates it from the others.

There are also many third-party app integrations that are available with FreshBooks. You can use Shopify, G Suite, Stripe, and more in conjunction with this accounting software. Invoices are highly stylized and customized to add to the professionalism of your brand. If you’re a service-based small business just starting out and looking for an accounting solution, FreshBooks is a great option.

4.QuickBooks Self-Employed

Most part-time freelancers and independent contractors rely on this accounting software for their needs because it is the perfect fit for them. QuickBooks Self-Employed tracks income and expenses to prepare a business for doing its tax return. It is especially useful for business owners who file a Schedule C on their individual tax returns.

As a freelancer, it becomes a grueling task to keep up with business activity, banks, and credit card statements. It is quite difficult being a freelancer or independent contractor and having to manage everything yourself. Luckily, QuickBooks is a software that totals up all your business transactions and keeps things organized as they should be.

QuickBooks Self-Employed is a product of Intuit with a cloud-based interface along with a mobile app. It is easily accessible on many different platforms, making things simple when it comes to organizing for an upcoming tax season. These are a few of their included features: tracking mileage, organizing receipts, sorting through expenses, estimating and filing taxes through TurboTax, and sending invoices.

There are three options for your very own accounting solution. The Self-Employed plan starts at $15 per month, the Self-Employed Tax Bundle is $25 per month, and the Self-Employed Live Tax Bundle costs $35 a month. There is also a 50% discount during the first three months. Both tax bundles come with a TurboTax subscription for income tax filing while the most expensive bundle also provides you with access to a CPA so that all your tax questions can be answered immediately and efficiently.

If you’re a little lost with organizing your business and have never served as your own personal small business accountant, QuickBooks Self-Employed will provide you with the necessary information and help to sort through each one of your problems.

5.Wave

Wave has something that the other four pieces of accounting software on this list lack. It is free of charge. You heard that right. Wave is a completely free accounting software. It has been categorized as an ideal accounting software for small businesses that are service-based and don’t need to track inventory or run payroll. Wave’s features can cover every one of your accounting needs at no charge.

As a software company that was founded only recently in 2010, the company has grown dramatically and even got bought out by H&R Block in 2019. Certain accounting needs like income and expense tracking, invoicing, scanning receipts, and financial reporting are all included with Wave. It is rated as the best free accounting software because of this and its accessibility; it can be found online or on their mobile app. It is important to note that you can access customer payment processing along with payroll, but these are considered premium services that come at an extra charge. Everything else, though, is completely free!

You may be wondering if this is a scam. How does Wave make its money then? Well, Wave uses a payment gateway. Processing payment from a customer brings about a 2.9% plus 30 cent transaction fee for Visa, Discover, and Mastercard. Wave requires a 3.4% plus 30 cent fee for transactions using American Express. Because of Wave’s free services, these fees are considered a bit pricier compared to those of other accounting software for small businesses. But if you want to know how to improve your small business, accounting software that is reliable and efficient is a must.

There are two payroll plans that are add-on services with Wave. One plan is priced at $20 per month plus $6 per employee/contractor while the second plan is $35 per month plus $6 per employee/contractor. In the first plan, Wave processes payroll and prepares tax calculations, but the user is the one responsible for completing the payroll tax forms and submitting these payments themselves. With the second plan, payroll is a full service, so all tax filings and payments are completed for you by Wave. Unfortunately, the second option is available in only 14 states.

These five different accounting software programs have been tried and trusted as the best of the best when it comes to small businesses. Although they hold varying advantages over one another, they thrive when it comes to their particular niche of consumers. These options for accounting software have been ranked highly for multiple reasons. Depending on what you intend to do with your small business and the direction your company is headed, one of these five is a sure fit for you.

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