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Best Accounting Software for Small Business

Best Accounting Software for Small Business

Accounting software benefits small business owners by allowing them to handle accounts receivable and payable, have a clear knowledge of their profitability, and prepare for tax season.

A tiny firm, in the area of accounting software, is one that can use out-of-the-box software without major adaptations. As a company grows, its accounting requirements get more sophisticated, necessitating the use of a specialized enterprise resource planning (ERP) system.

Accounting software for small businesses comes in a variety of flavors, each with its own set of features and price tag. In general, the type of industry and the number of employees are two aspects that might aid a small business owner in selecting appropriate accounting software. A freelancer, for example, would not require the same accounting software functionality as a restaurant owner.

Before choosing our top five accounting software companies for small businesses, we investigated and compared nineteen accounting software vendors. We evaluated cost, simplicity of use, features, integrations, and scalability when evaluating firms.

The 5 Best Accounting Software for Small Business of 2021

BEST OVERALL: QuickBooks Online

Of the accounting software for small businesses tested, QuickBooks Online is the best overall. Not only do the vast majority of small business accounting experts utilize QuickBooks Online, but there are also a plethora of online training materials and forums where you may receive help if you need it. All accounting capabilities may be accessed from a single dashboard, making bookkeeping easier and more efficient.

Pros

  • Scalable
  • Accounting experts frequently use this term.
  • Third-party application integration
  • Cloud-based
  • App for mobile devices

Cons

  • More users necessitate an upgrade.
  • Syncing issues with banks and credit cards occur from time to time.

Small businesses and their bookkeeping and tax specialists have long relied on Intuit’s QuickBooks Online accounting software. The program is hosted in the cloud and can be accessed via a web browser or a mobile app.

Simple Start ($25 per month), Essentials ($40 per month), Plus ($70 per month), and Advanced ($150 per month) are the four membership tiers available after the 30-day free trial. For the first few months, most accountants offer a large discount, and some accountants can also offer wholesale rates to small enterprises.

This software’s monthly subscription can be updated as a business expands, and the mobile app has several customization choices for receiving payments, reviewing reports, capturing an image of a receipt, and tracking business travel. QuickBooks Payroll is a payroll system that works seamlessly with QuickBooks Online.

Advanced capabilities such as inventory management, time tracking, additional users, and budgeting are included in each plan.

Simple Start will cover all of the demands of most service-based small enterprises. Essentials or Plus will provide greater inventory and customisation possibilities for product-based small enterprises.

The Advanced subscription is a brand-new product that includes Fathom-powered financial reports. Fathom is a high-end online financial report analysis tool that is utilized by a number of significant corporations throughout the world.

All options allow for third-party app integration, such as Stripe or PayPal. The app shop for QuickBooks Online organizes all of their apps by function and offers support.

BEST FOR MICRO-BUSINESS OWNERS: Xero

In our analysis, Xero is the best option for microbusinesses searching for extremely basic accounting software. This program features a straightforward user interface and seamlessly interacts with a third-party payroll service. Through Xero’s interface with Stripe and GoCardless, businesses can accept payments from clients online.

Pros

  • Cloud-based
  • App for mobile devices
  • Gusto’s payroll integration
  • App store for third-parties
  • Inventory management that is simple

Cons

  • Reporting is restricted.
  • Fees associated with ACH payments
  • Customer service is limited.

Xero was launched in New Zealand in 2006 and today has over two million members throughout the world. In New Zealand, Australia, and the United Kingdom, this accounting software is very popular. Xero has approximately 3,000 workers and is quickly expanding in the United States.

Xero has three monthly membership packages as well as a payroll add-on: Early on, at $11 per month, it grew to $32 per month, and by the end of the year, it was established at $62 per month. Gusto provides a full-service payroll solution for an extra $39 per month plus $6 per employee. The company offers a 30-day free trial as well as a two-month 50% off promotion.

The Early plan restricts usage to five invoices or quotes, five bills, and the reconciliation of 20 bank transactions per month. This limited plan may be appropriate for a micro-business that does a modest number of high-ticket transactions per month, such as a consultant or small service provider.

Invoices, bills, and transactions are unlimited in both the Growing and Established subscriptions. The sole difference is that the Established plan includes more capabilities such as multi-currency, spending management, and project costing. Hubdoc, a bill and receipt capturing tool, is included in all three levels.

BEST FOR SERVICE-BASED BUSINESSES: FreshBooks

Invoicing is the most important accounting requirement for most service-based firms. In comparison to other accounting software, FreshBooks allows users more invoicing customisation.

Its major purpose is to send, receive, print, and pay invoices, but it may also do basic bookkeeping for a company. Service-based firms can use this accounting software to send proposals and invoices, seek deposits, collect client retainers, track project time, and receive payments.

Pros

  • Cloud-based
  • Interface that is simple to use
  • Integration with third-party apps
  • Affordable
  • Features for advanced invoicing

Cons

  • There is no inventory management.
  • There is no payroll service.
  • There are several limitations to the mobile app.

