One of the fundamental aspects of running a business is tracking income, expenses, and profit. Keeping proper accounting records, including tax preparation and bookkeeping, is imperative for the long-term success of any business. If you are starting a business, you might find it challenging to manage all of the accounting tasks. Similarly, when running an established corporation with a high volume of invoices, it can be challenging to know your business’s financial position and performance.
According to the Small Business Administration Office of Advocacy, only 20% of small businesses survive after their first year. One of the many reasons for this is poor bookkeeping and money management. Switching from a time-consuming and complex manual mode to an automatic solution is necessary to make the process efficient. That is where accounting software comes in. Accounting software helps to give you a clear idea of your business efficiency and allows you to file your taxes on time. Also, submitting accounts to your accountant will go smoother and will reduce costs. It is a valuable tool for just about any type and size of business.
Finding the Right Account Software.
The right online accounting and bookkeeping software can help you manage your finances, save time, and reduce human error. It will also give your business a competitive advantage and contribute to its growth and success. But, with hundreds of online accounting programs out there, selecting the best can be a daunting process.
To help you, we have gathered the best accounting solutions on the market. We will also discuss accounting software basics and what you should look for in accounting software for small businesses.
What is Accounting Software?
Accounting software is a type of computer software that business owners, bookkeepers, and accounting professionals use to process accounting operations and financial transactions. Accounting is a process of recording financial data for financial analysis and reporting, and internal and external audits.
In other words, accounting software is an online version of an accountant’s general ledger. It is a priceless resource for modern businesses. It helps you maintain a clear picture of your business’s financial health by digitally recording and tracking income, expenses, liabilities, and assets.
Accounting software packages come in a variety of forms and offer multiple features to meet the needs of a specific business or industry. However, most of these accounting systems have features such as accounts payable, accounts receivable, payroll, general ledger, and financial reports. Small and medium-sized businesses often use a store product (single-entry accounting), while larger firms and corporations choose to implement customized in-house accounting software (double-entry accounting).
Accounting Software Classification Depending on Types
What type of business do you run? There are different packages of accounting software designed to accomplish a variety of tasks for different kinds of companies. Are you a small-business owner that needs a small-accounting solution? Do you run a large international corporation and need accounting software to manage your financial accounts? The general classification of accounting software depending on the businesses type is:
Commercial off-the-shelf (COTS) software is one of the most popular online accounting solutions for small and medium-sized businesses worldwide. It boasts an error detection feature to prevent incorrect data entry, as well as advanced reporting that a company can configure to their needs. COTS software can come with specific features to help certain industries meet the needs of their target markets. Some systems are available online, and users can access software by logging into the vendor’s site.
Enterprise Resource Planning (ERP) Software
Enterprise resource planning (ERP) software is a product designed for larger and more complex organizations that operate internationally. It incorporates all functional areas of business processes and unifies all of their financial data into one complete system, enhancing accuracy and cooperation between different departments inside the organization.
The ERP software includes basic reports and financial tools, including inventory control, commercial transactions, human resources, customer relationship management (CRM), and more. It can be industry-specific for sectors like manufacturing.
Fund accounting solutions help government agencies and nonprofit organizations with special requirements for financial reporting to track their finances. Charitable organizations can track and manage their donation and grant expenditures to meet fund requirements. Government agencies use fund accounting to comply with the Governmental Accounting Standards Board (GASB) regulations. Also, universities and colleges use this system to track financial aid expenditure.
Fund accounting buyers are also called best-of-breed buyers.
Key Accounting Software Categories and Features
Core accounting provides essential assistance with the business’ general ledger and helps track accounts receivable and accounts payable fixed assets, and bank reconciliation. These are the core and minimum functions that every business requires when managing finances. A core system aspires to expand beyond using an electronic spreadsheet for tracking accounts.
These essential elements combined offer numerous benefits to the business, including more accessible tax filing, consolidated financial statements, and more prominent control over business finances.
Payroll software is a standard tool for accounting that helps businesses with processing employee payroll deposits and print paychecks. The system’s cash flow calculators determine the amount of money you need to pay based on their working hours, their hourly wages, or deductions. A payroll system also involves processing tax information and adjusting employees’ paychecks by automatically withholding government taxes. Another useful feature of payroll software is payment reminders that help you file tax reports on schedule and avoid fees.
