Accounting software benefits small business owners by allowing them to manage accounts receivable and payable, assess profitability, and prepare for tax season. A small business can use out-of-the-box accounting software without requiring major adjustments. As a business grows, its accounting requirements become more sophisticated, requiring a custom enterprise resource planning (ERP) system.
Accounting software of various capacities and prices are available for small businesses. In general, the type of industry and the number of employees are criteria that could help a small business owner choose the best accounting software. A freelancer, for example, does not need the same features of accounting software as a restaurant owner.
Before choosing our top five accounting software companies for small businesses, we investigated and evaluated nineteen accounting software vendors. We rated the companies based on price, ease of use, features, integrations, and scalability.
5 Best Accounting Software – Overview
- QuickBooks Online– Best Overall
- Xero- Ideal for micro business owners
- FreshBooks– Ideal for service-based businesses
- QuickBooks Self-Employed– Ideal for part-time freelancers
- Vague– Best free software
QuickBooks Online – Our Top Pick
QuickBooks Online is the most enjoyable overall accounting software for small businesses reviewed. Most small business accounting professionals use QuickBooks Online, and there are several online training courses and forums where you can get help when you need it.
All accounting elements are easily accessible from a single central dashboard, making accounting more fluid and efficient.
Intuit’s QuickBooks Online has long been one of the most popular accounting programs among small businesses and their accounting and tax specialists. The app is cloud-based and can be accessed through a web browser or mobile app.
After the 30-day free trial, the four membership tiers are Simple Start ($25 per month), Essentials ($50 per month + $80 per month), and Advanced ($180 per month). Typically, a deep discount is given for the first few months, and some accountants may even offer wholesale rates for small businesses.
Each plan includes additional features such as inventory management, time tracking, additional users, and cash flow. Simple Start will meet the needs of the vast majority of small service-based businesses. Essentials or Plus will provide more inventory and customization choices for small businesses selling stuff. An advanced subscription powered by Fathom is a new option that provides sophisticated financial reporting. Fathom is a leading online financial services provider.
With all this, QuickBooks Online is considered the best accounting software.
Xero-Best for Micro Business Owners
According to our findings, Xero is the best solution for micro businesses looking for reasonably simple accounting software. This tool has an easy-to-use user interface and works in tandem with a third-party payroll source. Customers can pay businesses online through Xero’s connection with Stripe and GoCardless.
Xero was launched in New Zealand in 2006 and now has over 3 million users worldwide. This type of accounting software is commonly used in New Zealand, Australia and the UK. Xero employs approximately 4,000 people and is growing rapidly in the United States.
Xero offers three monthly subscription choices along with a full-service payroll add-on: Early ($12 per month), Growing ($34 per month), and Established ($65 per month).
Gusto offers a full-service payroll solution for an additional $39 per month + $6 per employee. They offer a 30 day free trial.
The Early plan has a used cap of 20 invoices or quotes and five monthly invoices. This limited plan might suit a micro business with a few expensive monthly transactions, for example, a consultant or a small service provider. The Growth and Established plans include unlimited invoices and invoices. The only difference between the two is that the Established plan contains additional features such as multicurrency, expense control, and project cost. Hubdoc, a tool for recording invoices and receipts, is available in all three tiers.
Freshbooks – Best for Service Businesses
For most service businesses, the most important accounting need is billing. FreshBooks offers more customization options for invoicing than other accounting software. Its main function is to send, receive, print and pay invoices, but it can also perform basic accounting for a business. This accounting software streamlines sending bids, tracking project time, and receiving payments for service businesses.
FreshBooks started as invoicing software in 2013 when it was founded. More features were added and FreshBooks now has over 30 million users. Four options are available and businesses can save 10% by paying annually instead of monthly. Additionally, FreshBooks frequently offers discounts for your first few months of subscription.
All four tiers are Lite, which costs $15 per month. Plus, which costs $25 per month, Premium, which costs $50 per month. And Select, which is a personalized service with special rates. These are the prices before the discounts are applied.
The main distinction is the number of customers that can be billed monthly. Up to five customers can be paid monthly under the Lite plan. Up to 50 customers can be paid monthly under the Plus plan. Unlimited consumers can be billed monthly under the Premium package.
The Select package does not limit the number of customers that can be billed monthly, but it does have some unique features. Several team members use the accounting software for an extra $10 per month, and the advanced payment option, which allows users to charge a credit card in real time or set up a recurring credit card charge for a client, costs an additional $20 per month. .
Several third-party app connectors are available, including Gusto, G Suite, and others. FreshBooks invoices can be customized and edited for a professional look, unique feature. and collect payments from customers.
Quickbooks Freelancers – Best for part-time freelancers
QuickBooks accounting software for freelancers is our top choice for part-time freelancers and independent contractors who want to manage their income and expenses primarily for tax purposes. This program is for small business owners who submit a Schedule C with their tax returns.
Without software to track business activity, freelancers would have to sift through all of their bank and credit card bills at the end of the year to total up their income and expenses, which can be time-consuming. QuickBooks Self-Employed will automatically total all business transactions.
QuickBooks Self-Employed is a solution from Intuit that includes a cloud-based web interface and a mobile app. This app was developed to help freelancers stay organized throughout tax season. QuickBooks features for the self-employed include tracking mileage, sorting expenses, organizing receipts, and estimating and filing taxes through TurboTax.
Users can choose from three plan options: Self-Employed ($15/month), Self-Employed Tax Package ($25/month), and Self-Employed Tax Package ($35/month). For the first three months there is a 50% discount. Both tax packages include a TurboTax membership for income tax preparation. The self-employed tax package also includes access to a CPA throughout the year and during tax season.
Prior to filing, the CPA will also perform the final verification of your TurboTax tax return.
The smartphone app allows you to measure kilometers while simply driving and capture receipt images for business expenses. Most accounting software is not intended to distinguish between business transactions and personal transactions. However, a feature of QuickBooks Self-Employed allows you to identify each transaction as business or private. This is useful for freelancers who don’t have a separate company bank account.
Wave – Best Free Software
Wave is an excellent accounting software platform for a service-based small business that provides basic invoices but does not require payroll processing. Wave’s free features will meet the accounting needs of many freelancers or service businesses, making it the best freeware in our review. Accountants can use Wave to retrieve the reports required to prepare a company’s year-end tax return.
The Wave was founded in 2010 and is based in Toronto. H&R Block bought the company, which employs more than 250 people, in 2019. This free accounting software covers most basic accounting capabilities for small businesses, such as revenue and cost management, financial reporting, invoicing and receipt scanning.
These features are available both online and through the mobile app. Customer payment processing and payroll are optional premium services, but all accounting, billing, and reporting features are free.
Wave offers two payroll alternatives as an add-on service. The initial plan is $20 per month plus an additional $6 per employee or contractor. With this plan, the wave will handle payroll and calculate payroll taxes, but the user is responsible for manually filling out payroll tax forms and submitting tax payments. The second option is $35 per month + $6 for each employee or contractor. Payroll is a full service with this package, meaning Wave handles all tax filings and payments. Only 14 states offer this full-service payroll option.
Best Accounting Software – Conclusion
We found the best accounting software after conducting a thorough study and reviewing 20 solutions. We then chose the top eight based on accounting features, functionality, ease of use for non-accountants, and pricing.
Our best solutions require little accounting knowledge, offer inexpensive and configurable accounting features that interface with other software and applications, and offer cloud-based backup alternatives.
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