As a fellow small business owner, I know how difficult it can be to keep up with accounting and bookkeeping. You have so much on your plate just trying to run operations, the last thing you want to worry about is invoices, expenses, taxes and financial statements.
But proper accounting is crucial for making smart decisions that help your business thrive. This is where small business accounting software comes in – it automates and simplifies accounting so you can gain financial visibility in less time.
In this comprehensive guide, I‘ll compare the top accounting software options based on 15+ years of experience helping small business clients find the right solution. You‘ll learn:
- Common small business accounting challenges and how software helps.
- Overview of 6 leading solutions: QuickBooks, Xero, FreshBooks, Wave, Zoho Books, Sage.
- Key features to look for when choosing accounting software.
- Detailed features and capabilities comparison.
- Pricing options.
- Pros and cons of each platform.
- Tips for getting started with implementation.
Let‘s dive in!
Contents
Why Small Businesses Need Accounting Software
First, let‘s look at some of the major accounting pain points for small businesses and how software can make life easier:
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Manual data entry is tedious and error-prone – Entering every invoice and expense transaction manually using spreadsheets takes ages. Accounting software automates data import from bank accounts, credit cards, POS systems, etc. This saves you hours of manual work and improves accuracy.
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Hard to track income and expenses – With everything in one place, you can easily categorize transactions and see where the money is going. No more shuffling between spreadsheets and stacks of paperwork.
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Invoices are a headache – Creating, sending and tracking invoices is a huge time suck. Accounting systems generate and automate reminders for overdue invoices to keep cash flow steady.
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Difficult to generate financial statements – Monthly profit & loss, balance sheet, and cash flow reports are critical but tough to produce manually. Quality accounting software makes it easy.
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Taxes are painful – Running payroll, calculating sales tax, W-2s, 1099s, depreciation and preparing tax returns all take specialized knowledge. Accounting systems help manage taxes seamlessly.
According to a recent Xero study, 58% of small businesses report cash flow problems and 41% find tax compliance challenging. Meanwhile, the IRS estimates that SMBs spend over $15 billion annually on tax preparation. Accounting software alleviates these major pain points for small business.
Now let‘s look at some top solutions on the market and how they compare.
Overview of Top 6 Accounting Software for Small Business
Here are six leading options I frequently recommend to small business clients:
| Software | Best For |
|---|---|
| QuickBooks | Most popular all-purpose accounting software |
| Xero | Real-time accounting for service businesses |
| FreshBooks | Freelancers & service businesses focused on billing |
| Wave | Free software with limitations |
| Zoho Books | Integrates with Zoho‘s business apps |
| Sage 50cloud | Robust capabilities including inventory mgmt |
Below I‘ve broken down key features, capabilities, pricing, pros and cons of each solution in detail.
1. QuickBooks
QuickBooks is the 800-pound gorilla. Developed by Intuit, it‘s the most widely used small business accounting software with over 3.2 million customers. QuickBooks strikes a nice balance between ease of use and robust features.
It‘s great for service companies, retailers, contractors, nonprofits and most small businesses. Top features include:
Bank Connections – Sync transactions from bank accounts, credit cards, PayPal etc. Connect PayPal sales, Square payments, etc.
Invoicing – Create, customize and send invoices. Set up recurring invoices. Accept online payments.
Expenses & Income – Track expenses, billable time and mileage. Categorize income and sales.
Reporting – Generate commonly used financial statements with one click. Analyze profitability.
Taxes – Automates tax preparation. Compatible with TurboTax.
Mobile Apps – iOS and Android apps to manage invoices, expenses, contacts.
Payroll – Built-in full-service payroll or integrate with Gusto, SurePayroll.