The package can come as a separate or a complemented product.
Billing and Invoicing
Billing and invoicing might seem simple, but if you don’t have the right tools, things can get complicated. Billing and invoicing automate the collection of payments from customers. It eliminates manual data entry and reduces manual entry errors. Billing and invoice systems come in different forms to provide needed support to a variety of industries, businesses, scales of operations, and payment processing options. The most common add-ons of the billing and invoicing software include sales tax calculations, multi-currency support, and a list of transactions.
Project accounting software is a product that helps businesses with complex project-oriented operations, such as construction companies, track costs. It provides core accounting on top of billing and invoicing, time tracking, estimation of overheads, material resource management, etc. Businesses can review old costs, evaluate new costs, and choose projects that will help them maximize profitability.
This system helps businesses manage and track inventory to minimize costs and maximize profits. The system tracks product levels, including orders, sales, and deliveries to avoid undersupply or oversupply. Some inventory management solutions have a tool for tracking stock depreciation and reducing costs associated with it.
Fixed Asset Accounting
With this accounting system, you can track and manage financial information on the company’s fixed assets, including cost, depreciation, audit history, upcoming maintenance due dates, etc. Fixed asset accounting is crucial for businesses that have a lot of assets that come in different forms.
Budgeting and Forecasting
The main feature of budgeting and forecasting software is estimating future costs and conditions by revising past revenue and expenditures. Budgeting and forecasting systems are ideal for companies that must consolidate multiple organizational budgets and forecasts when planning how to utilize resources for financial success. These systems allow you to use financial information to estimate a company’s earning potential.
Benefits of Adopting Accounting Software
Accounting software solutions can help you boost your business in many ways. It can help you cut costs, and, according to 56% of accountants, it can increase productivity. Here are the additional benefits of accounting software.
Moving from manual bookkeeping or spreadsheets to accounting software will help you save time when entering and balancing ledgers. That’s the first benefit most businesses notice when they start using an online accounting software system. For example, generating payroll and tracking employee hours manually usually takes up a lot of time. If you switch over to an automated version, where software records all the financial data and transactions, which can help you use your time more efficiently.
Regardless of the size of a business, financial data accuracy is a must. Eliminating human error is not possible, but accounting software minimizes mistakes and simplifies record-keeping. These systems automatically make all necessary calculations when you transfer funds, create invoices, or complete other financial transactions. Instead of relying on calculators and paper ledgers, automate tasks with accounting software and reduce errors.
Reporting and Cash Flow Management
With accounting software, you can analyze your business practices and track cash flow, such as accounts payable and accounts receivable. Not only does it help you identify your current cash flow status, but it also shows how the money will flow in the future. For example, when an application tracks customer invoices and bills, it provides a detailed report that shows if receivables can cover your future bills.
You can also get reports on what percentage of your revenue goes toward different operating costs. Plus, you can improve your business strategy based on reporting that analyzes a customer’s interest based on geographical locations. Besides these reports, you can generate an unlimited number of other reports, depending on the type of software you choose and the information you enter.
Businesses that have a product inventory understand how important it is always to know the amount of stock they hold. Luckily, online accounting solutions can track product inventory as you process orders. Some can even predict when you will run out of stock. Besides these benefits, tracking inventory with these programs also saves time and provides accurate results.
Disadvantages of Accounting Software
Choosing inadequate accounting software can cause several issues. Therefore, when comparing accounting software, you need to take into consideration the following disadvantages:
Most accounting solutions come at reasonable prices. Yet, the cost of the program is not the only cost you pay when using the application. There is the cost of maintenance and technical support, customization, personnel training, upgrades, and computer hardware. While numerous software benefits might justify the cost, it may take years before such an investment pays off for some companies.
Data Loss and Disruption
When your company relies on online accounting software, loss of power could cause business disruption. This disruption could prevent access to stored data and prevent the input of new information. If you don’t have a data backup, loss of service could cause loss of financial data.
