The Best Accounting Software, is part of an ongoing Small Business Toolkit series, here at Money360. Parts 1, 2, and 3 covered the Best Cloud Storage Providers, Best Email Marketing Services, and Best Project Management Software. Now we turn our attention to a crucial task for all small businesses: accounting.
The variety of small business accounting software and platforms is staggering, mostly driven by an exploding number of cloud-based startups. Cloud-based accounting software has been challenging downloadable accounting software with slick, convenient, easy-to-use services that can be accessed from anywhere — your phone, tablet or browser — not just the aging desktop computer in your back office. In fact, experts say software companies have seen the writing on the wall, and are focusing largely on cloud-based platforms going forward. It might not even be terribly long before your traditional software goes extinct.
In this article, I take a look at the best accounting software, cloud-based accounting platforms, and free accounting software. I’ll also discuss whether you should make the jump to cloud-based accounting or stick with your downloadable accounting software, and I’ll give you a rundown of essential features for any small business accounting solution.
First, here’s a quick look at my top picks for the best small business accounting software:
Money360’s Top Accounting Software Picks for 2018
Best Traditional Accounting Software
- Best overall: QuickBooks Pro
- Runner-up: Sage 50
Best Cloud-Based Accounting Software
- Winner: XERO
- Runners-up: QuickBooks Online and Freshbooks
Best Free Accounting Software
- Winner: Wave
- Runners-up: NolaPro and GnuCash
Best Downloadable Accounting Software: QuickBooks Pro
QuickBooks has dominated small business accounting since launching in the early ’90s. QuickBooks Pro, its entry-level offering, offers all the basic accounting services small businesses need for $299.95 (as of this writing, the software was on sale for $219.95).
The software is easy to use, even for true accounting neophytes. Step-by-step setup and new-user video tutorials help users gain confidence from the start, and a recently streamlined dashboard lets users easily keep an eye on crucial tasks.
Experts say standout features include billing, invoicing, and integration with third-party applications. Needless to say, the software plays nicely with other Intuit products such as TurboTax.
However, some say customer support is lacking, while others are frustrated that limited inventory management features require many users to upgrade to more expensive software.
Runner-up: Sage 50
Sage 50 goes toe-to-toe with QuickBooks Pro on most core features. In fact, it offers more powerful inventory management tools than its competitor. It’s also priced starting at $439 a year. Sage 50 boasts a convenient customizable dashboard, so you can add shortcuts for functions that your business uses the most.
Experts also give an edge over QuickBooks Pro to Sage’s customer service, which includes one-click chat and unlimited phone support.
However, new small business owners without accounting or bookkeeping experience may not find Sage 50 quite as easy to use as QuickBooks Pro. Experts also say installation isn’t quite as seamless and the software is simply a bit harder to navigate for beginners.
Best Cloud-Based Accounting: Xero
XERO has a loyal following, and it has many of QuickBooks Online’s main strengths. Xero has an elegant, easy-to-use interface, and it integrates with your bank and a wide range of third-party apps that tackle everything from time tracking to payroll. Mobile apps are also a strong point, making it easy to crunch numbers on the go.
Reviewers sing the praises of Xero’s customer service, which seems to be a weak point for QuickBooks Online. Xero has also made it easy to import QuickBooks files for customers who are making the switch.
Xero mostly matches QuickBooks Online’s features, though experts say it falls behind on quotes and inventory support. Experts say Xero is best suited for service-based small businesses, and some complain it’s too reliant on third-party apps for features such as project tracking and inventory management.
Xero’s basic plan, Starter, runs $9 a month and includes limited billing, invoicing, and bank integration. The mid-level Standard plan is $30. It removes caps on billing and invoicing while adding payroll for five employees. For $70 a month, the Premium plan throws in payroll for 10 employees and increased tax functionality.
Runners-up: QuickBooks Online and FreshBooks
QuickBooks Online offers a formidable blend of value and power for a variety of small businesses. Though it isn’t as fully featured as its traditional software counterpart, QuickBooks Pro, users still benefit from parent company Intuit’s dominance in the industry.
For example, QuickBooks Online integrates with a staggering number of apps, including customer relations and inventory management tools. Accounting professionals will find the interface familiar (this might not be the case with other cloud accounting platforms) and small businesses making the switch from traditional QuickBooks software will find importing data very easy. However, beware that a significant number of reviewers complain about poor customer service. Others say server downtime and technical glitches have prevented them from doing crucial work.
