Why use accounting or bookkeeping software?
There are many reasons to use bookkeeping software:
- Eases data entry: In the past, many calculations were done by hand, and it was harder to keep track of ledgers along with receipts for business transactions. This made the entire process more stressful by adding unnecessary redundancy. It also added complexity as many processes weren’t automated.
- Prevents errors: Many quality tax software products have automation tools that streamline any business process. For instance, Quickbooks Desktop users can automatically transfer their income statement to their TurboTax’s Schedule C. This is also available for Quickbooks Online users and is possible as both platforms are under the Intuit umbrella. This platform, along with Xero, has an open API or Application Programming Interface that connects it to popular apps like Paypal and Shopify.
- Reduces costs: Generally, each small business accounting software charges a monthly or annual one-time fee, with some platforms locking users into a contract. Luckily, most programs have a month-to-month billing cycle without a contract. Also, these programs are relatively affordable with fees ranging from $10-$50 per mo. on average. Some charge more based on features along with business size. Yet, other platforms like Wave, have a free option with limited features. Employees will always cost more than software as they need a minimum salary, health benefits, and other perks. On top of this, employers are required to pay hefty taxes like FUTA, SUTA, and half of the FICA tax on their behalves.
- Makes tax time easier
What to look for with accounting software?
Not every accounting program is created equal, with some being better for accounting firms and large corporations. Some platforms are better for small businesses and self-employed sole proprietors.
The first step a business owner should take when evaluating different plans is to acknowledge the business size and growth. Related to this, it’s prudent to consider how many users will have access to the software. Some products charge a higher monthly rate for additional users with others having more gradual fees for users. For example, Onpay has a low flat fee of $36 per month with each user costing an additional $4 per month.
Small businesses should also consider the functions they need from the software. Most plans have the fundamentals like tracking purchase orders, AR reporting, income statements, bank reconciliation, linking bank accounts, and income vs. expense tracking.
Yet, many plans have advanced features like project management software, HR tools, payroll services, and tax integration tools. Thus, it makes sense to evaluate current tools vs. future needs in prospective tax software.
Some businesses might already have a quality payroll system, making it unnecessary to pay extra for tax software that offers this benefit.
Ease of use is another consideration, as a business’s employees might not be the most tech-savvy people. You can also look into a project management template that can help you record information that can be accessed by your whole team.
QuickBooks
One of the most well-known small business accounting software solutions on the market, QuickBooks is a favorite for small business owners. It offers a lot of features that small businesses can grow into, and is the ideal software solution if you plan to work with accountants during tax season.
QuickBooks has some of the most advanced accounting features available, which makes it a popular choice and an industry standard. Due to its extensive features and popularity, QuickBooks is also one of the more expensive bookkeeping solutions on the market.
How it’s different
QuickBooks is known for its in-depth reporting features. Business owners can examine their business’s economic health through a variety of reports that go beyond profit and loss charts. Users even have the ability to build their own custom reports, like setting up a report to examine revenue generated by customers.
Businesses have the chance to grow with QuickBooks. While a sole proprietor may not use all of QuickBooks features to start, you can rest assured knowing you’ll have all the tools you need as you grow. Users can start at the most affordable plan and move their way up as needs change and evolve.
Users can also grant access to accountants. If you plan to ask an accountant to file your taxes, they can use your QuickBooks entries to file the proper documents with little to no hassle.
If you already utilize various apps, QuickBooks likely integrates with them. The software has 750 integrations with different apps and software.
Who it’s best for
Small business owners with an eye on growth are best suited for this software.
Pros
- Feature-rich program with solid reporting, invoicing, and payroll capabilities
- Extensive app integrations
- Phone support is available during the business week
- Payroll system is built-in, not a third-party integration
- Mobile app is available
- Number of invoices sent is not capped
Cons
- With so many features, there is a learning curve to use the software efficiently
- App is not as functional as customers would like
- Plans are more expensive than competitors
- Number of users is limited
See the full review of QuickBooks here.