When it comes to accounting software, securing financial data stored electronically should be a company’s top priority. Every business owner must take the proper security measures to ensure that only authorized personnel has access to sensitive and confidential financial data. Otherwise, a critical security breach could lead to data loss and system damage.
Another disadvantage of using accounting software is scalability or a firm’s rate of growth. You can’t predict how fast your business will grow, but you can consider the speed of growth when evaluating accounting software packages. You don’t want to end up with a program you will outgrow shortly after investing time and money in the process of comparing, choosing, and implementing.
Latest Market Trends
When shopping for accounting software that will suit your business needs, you should consider the current accounting software market and its trends.
When it comes to storage, the cloud storage or SaaS system is the future. That’s because the buyers are starting to realize the benefits of faster implementation time and reduced expenses. Plus, you can access your financial files on the go through an app or web browser, even on your phone, enjoying peace of mind while being protected at the same time.
Optical Character Recognition (OCR)
Optical Character Recognition is a technology that is transforming accounting. It takes printed materials and texts from paper and converts them into digital data that a computer can edit and search. It is highly beneficial to accountants who manually code invoices, checks, receipts, and other documents.
To respond to buyers’ demands regarding industry-specific components, vendors are adding new features to their solutions and tools. When searching for an ideal accounting program, make sure you choose the one that will fit your specific industry.
Crucial Steps in Finding the Best Accounting Software
Choosing the best accounting software for small businesses, enterprises, or nonprofit organizations can be challenging due to the many options out there. So, how to find the one that will best fit your needs? How to compare products? Consider the following points when looking for accounting or bookkeeping software.
List Your Accounting Needs
Before you start your search, you should first identify your accounting needs. After that, organize them by importance. Then, ask yourself the following questions:
- Do you want a program with a sales tax or payroll feature?
- Is an inventory tracking feature your priority?
- Do you need a desktop solution or web-based software?
Most accounting software solutions perform general accounting and bookkeeping operations. Not many of them offer specialized accounting tools and add-ons to meet your specific needs. What you need is a more targeted approach to find a solution that will work for your business.
How Much Can You Afford to Spend?
Again, before you start searching and comparing accounting software solutions, determine how much money you can afford to spend. Once you determine your budget, you can begin searching for products within your price range and prevent wasting time evaluating programs you cannot afford.
There are free accounting options out there, but quality solutions with add-ons and integrations usually come with a price. Note that some solutions offer discounts if you choose an annual plan over a monthly plan. Others offer a promotional rate for the first few months.
The Comparison Process
Once you have identified your needs and set up your budget, you can start comparing your options. Don’t get distracted by fancy features. Otherwise, you could end up paying for accounting services you don’t use or need. Stick to your “needs list” and compare price, features, integrations and add-ons, and customer support.
Choose a Product That Will Evolve with You
Your company’s scalability and growth potential is an essential factor to consider when choosing the right online bookkeeping software. Typically, you will buy a new solution when your current version isn’t working anymore. When it comes to buying a new piece of software, don’t commit to one that is not scaleable.
The Best Small Accounting Software of 2019:
FreshBooks is one of the most popular web-based accounting software designed for small business owners and freelancers. FreshBooks boasts simplicity and ease of use, but this smaller piece of accounting software also incorporates advanced features. It is ideal for users who send out recurring invoices, track time, track expenses, and generate reports. It is also suitable for users who don’t have much experience in bookkeeping. Creating a professional and customized look for your financial documents is simple and easy with FreshBooks accounting.
FreshBooks is reliable accounting software that helps you run your business and manage your finances without a hassle. It is known for streamlining customer invoicing processes and offering several online payment solutions. Customers can pay with their credit cards or via PayPal, Shopify, MailChimp, and other apps.
You can access FreshBooks from your desktop or your phone via free iOS and Android apps. All financial operations run on the cloud, so you don’t need to worry about backing up your data. Also, there is no need for additional software because FreshBooks offers a complete suite of accounting features. Let’s take a look at some of the most relevant FreshBooks’ characteristics and see why it is one of the best invoice solutions on the market.
