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Accounting software is beneficial for small business owners as it allows them to track receivables and payables, keep track of their profitability, and prepare for tax season. A small business can use accounting software without having to customize it. A custom enterprise resource management (ERP system) is often required as a business grows.
Small businesses have many options for accounting software, each with different capabilities and prices. A small business owner can start to select the right accounting software by considering the industry they are in and the number of employees. A freelancer wouldn’t need the same accounting software features as a restaurant manager.
We compared the top five accounting software providers before choosing our top five. Nineteen companies were analyzed. We evaluated companies based on cost, ease-of-use, features, integrations and scalability.
The 5 Best Accounting Software for Small Businesses of 2022
- QuickBooks Online
- Xero
- FreshBooks
- QuickBooks Self-Employed
- Wave
BEST OVERALLQuickBooks online
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QuickBooks Online is the best accounting software for small business of all those that were reviewed. The majority of small-business accountants use QuickBooks Online. 1 All accounting functions can be accessed from one central dashboard. This makes bookkeeping easier and more efficient.
- Scalable
- Accounting professionals commonly use this term
- Integration with third-party apps
- Cloud-based
- Mobile app
Cons
- Upgrades are required for additional users
- Occasional sync problems with banks or credit cards
BEST FOR MICRO-BUSINESS OWNERSXero
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Xero was rated the best accounting software for micro-businesses looking for a simple solution. The interface is simple and the software can be integrated with third-party payroll services. Through Xero’s integration with Stripe or GoCardless, businesses can receive payment online from their customers.
- Cloud-based
- Mobile app
- Gusto integrates payroll with Gusto
- App marketplace for third-party developers
- Simple inventory management
Cons
- Reporting is limited
- There are fees for ACH payments
- Limited customer service
BEST FOR SERVICE-BASED
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Invoicing is the most important accounting requirement for service-based businesses. FreshBooks has more options for invoicing than other accounting software. Although its primary function is to generate, send, print, and pay invoices it also has the ability to manage basic bookkeeping tasks for businesses. Service-based businesses can send proposals, track time and receive payments with this accounting software.
- Cloud-based
- Interface that is user-friendly
- Integration of third-party apps
- Affordable
- Advanced features for invoicing
Cons
- Mobile apps have limitations
BEST FOR PART-TIME FREELANCERS
QuickBooks Self-Employed
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QuickBooks Self-Employed accounting software has been voted our best choice by freelancers and independent contractors . It allows them to track their income and expenses and prepare their tax returns. This software is for individuals who have to file a Schedule A tax return.
Freelancers who don’t use a software such as QuickBooks Self-Employed to keep track of business activity would have to go through their credit and bank statements to calculate their income and expenses for the year. This can be very daunting. QuickBooks Self-Employed will automatically total all business transactions.
- Cloud-based
- Mobile app
- Track mileage
- You should distinguish between personal and business expenses
- TurboTax Syncs
Cons
- Transferring data to another accounting software is not possible.
- Reporting is limited
BEST FREE SOFTWARE
Wave
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Wave is a great accounting platform for small service-based businesses that can send simple invoices and don’t require payroll. Wave’s free features are ideal for freelancers and service-based businesses. It is also the best free software we reviewed. Wave allows accountants to pull all the reports needed to prepare a company’s tax return.
- Accounting, receipt scanning, and invoicing are all free
- There are no transaction or billing limitations
- You can manage multiple businesses from one account
- Unlimited number of users
- Mobile app
Cons
- Zapier is the only way to integrate
- Higher fees for credit cards, ACH payments and credit cards
- Only 14 states offer full-service payroll
Most Frequently Asked Questions
What does Accounting Software for Small Businesses Do?
Accounting software makes data entry faster by allowing users the ability to sync their credit cards and business bank accounts with the software. Once transactions are synced, they will flow into the software where they can then be categorized in various accounts. Although most accounting software is intuitive, it is important to have a basic understanding of accounting principles in order to prepare accurate financial reports. Many businesses employ bookkeepers and accountants to manage or review their books. Cloud-based online accounting software allows businesses to have access to their books while their accountant or bookkeeper is at work.
Accounting software for small businesses has the following functions:
- Invoicing
- Synchronization of bank and credit cards
- Accounts payable
- Receivables
- Customers can make online payments
- Basic financial statements preparation, including profit & loss statements and balance sheets and statements cash flow
- Access for tax professionals and accountants.
What is Accounting Software?
Once the bank accounts and credit cards of a business are synced with accounting software, transactions will appear as a queue. They can then be classified according to the categories shown on the chart of accounts. Once transactions are classified into the correct category, they will appear in the financial statements of the business. A financial report can be run by business owners in seconds. They can review profits, compare revenues and costs, check loan and bank balances, and forecast tax liabilities. Business owners have the ability to quickly access financial information to help them make informed decisions.
Many accounting software allow third-party integrations. A business owner might use a point-of-sale system to record sales transactions. The POS system can be integrated with the accounting software to record specific transactions and sales tax liabilities. A time tracking program could be integrated with accounting software to add labor to client invoices in a service-based company.
What is the cost of accounting software for small businesses?
The monthly cost of small business accounting software is between $0 and $150. The basic plans cost between $0 and $40 per month, making them a good place to start. A basic plan will allow a small business to track income and expenses, prepare financial reports, and send invoices. Software is easily scalable and can be upgraded as a business grows. Businesses can track inventory, create more custom financial reports, manage payroll and choose from more invoicing options.
Methodology
Before choosing the top five accounting software options, we looked at nineteen different software companies that offer specialized products for small-businesses. Cost, scalability and ease-of-use were all important factors. Reputation is a crucial consideration. The longer a company has existed, the more likely it is that technological problems have been fixed. This ensures that important financial information can be accurately reported. Scalability was next because companies grow and require more accounting software. It can be difficult to transfer financial information from one program to another. It was important that all users have access to and be able collaborate with each other in order to make the software easy to use.