Features in the base level platform, called Simple Start, include invoicing, check printing, and bank integration. You’ll have to step up to more expensive versions for features including bill payment scheduling, purchase order management, and inventory tracking. Simple Start is $7 a month, while the mid-level Essentials version is $17 a month. QuickBooks Plus, the most fully featured of the three, is $25 a month. Full-service payroll is an add-on for $49 a month.
Freshbooks dominates a niche for smaller service-based business who mainly need easy-to-use invoicing and project management software. In fact, whether FreshBooks should call itself accounting software or invoicing software is up for grabs — some experts insist that too many key functions are missing for FreshBooks to be a true accounting platform, including double-entry bookkeeping.
For users satisfied with FreshBooks’ capabilities, reviewers say there’s much to like: They rave about customer service, ease of use, and mobile tools. FreshBooks also integrates with many third-party apps as well as other accounting software, so some small businesses may take advantage of FreshBooks’ strengths while using another program to fill in the gaps.
FreshBooks’ base level platform, Lite, is $15 a month. You can manage only 5 clients at this level. With Plus, $25 a month, you can manage 50 clients, gain project management tools, and easily accept online credit card payments. Premium platform, $50 per month, offers all the best Freshbooks offers, including unlimited invoices and estimates.
Best Free Accounting Software: Wave
As long as your business is truly small — we’re talking under 10 employees — cloud-based Wave could be a viable accounting solution. Features include invoicing, expense tracking, receipt scanning, and integration with bank accounts and online platforms such as PayPal.
Advertising keeps Wave free, but payroll and payment tools are premium services that do require a fee to use. Experts say the interface is intuitive and easy to use, even for beginners, and several reviewers say Wave is better than some of the cheaper paid cloud accounting options.
Unsurprisingly, there are some hiccups: Some users have reported glitches with bank information not syncing reliably, while others say customer service can be very slow to respond to problems. (Wave does offer premium customer service starting at $9 a month.)
Runners-up: NolaPro and GnuCash
NolaPro operates much like Wave: It’s a free, cloud-based platform, but there are some add-ons that cost money. Billing, payables, and customer tracking are among the free features. It supports bigger businesses and reviewers say the browser-based interface is easy to navigate for beginners.
NolaPro does feel dated, however, especially compared to Wave. Premium services include inventory and payroll management.
GnuCash could be a good pick for a more advanced small-business user who wants a powerful accounting platform without shelling out a dime. Wave and NolaPro are “freemium” (you use the core service for free, but pay for upgrades), but GnuCash is completely free because it’s open-source software — anyone can download and share it. Features include customer and vendor tracking, invoicing, bill payment, and budget management.
However, reviewers say GnuCash isn’t as intuitive as other options, so it’s best for users who already have some accounting knowledge. Also, there’s no live support — if you can’t find help using online tutorials and FAQs, you may be out of luck.
Traditional or Cloud-Based Accounting: Which is Best?
As I mentioned above, most innovation in small business accounting software has headed online. That doesn’t mean that traditional accounting software is dead yet — right now, it’s still the standard for the majority of small businesses. If you’re wondering whether your small business should make the leap to cloud-based accounting or stick with tried-and-true traditional software, here are some pros and cons to consider.
Small businesses have relied on traditional accounting software such as QuickBooks for years. Longevity means a large number of expert users, support guides, and other documentation that can keep you up to speed. Experts agree that desktop programs are usually more feature-rich and powerful than cloud-based competitors, and you don’t need a fast Internet connection (or any Internet connection at all) for most features. Finally, this is a one-time expense. You pay for your software and can use it indefinitely without shelling out more cash (at least until you need to upgrade to a new program).
Of course, one major con of traditional accounting software is that access is limited to wherever you’ve installed it. This can also make it hard to use collaboratively — this is typically a one-user-at-a-time scenario for small businesses. You have to be extra careful to back up your data, which could be swallowed up in the black hole of a computer crash or malware attack. Finally, you’ll need to periodically check for software updates to keep things running smoothly and take advantage of new features.
One of the biggest advantages of cloud-based accounting is accessibility. As long as you can get online, you’ll be able to access your account. Because the software lives online, you won’t have to worry about updates and backing up your work — that’s all automatic. You’ll also be able to collaborate more easily with others, and can even work simultaneously if your platform allows multiple users. You can link up your account with your bank or other cloud-based applications such as PayPal, which can save you from some tedious data entry.