FreshBooks Pricing Plans
FreshBooks offers flexible pricing models to fit the needs of every accounting team or business. The three pricing plans differ in price, but the main difference lies in the number of customers you plan to bill per month. Before you opt for a particular pricing plan, you get a 30-day free trial to evaluate its features. FreshBooks subscription plans include:
- The Lite plan – FreshBooks Lite plan costs $15 per month, and it is ideal for small startups that have no more than five clients that need invoicing per month. This plan does not allow you to track your accounts payable balances, but you can send unlimited invoices, accept online payments, and track time.
- The Plus plan – For $25 per month, the Plus plan is suitable for businesses that have up to 50 customers that need invoicing each month. It allows you to send recurring invoices and process payroll tax payments, as well as financial reports.
- The Premium plan – With this FreshBooks plan, you can bill up to 500 clients for a monthly price of $50. It has all the features that come with the Plus plan, but you can charge more clients.
- The Select plan – This plan is ideal for businesses that have over 500 clients and over $150,000 in billing annually. It offers competitive rates for credit card transactions, and you get a personal accounting manager. This plan’s pricing is custom, so you need to contact FreshBooks to get your quote.
Purchasing an annual subscription of any of the FreshBooks plans comes with a 10% discount. Adding additional users cost $10 per month, per user. Other users include employees, business partners, and contractors. Adding your accountant is free of charge.
FreshBooks currently charges 2.9% plus 30 cents per card transaction.
Managing accounts receivable on any device with FreshBooks is simple and smooth. You create invoices and customize them to match your brand by choosing colors, templates, and font or adding a photo or logo. You can set automatic payment reminders and recurring invoices. FreshBooks also allows you to charge late fees to past-due invoices. After you send invoices, you can see when a client receives and opens them. It is a useful tool that can help you deal with customers who claim they didn’t receive the invoice, so you can always be on top of your cash flow.
It is easy to track your company’s day-to-day spending with FreshBooks. You take a picture of receipts, attach them, and keep them organized in the cloud. Expense tracking categorization keeps you prepared when the time for filing taxes comes and helps you stay within budget. This feature also helps you bill clients for expenses. You identify chargeable costs and add them to a client’s invoice. Moreover, you can link your bank or credit card account to FreshBooks and import expenses.
You can track time in FreshBooks to monitor the amount of time you’re spending on clients and projects. You can then add logged hours into an invoice and bill your customers for hours tracked. Apart from individual time tracking, FreshBooks allows team collaboration where each team member logs in their time separately.
Despite being one of the most popular pieces of accounting software, FreshBooks has few limitations and has few areas it could improve. First, it lacks enterprise-level features, such as purchase ordering and inventory management. Second, FreshBooks doesn’t allow you to manage team members or see reports from the mobile apps. And third, there is no bank reconciliation, so you need to create these reports manually.
QuickBooks Intuit has been around for decades. The QuickBooks Desktop version, with QuickBooks Pro and QuickBooks Premier options, is familiar to most accountants because it is one of the most powerful accounting solutions on the market. QuickBooks Online, Intuit’s latest version, is one of the top accounting software solutions for small businesses. QuickBooks Online is online accounting software that offers a range of distinct features, integrations with Shopify and PayPal, expert customer support, and more.
QuickBooks Online is easy to set up. You get a customized service based on the details you provide about your business. The interface is user-friendly and intuitive. The dashboard gives you an overview of your financial status and provides information on overdue and paid invoices, bank accounts, expenses, and more.
It is suitable for businesses of all shapes of sizes, thanks to a full-feature offer that includes accounts receivable, accounts payable, inventory tracking, project management, etc. It is scalable and grows with your business, which gives QuickBooks Online a competitive advantage. You can customize their service to your needs by choosing a suitable subscription plan.
QuickBooks Pricing Plans
QuickBooks Online offers five pricing plans to accommodate the needs of different business types. There are four tiers for small businesses and one tier for self-employed and freelance workers.
There’s a free 30-day trial that doesn’t require contracts or credit card details. Also, you can take advantage of the 50% discount you get for the first three months of using specific plans.