FreshBooks
Freshbooks offers small business accounting software. It’s a feature-rich program that’s ideal for anyone that’s self-employed. Whether you run an online store, are a freelancer, or run a small business, it’s a viable bookkeeping solution.
You’ll find many useful services within the software, including invoicing, expense tracking, time tracking, mileage tracking, and the ability to accept debit and credit cards from clients.
How it’s different
FreshBooks is an affordable, cloud-based tool for small businesses. In addition to its web portal, users rely heavily on its app. There’s a low learning curve, and the features available give your business room to grow.
Even the Lite plan gives you access to time tracking, which is often an add-on with other accounting platforms. You can snap pictures of receipts and add them to expense reports, use log mileage from the app, and see your company’s financial health “at a glance” with intuitive charts and graphs.
FreshBooks does give its users the ability to accept debit and credit cards, which is often a hurdle for those just starting out. Clients can pay directly from the FreshBooks invoice, and online payment systems like Stripe or Paypal can be accepted too.
The number of billable clients is limited in the Lite plan, as is the ability to give access to multiple users or an accountant. If you want more features, you’ll need to upgrade your monthly plan.
If your business wants to create recurring invoices or charges a retainer, FreshBooks has the functionality to achieve this task. For client retainers, you’ll need to select the Plus Plan, since it’s not offered in the most affordable tier.
Who it’s best for
FreshBooks is ideal for small business owners who want to track cash flow and utilize a general ledger. Freelancers, sole proprietors, and even small LLCs use the tool as their main accounting software.
Pros
- User-friendly
- No experience is needed to start
- Four different plans to choose from
- Time tracking is available on all four plans
- Phone support is available by phone on the weekdays
- Customers love its mobile app
Cons
- Reports are lacking
- Tiered plans restrict the features that are available
- Accountant permissions are restricted based on the plan
- You can only bill five clients in the most affordable plan
See the full review of FreshBooks here.
Zoho Books
Zoho Books is a cloud-based accounting software that has a free plan, which is excellent for small businesses and startups that need assistance with their accounting to maximize their profits and keep track of all their expenses and income.
However, for larger businesses with more needs when it comes to accounting, you might need to go for their more expensive plans to enjoy all the advanced accounting features, such as purchase approvals, vendor portals, and more customization options.
Zoho is very easy to use compared to other bookkeeping software like QuickBooks and FreshBooks. The Zoho Books Dashboard gives you a clear view of everything you need to keep track of, such as highest expenses, receivables, payables, and sales. You can also create various business reports, profit statements, and more.
How it’s different
Although Zoho Books shares a lot of similarities with similar apps like QuickBooks and FreshBooks, the best thing about Zoho Books is its mobile app that you can download on iOS or Android.
Other accounting software also have mobile apps, but the Zoho Books mobile app is a lot easier to use compared to other software apps.
Another notable difference is that you can customize plans and only get the features you need without paying a lot of extra money on features that you probably don’t need. Zoho Books offers add-ons for a fraction of the price. For example, you need to add more users or more features, you only need to add a specific amount for a month based on the extra features and functions you want to add on.
Who it’s best for
Zoho Books is best for small businesses and startups. Although medium to large-sized businesses can still use this software, it is not recommended for companies that are growing at a faster pace. If your company’s goal is to grow bigger faster, Zoho Books might not be the right option because of its limitations.
Pros
- Extensive pricing plan options
- Excellent mobile app
- Easy to use
- Free plan available
- Excellent customer support
Cons
- Limited in terms of scalability
- Advanced features can be expensive
See the full review of Zoho here.
OnPay
OnPay is a cloud-based payroll service, which is excellent for small businesses when it comes to handling automated payroll schedules. It comes with all the tools you need to make employee payments on time and all the specific configurations for specific employee pay rates, schedules, and more.
It is very intuitive and easy to use, making it an award-winning service for employers and HR managers with little software knowledge.