Additional Features – Inventory management, purchase orders, quoting, projects, fixed assets, account reconciliation, chart of accounts, multi-currency.
| Plan | Price/Month |
|---|---|
| Simple Start | $10 |
| Essentials | $20 |
| Plus | $35 |
| Advanced | $75 |
Pros
- Very user friendly
- Scales with your business
- Hundreds of integrations
- Strong mobile apps
- Top-rated customer support
Cons
- More expensive than some options
- Limited API access in lower tiers
- Steep learning curve for advanced capabilities
2. Xero
Xero is one of the fastest growing competitors to QuickBooks Online. It offers robust real-time accounting suitable for most types of small businesses. Based in New Zealand, Xero integrates beautifully with hundreds of third party business apps.
It‘s a great choice for service companies, agencies, ecommerce stores, nonprofits and more. Here are some key features:
Bank Feeds – Automatic, daily bank imports. Reconcile instantly.
Invoicing – Online invoicing with custom branding. Automated reminders.
Expenses – Snap photos of receipts. Categorize expenses.
Reporting – Dashboards for insight into cash flow, A/R, A/P, budgets.
Payroll – Built-in payroll or integrate Gusto, ADP.
Inventory – Manage stock, price books, transfers between locations.
Mobile – iOS and Android apps to manage accounting on the go.
Add-ons – Bill payments, 1099 contractors, purchase orders, projects and more.
| Plan | Price/Month |
|---|---|
| Early | $9 |
| Standard | $30 |
| Premium | $60 |
Pros
- Cloud-based with mobile access
- Beautiful and intuitive interface
- Excellent ecosystem of integrations
- Strong inventory management
- Popular with accountants
Cons
- Less suitable for product retailers
- Lacks some advanced QuickBooks features
- Steep learning curve for setup & customization
3. FreshBooks
FreshBooks is one of the top accounting apps designed specifically for service-based small business owners and freelancers. It makes business billing super fast and streamlined.
If you bill by the hour/project and work with clients, FreshBooks is a fantastic choice. Features include:
Invoicing – Mobile-ready, customizable invoices. Accept online payments.
Expenses – Snap photos of receipts to log expenses on the go.
Time Tracking – Track billable time and expenses by project.
Reporting – Real-time visualization of account balances, income, expenses, profitability.
Accounting – Full double-entry accounting capabilities.
Payments – Get paid 2x faster with direct credit card and ACH deposits.
Mobility – iOS and Android apps for invoicing, payments, expenses.
| Plan | Price/Month |
|---|---|
| Lite | $15 |
| Plus | $25 |
| Premium | $50 |
Pros
- Perfect for service businesses
- Very fast and easy invoicing
- Intuitive interface and reporting
- API integrations with CRMs, POS systems etc.
- Excellent customer support
Cons
- Light on features beyond billing & invoicing
- Inventory capabilities lacking
- Pricey compared to similar apps
4. Wave
Wave offers 100% free accounting software targeted at very small, early stage businesses. There are limitations – no direct bank imports or reconciliations. It generates income reports from manually entered data.
You‘ll need paid subscriptions or upgraded software as your business grows. But it‘s a good basic starting point for simple accounting needs.
Invoicing – Send and track invoices. Get paid online.
Accounting – Income, expense, balance sheet, and cash flow reporting.
Receipts – Photograph receipts to log purchases.
Payroll – Payroll is available as a paid upgrade.
Credit Card Processing – Accept payments for 2.9% + 30¢ per transaction.
Bank Payments – ACH payments for 1% per bank transfer.
Plans & Pricing
- 100% free basic software
- Payroll, payments, other upgrades extra
Pros
- Totally free software
- Easy to get started
- Upgrade capabilities as you grow
- Mobile invoicing
Cons
- Very limited free features
- No accounting automation
- Support fees are expensive
- Must upgrade to scale
5. Zoho Books
Zoho Books is part of the popular Zoho suite of business apps. If you use other Zoho tools like CRM or email marketing, it integrates beautifully.
Zoho Books works well for agencies, consultants, freelancers and small service businesses. Features include:
Banking – Connect accounts to automate transfers.
Invoicing – Build estimates and professional invoices. Send automated reminders.
Expenses – Import transactions. Take photos of receipts.
Billing – Track time and bill clients.