The Self-Employed Plan
The Self-Employed plan is a basic plan designed for freelancers and independent contractors. It costs only $15 per month. Its features include tracking income and expenses, capturing receipts, invoicing, basic reporting, etc. If you opt for this plan, you can save 50% for the first three months. The only disadvantage of this tier is that, if you outgrow it, you can’t upgrade to a higher level. You need to buy a new small business plan.
The Simple Start Plan
The Simple Start plan is a single-user plan that costs $25 per month and includes basic but useful features like tracking income, expenses, sales, and sales tax. Tracking miles is a recently added feature. It also includes generating basic reports, such as balance sheets, statements of cash flows, and profit and loss. Automatic bank feeds are available, which is not the case with competitors, such as the AccountEdge Pro, for instance.
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The Essentials Plan
This plan is suitable for a business that needs support for up to three users. You pay $40 per month to use all the services that come with the Simple Start plan, plus tracking time and managing bills.
The Plus Plan
With the Plus plan at $70 per month, you get support for five or more users and access to all previously mentioned tools and features, plus inventory and project tracking.
The Advanced Plan.
The Advanced plan supports up to 25 users and comes with a price of $150 per month. The plan includes all the features of the previous plans, and it gives users access to premium training and care and a dedicated manager. It also comes with a tool for smart reporting by Fathom that tracks cash flow and profitability, as well as custom permissions for expense reports, sales transactions, deposits, etc.
All plans offer self-service payroll and full-service payroll for an extra price. The self-service payroll costs $35 plus $4 per employee per month. If the full-service payroll better fits your needs, then you need to pay $80 plus $4 per employee per month. You can save money when the add-ons are 50% off, which happens occasionally.
Creating and sending invoices with QuickBooks Online is simple and easy. You can do it from the mobile app or the browser and complete billing as soon as you finish the job. You can customize your invoice by choosing a different font and its sizes, color schemes, logo positions, and more. You can add attachments, discounts, and shipping expenses to invoices and import templates via Microsoft Word.
Thanks to invoice tracking, you can see when customers view their invoices, set up automatic payment reminders, and create recurring invoices. Another time-saving invoice convenience is converting estimates into invoices. When you create an estimate, and your client approves it, you can turn it into an invoice without having to start building it from scratch.
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If you subscribe either to the Plus or Advanced plan, you will have access to an inventory tracking feature. You can track the sale, purchase, and payments. That way, you monitor your supply in real-time, preventing shortages. Low stock alerts tell you when you need to make the purchase order. And once you do, the software converts it into an invoice to ensure you pay your vendor timely. If your business keeps large quantities of inventory, you will want a plan that includes this feature.
QuickBooks has built-in reports that spare you the hassle of creating financial reports from scratch. You can run reports on profit and loss, balance sheets, statements of cash flows, and expenses. The number of reports depends on the plan you choose, but the Simple Start plan includes more than 20. Not many competitors can beat QuickBooks Online in terms of the reports.
Manual data entry can be a thing of the past with QuickBooks Online. That’s because it has 400+ integrations with third-party applications, which automatically connects it with other business programs you use (e-commerce, CRM, payroll services, etc.) and syncs data in real-time. If you opt for an Advanced plan, you get a built-in Fathom integration free of charge. As for payment processing, users have over 25 different options.
QuickBooks Online Drawbacks
Even the most impressive accounting software solutions can have few areas that require work. Even though QuickBooks Online has all the features small businesses need for accomplishing their accounting tasks efficiently, there are few things to consider before you select the plan.
First, there is no free version of the software. Second, you cannot upgrade the self-employed plan. If your business grows and you need to employ more people, you will have no other choice than to start a new plan. Choosing the right one can be tricky. And third, each QuickBooks Online plan has a limited number of users who can access the software. And, unlike with FreshBooks, your accountant counts as a user.
NetSuite ERP is scalable cloud-based accounting software for small and mid-sized businesses, as well as enterprises. It is customer relationship management (CRM) software that offers automation of all back-office processes, including reporting, financial management, analytics, inventory planning, billing, e-commerce, and revenue management. The software is perfect for companies whose needs go beyond accounting software and require a full business management solution.