How it’s different
Although there are many other payroll service software, such as Quickbooks Payroll, Gusto, and Xero, what makes OnPay different is its easy-to-use and learn features that make it a simple, yet flexible payroll service. The pricing is very affordable, and it offers more than what it shows, especially in terms of HR management and PTO management tools.
OnPay is a lot more than just an employee payroll service, it is a full-service management tool that has many benefits and uses.
Although many employers and larger companies could use more features, especially for growing companies that require more tools and functionality, OnPay is everything you need and more if you own a small business with fewer than 100 employees.
Who it’s best for
Based on its features and price point, OnPay is best for startups and small businesses. Whether you are a sole proprietor or LLC, you can benefit by using OnPay and its automated payroll features, scheduling, and its valuable HR tools that come at no extra costs. It might be a cheap payroll service, but it is legitimate and easy to use, even if you don’t have experience with this type of software.
Pros
- Easy to use
- Affordable
- Great customer service
- Robust technology
Cons
- No 24/7 customer support
- Not for large businesses
- Lacks expert features
See the full review of OnPay here.
Patriot Software
Patriot Software is a powerful yet easy-to-use online platform that offers both accounting and payroll solutions. With it, small businesses can track revenue and expenses, issue invoices, run payroll, compile reports, and much more.
Patriot’s accounting software starts at just $20 per month, and there is no contract to sign or commitment to make. Payroll solutions start at just $17 per month, plus $4 per employee per month. These prices are well below the industry average.
How it’s different
For one, Patriot offers both accounting and payroll solutions, which is unique. Users can choose between cash-basis or accrual-basis accounting and easily switch between them with one click.
Patriot is cloud-based, which means you can use the platform just about anywhere, as long as you have an internet-connected device.
Unlike other accounting software companies that require you to sign a contract, Patriot lets you use the services and pay month-to-month, without ever signing a contract or commitment.
Many customers of Patriot have reported excellent experiences with the platform, and particularly enjoy the superior customer support offered by Patriot.
The other highlight is the very affordable price point, as the software costs much less than many competitors.
Who it’s best for
Patriot Software is best for business owners who want to do their own accounting, without learning a complex system. It’s also a great option for budget-minded companies, as it’s one of the more affordable accounting software solutions out there.
Pros
- Great customer service is available for all users
- Income and expenses can easily be tracked
- Features make it easy for users to file taxes each year
- Users can customize each invoice
- Affordable pricing
Cons
- Patriot Accounting does not have an app
- Inventory tracking, something many businesses need, is not available through the platform
- The basic plan does not offer bank reconciliation, recurring invoices, or payment reminders
See the full review of Patriot Software here.
Neat.com
Neat.com is an accounting software solution that can ease your business finances.
Through cloud-based accounting, it offers two primary options: NeatBooks and NeatFiles.
NeatBooks is both a reconciliation and an analytical system that tracks financial data. It allows business owners to see where cash is going in real time and shows its total sales.
NeatFiles is cloud storage for financial documents, offering a way for business owners to declutter their desks and keep everything handy.
Both products come with the highest level of cybersecurity with Neat.com using bank-level encryption that protects important documents from breaches.
How it’s different
Some of the best features include paired receipts, transaction filtering, quick financial overviews, real-time accounting, and guided workflow.
Users can scan receipts and upload them to automatically-categorized folders so anyone on the system can see the new information.
Real-time reporting is also a benefit. At a glance, users can see cash flow statements, balance sheets, and profit and loss statements. Other reports can be customized.
Users can also filter transactions. With just a keyword, a business owner can pull up a receipt or an expense report that details transactions in that category.
This system syncs with your business bank accounts so you have all your transactions in one place. This helps you see everything at any time.
Who it’s best for
Neat.com has functionality that’s best for businesses that are just starting or who are beginning to grow but don’t have enough resources to hire a full accounting staff and secretaries.
It works well with businesses that are either solo-operated or small teams.
Pros
- An affordable option for new entrepreneurs
- Take pictures of receipts and avoid keeping hard copies
- Users can use the search function to find pieces of information
Cons
- Users pay for documents storage, other options may be more affordable
- Connectivity issues are often reported
- Doesn’t have robust accounting features needed for growth
See the full review of Neat.com here.
