How to Choose the Best Accounting Software

How to Choose the Best Accounting Software

How to Choose the Best Accounting Software

Small business owners have a multitude of accounting software options available to them, but sometimes it’s sheer analysis paralysis that keeps them from selecting one for their business. If you’re nodding your head, you may have already wondered:

Which one offers the features I need? Which one fits my budget? Which one doesn’t require a degree in accounting to figure out?

Not to worry. Here, we’re going to dive into the features of accounting software so you know what to look for, and we’ll show you a few great options for smaller businesses.

What is Accounting Software and How Does It Work?

Accounting software is used by businesses of every size to help them manage their financial activities. Today’s software connects to a business’ bank accounts to download transactions and track expenses.

Accounting software products can generate financial statements like profit and loss statements, balance sheets, and general ledgers. And most offer far more than just bank reconciliation: you can find software that offers payroll services, inventory tracking, inventory management, and more.

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Nav’s Picks 

We’ve vetted accounting software vendors who specialize in small business to help you choose the one that’s right for your needs.

Pro Small Business Accounting Software by Intuit

Quickbooks Online and Quickbooks Desktop accounting software is a popular choice for entrepreneurs because it’s got a package for every size business, whether you’re a solopreneur or have employees or freelancers that you work with.

Beyond the typical features for a cloud accounting software product, Quickbooks offers mileage and time tracking, inventory management, and payroll services, just to name a few. You can customize your plan to get exactly what you need, and there’s also an accounting application if you need to manage your finances on the go.

FreshBooks: Small Business Cloud Accounting Software

Another option that’s great for small businesses, particularly freelancers, is FreshBooks. Its time tracking feature is robust, allowing you to not only track time spent on a project but also automatically add that time to invoices. Each plan comes with unlimited invoices.

You can also generate financial reports like profit and loss, balance sheets, and revenue earned by client. And if you work with accounting professionals, you can add them, so they have access to your account for free.

Xero

Another accounting option is Xero. In addition to the basic accounting features you’d look for, Xero lets you generate quotes to send prospective clients and even pay bills through the tool. If you use Gusto for payroll, Xero integrates seamlessly with it.

Wave

Here’s something you don’t see often: reliable and free accounting software. Wave gives you many of the features you get with other brands, including syncing to your business bank account, sending invoices, and scanning receipts, without the price tag.

Benefits of Accounting Software for Small Businesses

So maybe you’ve been using a spreadsheet for years to manage your finances and you figure, if it ain’t broke, why fix it? Why invest in accounting software if what you’ve been using works just fine?

The truth is: you may not know what you’re missing.

Additional Business Features

A spreadsheet is a spreadsheet. Nothing more. But most of today’s accounting software comes with other features that your business may need, like the ability to create invoices and send automated reminders, payroll services, or inventory management. Having more tools in one place means you spend less time hopping from tool to tool to manage it all.

Easier Tax Filing

While your software may not do your taxes for you, it makes it a lot easier come tax time. Because the expense tracking feature categorizes your expenses each month, at the end of the year you can generate financial reports that show the breakdown of expenses and income. Then you simply plug those numbers into your tax forms.

Visibility Into Your Business Finances

Where are you spending the most money? Which client always pays late? These are questions spreadsheets can’t answer, but accounting software can. And the answers can help you make strategic decisions to help your business grow.

No Expertise Needed

You may not be an accountant, but with this software, you don’t need to be. It’s intuitive enough for anyone to use, and if you do have an accountant, he or she can easily log in to manage your accounts.

Knowing What You Need From an Accounting Software

Now that you’re excited about accounting software (you never thought you’d see the day), let’s consider your business’ specific needs in a business accounting solution.

Do you work on projects where you bill by the hour? If so, you’ll want a platform that offers time tracking built into invoice creation. And if you send invoices for the same amount and services each month, you’ll want to look for one that automates recurring invoices.

What about inventory management? Is it important to keep up with inventory numbers so you never run out? 

Then there are other accounting features to consider. Financial reports will make it easier to make big-picture decisions about your company. And payroll services are a must if you have employees.

Make a list of any features you need so that when you start researching, you find the ones best aligned with those needs.

Accounting Software vs. Bookkeeping Software

As you start researching business accounting software you may also see links for bookkeeping software and wonder what the difference between the two is. Truth be told, there is often little difference, and many companies use the terms interchangeably.

Bookkeeping software may provide fewer features, focusing primarily on general ledger updates, business cash flow, and expense tracking. Accounting systems may go deeper than basic accounting tasks to take financial data to generate financial reporting like balance sheets, profit and loss, and cost of debt.

Both bookkeeping and accounting tools may have other features like invoice creation or payroll services.

Paid vs. Free Accounting Software

You’ll see that some accounting solutions available charge a monthly (or annual) fee, while a few are completely free. Wondering whether you need to pay for an accounting system? It depends on what your needs are.

Free accounting software tools tend to be simpler in terms of features. They offer expense tracking and invoicing, but may not offer features like inventory management or financial reports. Some free software will offer additional tools like accepting payments online or ecommerce features for a small fee. They may be limited in how many clients you can send invoices to.

If your accounting needs are minimal, free online accounting software could be a great resource for managing cash flow. But if you have employees or more complex finances, you’ll want to pay for your service.

Pro tip: What you don’t know can kill your business

Pro tip: What you don’t know can kill your business

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Nav’s Verdict: Accounting Software

No matter what accounting solution you’ve been using, if it’s not fulfilling all your business needs, it may be time to explore other small business accounting software options. The solution you choose should make it easy to see, at a glance, your business cash flow: how quickly are clients paying you? What are your big expenses?

It should also include features that make your life easier, whether that’s automated invoices, inventory management, or payroll features. All in all, your accounting software should be an asset to your business.

This article was originally written on October 27, 2020.

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ABOUT AUTHOR

Susan Guillory

Susan Guillory is a Senior Content Writer for Nav. She’s written books on business and travel, and blogs about small business on sites including Forbes and AllBusiness.

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