Still, since cloud-based accounting is relatively new, you may find there are fewer experts to guide you, and industry-specific platforms are rare. Depending on your needs, you may also find some advanced features are missing, such as customer relations management or purchase order control. Price can also be a big downside here: You’ll have to pay month after month for a cloud-based service. At roughly $20 a month (the price of a low- to mid-tier cloud accounting solution) it will take you about a year to equal what you might pay for basic traditional accounting software — however, you’ll still keep paying after that, and prices for premium cloud accounting run $30, $40, or even more a month.
What About Security?
Many small-business owners have been reluctant to put their financial data online because of security concerns. Certainly, no one wants their account numbers in the hands of hackers. However, most experts agree this concern is overblown, and shouldn’t dissuade you if you’re thinking of moving your accounting to the cloud. After all, your data is probably more at risk on your old desktop or laptop, whether that’s from a computer crash, a virus, a theft, or even something like a fire. In contrast, cloud accounting companies know their own businesses are at stake in the event of a major data breach, so they spend a lot of time and money keeping their security top-notch.
If you need features or truly industry-specific support that you can’t find in cloud accounting, it may still be best for you to choose traditional accounting software. Otherwise, it probably makes the most sense to head online. As one expert notes, the reasons to stay with traditional software will lessen considerably after a few more years of innovation.
How to Shop for the Best Small Business Accounting Software
Once you’ve decided whether to stick to traditional software or move your data into the cloud, you’ll want to keep the following considerations in mind as you shop.
- Do you really need accounting software? If you’re a one-person operation with little inventory and just a handful of customers, an old-fashioned spreadsheet may serve you just fine.
- What are your must-have features? Take a hard look at your business’ specific needs to determine what matters most to you. Do you have a lot of inventory to manage? Invoices to tame? Do you need time tracking or project management? Do you need a better way to start keeping track of customers so you can keep their loyal business? Small-business accounting software can do all of these things, but never assume a certain feature is included before buying. Also, in the case of cloud-based platforms, make sure you know whether the feature you want is included in the base price or is a premium add-on.
- Ask around. Find out what software your competitors are using. Pick their brains if they’re game. What do they like? What’s limiting? If you have an accountant, you’ll want to ask for their advice, too. They may want you choose a program that’s compatible with what they use — it will make everyone’s lives a little easier, especially at tax time.
- Think about third-party integration. You’ll probably want to integrate your bank account with your software, so make sure that functionality is supported at both ends. If you rely on any other apps or programs — PayPal, Square, and Salesforce are just a few common examples — look for software that integrates with them, too.
- Can your software scale with you? There’s always a chance you’ll outgrow software that’s limited to a certain number of users or tracking a limited number of customers, or platforms that don’t include certain features that you may not need now, but possibly will later. At the very least, you should be able to export data easily if you decide to switch providers down the road.
- Try before you commit. Many cloud-based companies offer users a free trial these days, making it easy to try a couple or more providers before getting entrenched. If you’re going with traditional software, check for a money-back guarantee. Both QuickBooks Pro and Sage 50 give you 60 days to decide whether you like the product.
How I Chose the Best Accounting Software
To narrow down a pool of products to look for in my search for the best accounting software, I combed through sales lists (such as best-sellers on Amazon.com), articles, comparisons, and single-product reviews to identify the most popular options on the market today.
From that point, I made a list of criteria that would be easy to evaluate myself. Examples include price, included features, number of users allowed, and capacity to upgrade the software or add on features.
However, the more important criteria for this category, and those I weighed more heavily, were ease of use, customizability, and customer service. For evaluations of these more intangible considerations, I relied on expert reviews and comparisons as well as customer reviews. I paid special attention to detailed, head-to-head product comparisons, and discounted any analysis that seemed biased or thinly researched.
Starting Your Search
Accounting can be an intimidating chore for newer small business owners, and an exhausting one for more seasoned merchants. The best accounting software should make this important task a little less of a grind, if not the pleasure some companies claim.
However, remember that you can still get in trouble with even the easiest-to-use programs if you don’t bring at least some basic accounting knowledge to the table. There are plenty of online tutorials that can help you get your feet wet, boost your confidence, and increase your chance of successfully navigating your software. You’ll also be able to make a better pick for your needs from the get-go.