FreshBooks began as a simple invoicing software in Toronto in 2003. More features have been developed over time, and FreshBooks today employs over 500 people.

There are four different plans to choose from, and corporations can save 10% by paying yearly rather than monthly. FreshBooks also offers a monthly discount of 60% for a period of six months.

The four plans are: Lite ($6/month), Plus ($10/month), Premium ($20/month), and Select ($20/month). Select is a personalized service with custom pricing.

The amount of different clients who can be billed per month is the biggest variation between the four tiers. Up to five clients can be billed each month on the Lite plan.

The Plus package allows you to bill up to 50 clients each month. Unlimited clients can be billed per month on the Premium plan. The Select plan similarly doesn’t have a limit on how many clients can be billed every month, but it does have some unique features.

The accounting software costs an extra $10 per month for numerous team members, and the advanced payment option costs an extra $20 per month and allows users to charge a credit card in real-time or set up a recurring credit card charge.

Shopify, Gusto, Stripe, G Suite, and other third-party app connectors are also accessible. FreshBooks invoices may be highly personalized and adjusted for a professional look and feel, which is a unique feature. FreshBooks is a fantastic tool for planning tasks, sending estimates and bids, and collecting payments from customers.

BEST FOR PART-TIME FREELANCERS: QuickBooks Self-Employed

For part-time freelancers and independent contractors who primarily want to manage their income and expenses for their tax return, we recommend QuickBooks Self-Employed accounting software. This program is for small business owners who file a Schedule C on their personal tax return.

Without employing software like this to track company activities, freelancers would have to sift through all of their bank and credit card statements at the end of the year to tally up their income and expenses, which can be time consuming. All business transactions will be automatically totaled by QuickBooks Self-Employed.

Pros

  • Cloud-based
  • App for mobile devices
  • Keep track of your miles.
  • Make a distinction between business and personal expenditures.
  • It synchronizes with TurboTax.

Cons

  • Data is difficult to transfer to other accounting software.
  • Reporting is restricted.
  • Customization and limited invoicing functionality

QuickBooks Self-Employed is an Intuit solution with a mobile app and a cloud-based internet interface. This program was intended to assist freelancers in staying organized throughout tax season each year.

Tracking mileage, classifying spending, collecting receipts, issuing invoices, and calculating and filing taxes using TurboTax are all features of QuickBooks Self-Employed.

The Self-Employed plan is $15 per month, the Self-Employed Tax Bundle costs $25 per month, and the Self-Employed Live Tax Bundle costs $35 per month. For the first three months, there is a 50% discount.

A TurboTax subscription for income tax filing is included in both tax bundles. The Self-Employed Live Tax Bundle also includes access to a CPA throughout the year and during tax season to answer inquiries. Before filing, the CPA will check your tax return in TurboTax one last time.

The mobile app makes it simple to log miles and take images of receipts for business expenses while driving. Most accounting software does not distinguish between business and personal transactions, but QuickBooks Self-Employed has a function that allows you to label each transaction as either business or personal. This is advantageous for freelancers who do not have their own bank account.

BEST FREE SOFTWARE: Wave

Wave is a great accounting platform for a service-based small firm that doesn’t need to maintain inventory or run payroll. Wave’s free features will handle all of a freelancer’s or service-based business’ accounting needs, making it the top free software in our evaluation. Accountants can use Wave to pull the reports they need to compile a company’s tax return at the end of the year.

Pros

  • Accounting, invoicing, and receipt scanning are all free.
  • There are no transaction or billing limitations.
  • Multiple businesses can be run from a single account.
  • The number of users is unrestricted.
  • App for mobile devices

Cons

  • Integrations with third-party apps are limited.
  • Credit card and ACH payments have higher costs.
  • Only 14 states offer full-service payroll.
  • There is no inventory management.

Wave is a Toronto-based company that was launched in 2010. H&R Block just purchased the company, which employs over 250 people.

This free accounting software includes all of the essential accounting tools that most small businesses require, such as income and cost management, financial reporting, invoicing, and receipt scanning.

These functionalities are available both online and through the mobile app. Customer payment processing and payroll are regarded premium services that incur additional fees, while all bookkeeping, invoicing, and reporting functions are available for free.

Wave makes money through its payment mechanism. Wave charges 2.9 percent plus 30 cents each transaction for Visa, Mastercard, and Discover, and 3.4 percent plus 30 cents every transaction for American Express.

These fees are slightly more than those charged by competing accounting software. In addition, Wave charges 1% per transaction with a $1 minimum fee when processing an ACH payment rather than a credit card. Wave is exceptional in this regard, as other accounting software does not charge a fee for ACH payment processing.

As an add-on service, Wave offers two payroll plans. The initial plan is $20 per month plus an additional $6 per employee or contractor.

Wave will handle payroll and calculate payroll taxes under this plan, but the user will be responsible for manually filling out payroll tax forms and sending tax payments.

The second option is $35 per month + $6 for each employee or contractor. This plan includes full-service payroll, which means that Wave handles all tax filings and payments. Only 14 states provide this full-service payroll solution.