Xero
Xero is quickly becoming a must-have platform for small businesses. This accounting program is easy to use, affordable, and doesn’t charge add-ons for additional users.
Xero offers customizable features, including customized invoices, reports, and dashboards. Its intuitive features aid owners by suggesting matching transactions to ease the reconciliation process.
The platform does allow accountant access, which is ideal for any small business that plans to work with an accountant throughout the year or during tax season.
How it’s different
Xero is different from most bookkeeping options as it’s one of the best accounting software solutions for larger businesses.
It has the most integrations of any choice on this list as it can link with over 700+ apps.
Also, users can take advantage of the over 55 reports that can be found within Xero. These reports deal with inventory management, AR management, and cash flow.
Xero also has a robust social media presence which includes a podcast with over 700 episodes. This is quite useful as Xero has a higher learning curve than the other options.
Businesses that are active internationally can also take advantage of the multi-currency feature available with the higher-end plans, like the Business Edition, which allows invoicing and payment receipt in over 160 world currencies.
Who it’s best for
Small businesses get the most out of Xero. It has all of the features you’d need to manage a small business and work with accountants.
Pros
- There are no additional fees to add users
- Many commonly used business apps have integrations with Xero
- Users can use an app as well as a web portal to access Xero’s many features
Cons
- Customer support is not available by phone
- Entry level plan limits the number of invoices that can be sent
- There is no free plan
- Reporting features are lacking
See the full review of Xero here.
ZipBooks
ZipBooks is fairly new to the accounting market, but it has a list of introductory features that are ideal for small businesses or budget-restricted solopreneurs who want the advantages offered by accounting software.
ZipBooks offers basic income and expense tracking, double-entry accounting, and allows owners to link their bank accounts directly to the platform. The starter plan, however, only allows you to link one bank account.
Users can create and send invoices, use time-tracking tools, view income reports, and manage vendors and customers in one portal.
How it’s different
ZipBooks has fundamental features like income statements, HR management, and bank reconciliation.
Its main differentiators include the ability to color-code sections and the business score. Color coding is especially helpful for type A owners and will ensure processes are organized. The business score is found on the main dashboard and is a score out of 100. This score accounts for unpaid invoices, receivables, income, and expenses and gives the business a nice high-level view of its finances.
Who it’s best for
ZipBooks is best for entrepreneurs who are just starting out and looking for a free accounting service to test.
Pros
- ZipBooks has a free plan and is scalable for your business
- Payroll is possible, but through integration with Gusto
- Many customized invoice options
Cons
- Support is only offered through live chat
- Featured needed by larger companies, like inventory management and budgeting, aren’t available
- The app does not support Android devices
See the full review of ZipBooks here.
Sage 50cloud
Sage has been around since the 1980s and is one of the more established companies in the accounting software industry. It’s a comprehensive tool, with a desktop version, not cloud-based software like others.
Sage connects with Microsoft 365, so if your company uses Microsoft 365, this accounting software is a likely choice.
How it’s different
Sage 50cloud has detailed graphs, invoicing systems, and a cash flow manager. The cash flow manager is a huge differentiator as it allows companies to run many “what if” scenarios. These scenarios can help firms project cash flow in a variety of cases.
Users have complained about high prices and an outdated user interface. In fact, some users have compared its dashboard to the antiquated Nintendo 64 gaming system.
Due to its robust systems, Sage has the highest prices which go as high as approximately $1,800 per year. Also, each option has a year-long contract, which locks in users and is tough to cancel.
Who it’s best for
Sage 50cloud Accounting is best suited for medium to large businesses that use Microsoft 365 and need extensive features. Most users have large companies with 50+ employees and large product offerings. The complex features and the higher price point are often deterrents for smaller companies.
