Small business accounting software helps manage financial transactions by providing simple (easy to use) options with a low cost of entry. Small businesses should look at core accounting features such as accounts payable for tracking expenses, accounts receivable for tracking invoices to customers, and a general ledger that creates profit and loss statements and balance sheets.
Small businesses that are looking beyond basic income and expense tracking will want to look into additional functionalities, such as payroll services, inventory management, and fixed asset management. Some solutions are scalable and will let you add these functionalities on at a later date.
|Accounts Payable (AP)||Track expenses by monitoring the money you paid or currently owe.|
|Accounts Receivable (AR)||Track income by monitoring the money you received or are owed from invoicing.|
|General Ledger (GL)||Records financial activity including transactions and account structures. Creates reports such as profit and loss statements and balance sheets.|
|Payroll||Manage employee compensation including wages, check printing, ACH deposits, and compensation tax reports.|
|Inventory Management||Inventory is recorded as current assets on your balance sheet. The cost of goods sold is also tracked on the income statement.|
|Fixed Asset Management||Automates the calculation of depreciating asset value with standard or custom decay models.|
Startups and very small businesses can get away with using free accounting software, but free software will be limited in functionality. You will also be limited to one user, and will usually have a small threshold when it comes to how many customer/vendor accounts you can store information on.
Features typically include income and expense tracking, invoicing, and receipt scanning. Additional fees usually apply to credit card payment processing and ACH transfers (per transaction).
Popular free small business accounting software includes:
Small businesses need an affordable, easy to use solution. A company will understandably want to save on their first software purchase and will need a user-friendly option that someone without an accounting background can learn quickly. Some of the best accounting software tailored to small businesses include:
QuickBooks Online by Intuit is an extremely popular accounting system among startups and small businesses. The affordable price (starting at $15/month) and ease-of-use make QuickBooks a great first-choice for many companies. Some functionalities include income and expense tracking, time tracking, invoicing, and receipt storage. Basic reports can be run on profit and loss, as well as expenses.
Since QuickBooks Online is cloud-based, data can be accessed from anywhere with an Internet connection.
Sage 50c, previously known as Peachtree or Simply Accounting, is an accounting program designed for small businesses. The simplest version, Sage 50c Pro, starts at $46.83/month or $465.95/year. This version handles invoicing, and income and expense tracking for one user. Sage recommends Sage 50c Pro as an adequate option for previous users of Peachtree and Simply Accounting.
FreshBooks is a cloud-based small business accounting software. Small business owners and self-employed professionals use FreshBooks to manage expenses, send out invoices, accept online payments, and track time. FreshBooks also has free mobile apps for iOS and Android devices.
The Lite package starts at $15/month and includes management of up to 5 billable clients - this package is most commonly used by self-employed professionals. Small businesses typically start with the Plus plan - this plan starts at $25/month and management of up to 50 billable clients. The Plus plan also has additional features like automated recurring invoices, double-entry accounting reports, and automated late payment reminders.
Finding a reliable small business accounting software for Mac platforms can be a challenge. This is because the vast majority of solutions are built with PCs in mind. Accounting solutions developed for Macs often have limited functionality compared to similar options on PC. Developers tend to focus their efforts on PCs because PCs are more common. Net Applications found that only 10% of active personal computers were Macs. PCs are considerably cheaper than Macs, which plays a big part in their popularity. Businesses also find PCs to be a more cost-effective option for running accounting software.
Because of the prevalence of PCs in the workplace, software developers looking to capture both PC and Mac users will create full-featured online and cloud-based options that run easily on both. For example, Xero is a popular online accounting software that is optimized for PC and Mac.
One of the most popular desktop solutions for Mac users that doesn’t sacrifice functionality is QuickBooks for Mac.
Online (also known as cloud-based), small business accounting software lets you access real-time financial data from anywhere with an Internet connection. Online software has a low cost of entry, making it a popular option for smaller companies with limited funds. Cloud-based software is typically lower-cost because it is billed on a subscription model. You will pay a small monthly or annual fee to get access to the software. The developer also handles all of the hosting and you won’t need to spend extra money on additional hardware to download the solution.
Popular cloud-based small business accounting software includes:
Our 2018 Accounting Software Buyer Trends Report surveyed 3,000 software projects and found that 21% of smaller businesses want cloud-hosted software only. Smaller companies were also more receptive to cloud solutions than larger companies.
Cost: Cloud-based accounting software is usually more popular among small companies due to a generally lower monthly cost compared to the upfront prices of an on-premise solution. However, some companies prefer the one-time purchase of on-premise, because they feel more comfortable owning the software or don’t want to worry about ongoing monthly payments.
After years of paying for a subscription-based software, you might end up paying more than if you bought a solution outright. However, many smaller companies don’t have immediate funds to pay for a solution upfront.
Adding users: Online accounting software makes it easier to add additional users as your business grows. Some systems give you a range of users or even unlimited users that you can set up with an account in just a few minutes. Desktop software typically requires you to purchase additional user licenses for each computer you want to install the solution on.
Accessibility: Cloud-based solutions allow you to log into the software from any computer or mobile device. With on-premise software, you would only be able to access your financial data from the computer where the software is installed. A smaller company might need the convenience of cloud accessibility. If an employee is traveling for business or working from home for the day, they will have easy access to the data if needed.
Data backups: Online software generally allows automatic cloud data backup. Depending on the package, there may be a storage capacity limit. Desktop software requires data to be backed up manually.
Security: Some business like the idea of having their data secured on designated computers within the company instead of storing data on the cloud.
|Payment Model||Small monthly payments with little to no upfront costs||One lump sum with little to no ongoing costs|
|Deployment||Hosted by developer||Installed on your server or computer|
|Accessibility||Accessible from anywhere with an Internet browser||Accessible from the system it’s installed on|