NetSuite ERP combines built-in business intelligence and financial processes to help organizations make informed business decisions faster. Its order management capabilities ensure smooth order-to-cash processes, improving cash flow, and reducing billing errors to the minimum. With the production management feature, manufacturing operations management is easy and straightforward. It helps users reduce quality expenses and increase timely delivery.
NetSuite’s intuitive dashboard provides a customizable view of KPIs. It is easy to use and suitable for users with no accounting experience. Each employee has a personalized dashboard with access to features specific to their position in the firm.
NetSuite ERP doesn’t offer pricing plans or a free trial. The price gets tailored to each buyer, depending on required add-ons, configuration, the number of users, and more. You can get your customized quote by contacting the vendor directly. The price of a base license is $999 per month. An access cost per user is $99 a month.
So, it’s up to you how much you are willing to pay for the comprehensive software you will never outgrow.
Users have several options when it comes to NetSuite invoice templates. For example, you can send customizable invoices via fax or mail. You can also add details like sales representative, class, or department to your invoice. Moreover, it supports the writing of checks and alerts you when there are duplicate payments, and offers an approval control, where representatives submit invoices to business owners for approval.
NetSuite is one of the best accounting solutions for global businesses. It offers international invoicing, robust global compliance, and multiple currencies. You can send your bills in twenty different currencies, and every day you have access to updated exchange rates. There’s also an option for multi-currency reporting, enabling business owners to track their global performance.
Inventory is one of the best NetSuite features. It enables you to track and manage the products and services you sell. It also allows you to track stock by location, which is useful if you have several departments and warehouses. Users have access to a supply chain management option, too.
NetSuite ERP Drawbacks
The lack of an on-premise version of the software is one of NetSuite’s drawbacks. The numerous integrations (over 400) are convenient, but if the third-party solutions are not updated regularly, it could lead to performance issues.
On the bright side, NetSuite beats the competition when it comes to the quantity and quality of features available, which pushes these minor limitations into the background. If you want to check NetSuite alternatives, don’t miss FinancialForce Accounting.
Wave Financial is one of the best free accounting apps. This software for small businesses is ideal for freelancers and companies that don’t have many employees. Wave is an online accounting system that comes with a wide selection of accounting features and tools. Wave keeps your online bookkeeping updated with automated invoicing, inventory tracking, time tracking, project management, and more. It also includes recurring invoices and automatic payment reminders. If the free features are not enough to complement your business needs, you can pay for add-ons, such as payroll.
Wave’s easy-to-use platform is worth considering, especially for small businesses. Even though it is free, Wave is a quality service that beats some paid accounting solutions.
Not many well-designed cloud-based accounting packages are free. Wave is one of the few. There are no monthly or annual charges, and you don’t pay for a license. You don’t pay for invoicing, receipt scanning, accounting, etc. Plus, there is no limit to the number of account users or the number of invoices and transactions you can have.
If you opt for buying add-ons, that’s the only cost you will have to pay with Wave. Optional services include payroll, which costs up to $35 plus $4 per employee per month, and online credit card processing (2.9% flat fee plus 30 cents per transaction). Wave’s accounting coaching and bookkeeping services are optional as well, and you can add them to your free package.
Creating and sending invoices with Wave is free, simple, and unlimited. You can track your revenue by monitoring paid invoices. You can also schedule recurring invoices and set automatic credit card payments to get paid on time. The best part is that your invoicing and payment data syncs, which means that your bookkeeping updates automatically.
Wave offers integrations for Zapier, PayPal, Etsy, and Shoeboxed. Compared to its competitors, Wave offers fewer integration options. However, you can use Zapier to connect with hundreds of apps.
Wave is an ideal piece of accounting software for small businesses with a tight budget. It offers a good selection of features and has several excellent benefits. However, it has a few limitations. For example, you cannot track billable hours, but you can do it manually and add them to an invoice. Also, it doesn’t offer an inventory tracking feature and fixed asset management.
Before you choose the best account software for your business, you need to consider many factors. Each package offers different features and pricing plans. As you compare software solutions, focus on your budget and business needs.
Have you automated your business processes and operations? What account software fits you best? Do you have any suggestions or tips you would like to share with us? Feel free to comment below!