Pros
- Sophisticated set of tools and features fit for complex companies
- In-depth reporting abilities with extensive customization options
- Microsoft 365 integration
- Budgeting and forecasting tools are available
Cons
- The software is for windows users only
- Price points are on the higher end for accounting needs
- All accounting processes can be tracked, monitored, and reported
- The desktop has an outdated look and some say difficult navigation
See the full review of Sage 50cloud here.
OneUp
OneUp offers a set of accounting tools that freelancers, contractors, and small business owners appreciate. Users have access to all of the tools they’d need to track income and expenses and can utilize additional tools like inventory management, invoicing, and the ability to track new leads through a feature called Opportunities.
How it’s different
Small business owners have really benefited from its inventory reports. These reports not only allow businesses to keep track of inventory but have alerts to prevent running out of stock. Having a healthy inventory is crucial for product-based businesses and will prevent lost sales along with impatient customers.
Like Zoho, it offers users the option to use a comprehensive CRM system. This CRM system keeps track of leads, customers, and opportunities. It also has tasks that remind small business owners of important items to complete per day, week, or month.
Who it’s best for
OneUp is best for product-based businesses and smaller firms. Growing business will appreciate the software too.
Pros
- The accounting app is functional and versatile
- Affordability
- Inventory management is available
Cons
- Pricing is based on the number of team members
- Email support for all plans but the most expensive
- No budgeting capabilities
See the full review of OneUp here.
AccountEdge Pro
AccountEdge Pro is an accrual-based accounting software that’s meant to be installed on your desktop, with an app that gives you remote access. The software outperforms those that offer basic accounting tasks. Users can expect an advanced set of tools, with higher pricing.
The software does charge extra for payroll features including direct deposit and credit card processing. If you want phone support, you’ll pay extra for that too.
How it’s different
Payroll is one of the main features that differentiate small business software from, mid to large-firm software. Account Edge Pro has payroll features that help businesses manage employee withholding, and pay FICA tax among other options.
This platform is also great for large businesses that are product-based like retail or e-commerce firms due to its customizable inventory reports. These reports allow users to track inventory, warranty, and manage sales tax. In fact, sales tax can be a complex topic for multi-state businesses, with Account Edge Pro allowing users to easily keep track of sales tax per product and location.
Its automated cards send out messages for birthdays, thank you occasions, and apology letters. These integrate with its proprietary CRM and help business owners improve customer relationships.
Who it’s best for
AccountEdge Pro is one of the best software options for large businesses as it has many comprehensive financial reports, detailed inventory tracking reports, automated cards, and payroll.
Pros
- Advanced features
- Highly customizable in many areas including invoices and reports
- Has a mobile app
Cons
- Many add-ons fees
- Steep learning curve
- Few integrations
- Not user-friendly for beginners
See the full review of AccountEdge Pro here.
Wave
Wave software is an industry newcomer with high-quality, free accounting software. It has basic accounting features that attract freelancers and small businesses. Bookkeeping, accounting, and invoicing are all possible through Wave, with additional features added to paid plans.
How it’s different
Its double-entry accounting feature allows users to manage income and expenses, send unlimited invoices, have unlimited users, and manage receipts.
Users can upload business expense receipts in the software and can sort them based on business expenses.
Wave isn’t entirely free as it charges a 1% ACH fee and a 3% credit card payment processing fee. Both these fees are competitive in the industry but can add up over time.
It also charges users that want to have payroll, but it’s affordable, and costs vary by state. It does charge an additional fee per employee or contractor.
Wave has sufficient customer service via email and phone, though phone support is only for paying customers.
Who it’s best for
Wave is best for freelancers, contractors, or small businesses with less than eight employees. Service-based businesses like Wave due to its versatile invoicing.
Pros
- There is a free plan
- Strong invoicing features and customization options
- Ability to manage different user permissions
Cons
- Advanced features like inventory management aren’t available
- Must pay for phone support
See the full review of Wave here.