Reporting – Insight into income, expenses, profitability, receivables, and payables.
Inventory – Manage stock across locations. Track orders and transfers.
Clients – Manage clients and view history in one place.
Multi-Currency – Send invoices and accept payments in different currencies.
| Plan | Price/Month |
|---|---|
| Basic | $9 |
| Standard | $19 |
| Professional | $29 |
Pros
- Generous free plan to get started
- Integrates well with other Zoho apps
- Client portal for sharing documents
- Inventory capabilities
Cons
- Third-party integration lacking
- Forecasting capabilities limited
- Steep learning curve
6. Sage 50cloud
Sage 50cloud (formerly Peachtree) offers robust accounting capabilities, inventory management, fixed assets etc. It‘s a solid choice for product retailers and manufacturing businesses.
Features include:
Banking – Automatically download transactions from banks.
Invoicing – Create, customize and send invoices. Accept payments online.
Inventory – Demand planning, serial/lot tracking, supply chain.
Purchasing – Streamline POs, returns, vendors.
Reporting – Drill into reports on financials, customers, sales, inventory.
Add-ons – HR, time tracking, procurement, document management.
Mobility – iOS and Android access. Limited features.
| Plan | Price/Month |
|---|---|
| Simple Start | $25 |
| Accounting Start | $45 |
| Pro Accounting | $75 |
Pros
- Good for product businesses
- Strong inventory management
- Multi-location support
- Integrates with ecommerce platforms
- Fixed assets management
Cons
- Interface less intuitive than other options
- Weak mobile apps
- Add-ons get expensive
- Steep learning curve
Key Features to Look for in Accounting Software
Here are some of the most important capabilities and features to look for when researching small business accounting systems:
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Automatic sync with bank accounts – Direct feeds eliminate manual entry.
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Invoicing – Fast and professional invoices. Accept online payments.
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Expenses – Enter or snap photos of receipts.
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Reporting – Insights into profitability, cash flow, taxes, A/R, A/P.
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Inventory – For product-based businesses. Scan barcodes, track inventory.
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Payroll – Built-in or integrate with leading payroll services.
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Multi-currency – For businesses with international clients.
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Time tracking – For professional services firms to log hours.
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Mobile apps – Manage invoices, payments, expenses on the go.
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Add-ons – Bill pay, 1099 contractors, purchase orders etc.
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Customer support – Look for US-based support teams.
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Ease of use – Software should be intuitive without extensive training needed.
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Integration – Connect the dots with other business software.
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Scalability – Ensure the system can grow with your evolving needs.
How to Implement Small Business Accounting Software
Once you‘ve chosen the best accounting software for your business from the options above, here are some tips for getting started with implementing the new system:
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Map your accounting process first – This will help you configure software optimally.
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Enter historical data – Input past accounting data for reporting continuity.
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Integrate bank feeds – Connect credit cards and bank accounts to automate everything going forward.
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Set up chart of accounts – Create income, expense, asset, accounts tailored to your business needs.
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Review default settings – Tweak configurations for taxes, customers, invoices and more.
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Import lists – Sync over your customers, vendors, products etc.
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Train your team – Get everyone up to speed on using the software day-to-day.
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Explore capabilities – Take advantage of all the features and apps available to maximize value.
It can take 1-2 weeks to fully onboard onto new accounting software. Start the implementation a month or two before your current solution expires so you have time for a successful transition without any gaps.
Choose the Right Solution for Your Business
Determining the best small business accounting software for your needs depends on your budget, industry, business model, size of your team and other factors.
I recommend starting with the purpose-built solutions for your specific business type – QuickBooks Online for general small businesses, FreshBooks for service professionals, Xero for ecommerce retailers, etc.
Look for free trials so you can experience using the software firsthand with your own data. And don‘t hesitate to reach out to the vendor‘s sales reps with any questions.
Investing in accounting software that streamlines back office work provides incredible value. With tools that automate routine finance tasks, you can focus on growing your business and serving more customers.