Two common mistakes to avoid with accounting/tax software
1. Not checking important info like rolling over old information
Quality Tax software has changed the game by making processes quicker, less expensive, and more integrated. However, mistakes can happen from time to time, which includes bugs. Unfortunately, business owners have reported dealing with bugs when using software like Quickbooks. This can add inefficiency and increase errors, especially when customer service doesn’t keep people informed.
It’s also wise to check fundamental information like prior year AGI, tax payments, taxable income, and carryovers as these roll over from year to year. These can significantly alter tax liabilities or refunds. Therefore, it could be a prudent idea to consult with a CPA to ensure that the carryovers and other related information are correct. This can also prevent audits, as large carryovers can trigger IRS audits. Lastly, it’s wise to ensure that each platform has good customer support to assist with these tasks.
2. Not considering using software that can accommodate multiple businesses
Many small business owners have multiple small businesses, which require several Schedule C forms. One Schedule C can be tough enough on its own, which is why it’s imperative to utilize software that has options for multiple businesses. This can save money, time, and enhance processes. Many business owners especially novices, make the mistake of using too many platforms which adds unnecessary confusion by toggling back and forth between each one. This crucial mistake wastes time that could have been spent on more important purposes.
In addition, having multiple software platforms can be expensive as monthly fees add up. Some rookie business owners think that the next software or product will help make their business great and develop shiny object syndrome. This syndrome refers to people that are easily distracted and want to try the next new “it” thing without making any progress on anything. They have to realize that they need sufficient revenue to support their tools and staff, or else they will run out of business.
What professionals can help with accounting/HR software needs?
While accounting software can reduce the number of employees; there are still some key professionals that can assist with bookkeeping software. For example, the main two professionals are accountants and bookkeepers.
Many people erroneously interchange these professionals, when they have many distinct differences. Bookkeepers usually focus on day-to-day financial operations like bank reconciliations, categorizing expenses, managing AR, and creating financial statements.
Accountants can perform these operations as well, but usually, have a supervisory role especially when it comes to editing important financial statements like the balance sheet. Accountants have a 4-year degree, a CPA, or an EA. They can assist with complex topics like tax planning, auditing, and financial planning.
If a business owner has to choose between hiring these professionals, it could be wise to hire an accountant over a bookkeeper since they can provide guidance on more topics. This article provides more clarity regarding the specific differences between these similar professionals,
Other useful professionals like insurance agents and HR companies
Besides consulting a competent accountant or bookkeeper, it’s wise to consider using other professionals to assist with your accounting solution. For example, OnPay specializes in HR functions like Payroll, 401(k), and health insurance administration. It provides value by allowing small business owners to consult with qualified and licensed health insurance brokers. These brokers help employers choose the right plan based on their business needs, which is a win-win situation. Onpay also helps small business owners stay compliant with health insurance laws like COBRA, which reduces stress and saves money. Healthcare is one, if not the most important employee benefits which is why it’s imperative to have proper systems.
Onpay also assists business owners with managing 401(k) plans. A 401(k) is the most common way for employees to save for retirement on a tax-deferred or Roth basis. These plans can allow employees to build a large sum of money that will help them retire. Having a 401(k) is an important employee perk as it encourages prudent investing and boosts morale. Companies that offer an employer match can also attract the best employees and help employees surpass their retirement goals
Financial advisors and 401(k) administrators are some other professionals that can assist a business with its accounting/bookkeeping needs. They can ensure that the plans are compliant with the SEC and IRS. Also, some accounting software platforms allow business owners to offer fee-free financial advice to their employees. Offering financial advice is another new employee perk that is gaining popularity and benefits the company along with the employees. Lastly, these professionals can provide guidance regarding 401(k) deductions on employee payroll.
Payroll is another important accounting concept task for any sized business. There are many processes behind payroll, which includes time tracking, ensuring employees are paid on time, and that payroll or FICA taxes are paid. Many larger software platforms offer payroll options that can help automate and streamline these procedures. However, it could be wise to collaborate with an outside payroll firm like Paychex, ADP or even an individual payroll consultant. These professionals can provide clarity about complex payroll topics and ensure that the software is correctly managing payroll.
