Running a small business can be an exciting time. You can execute your plans and work on something you are passionate about. However, running a small business also means dealing with logistics and management tasks, such as accounting.
The accounting services market has been steadily growing in the past few years. In 2023, its market size reached $652.32 billion and is expected to reach $676.73 billion in 2024.
As a small enterprise, finding the resources to hire an accountant on retainer can be challenging. In these cases, using accounting software for your bookkeeping and accounting needs is a good idea.
5 Best Accounting Software for Small Businesses
Managing your finances well is crucial. It helps your small businesses thrive amidst limited resources and intense competition.
Luckily, small businesses don’t need to spend a fortune on accounting services. Many accounting software are specifically designed to meet the needs of smaller enterprises. Here are five recommendations:
1. QuickBooks Online
QuickBooks Online is popular among small enterprises due to its comprehensive accounting features and ease of use.
This accounting software offers a full range of accounting tools and features, such as the following:
- Expense tracking
- Managing bills
- Tax Preparation
- Invoicing, etc.
Its intuitive interface makes it accessible to people with different levels of accounting knowledge. It also integrates well with third-party applications like PayPal, Square, and Amazon, enhancing its functionality.
2. Zoho Books
Zoho Books is a comprehensive solution for growing businesses looking for affordability without sacrificing features.
Here are some of its notable features:
- Quotes
- Sales and purchase orders
- Banking
- Inventory
- Project management, etc.
This accounting software solution is an excellent choice for organizations that already use other Zoho software. However, it still has several useful integrations outside the Zoho ecosystem, such as payment gateways and Google Suite.
3. FreshBooks
FreshBooks is tailored for small businesses and freelancers who need an easy-to-use accounting solution with excellent customer support.
Its best features include the following:
- Invoicing
- Time tracking
- Expenses and receipts
- Report generation
- Proposals and estimates, etc.
It offers a clean, user-friendly interface, making it easy to manage financial tasks without extensive accounting knowledge. FreshBooks also integrates with various external applications, such as Google Suite, Zapier, and Slack.
4. Xero
Xero is a cloud-based accounting tool known for its powerful features and flexibility, making it a favorite among small businesses.
Despite being entirely cloud-based, this accounting software still packs a punch with features such as the following:
- Mobile application
- Project tracking
- Bank reconciliation
- Expense claiming
- Bills payment, etc.
It’s especially useful for businesses with multi-person accounting teams. It also integrates seamlessly with hundreds of other applications you may need, including popular tools like Stripe, Shopify, and HubSpot.
5. Wave
Wave is a standout option for small businesses, especially those with limited budgets. It offers powerful accounting tools and features for free.
Here are some of its most valuable features:
- Invoicing
- Payment processing
- Accounting
- Payroll
- Mobile receipts, etc.
Its user-friendly interface makes it accessible even for users with little to no accounting background. The Wave dashboard provides a clear overview of key financial metrics.
While Wave doesn’t have as many integrations as bigger or paid accounting tools, it does integrate with key financial services and payment gateways.
Benefits of Using Accounting Software
Businesses of all sizes are increasingly digitizing many processes, including accounting. Aside from helping with number-crunching, accounting tools and software offer many benefits.
Saves time
Time is a precious resource, especially for small businesses. Accounting software can automate repetitive yet necessary tasks that would otherwise take hours of manual work.
Accounting software has automation features that handle routine tasks such as data entry and generating invoices. These time savings allow you and your staff to work more efficiently and focus on more urgent tasks that require greater attention.
Streamlines tax filing processes
Tax season can be stressful for many small businesses. It requires intense attention and accuracy to avoid potential fines or legal consequences.
Accounting software helps simplify this process by maintaining accurate and complete records throughout the year. These records are your foundation for filing your returns once tax season comes.
Many accounting software solutions have features dedicated to helping with tax filings, like automatic tax calculations and electronic filing capabilities. Some even have reminders for tax deadlines. These features can be useful if you own or manage any property assets.
These tools help streamline tax-related tasks and ensure your business’s compliance with tax regulations. They alleviate the burden of tax preparation and minimize the risk of costly mistakes, helping your business save time and money.
Up-to-date information access
Current markets have become increasingly fast-paced, and small businesses often have to keep up with these developments. In these cases, having access to real-time financial information is essential for making informed decisions.
Accounting software, especially cloud-based ones, provides a centralized platform to access up-to-date financial data anytime, anywhere. You or any team member can quickly check your cash flow or analyze revenue trends.
This instant access empowers you and your staff to respond promptly to opportunities and challenges, which improves your company’s agility and competitive advantage.
Generates financial reports
Analyzing and understanding your business’s financial health is essential. It helps you create effective plans and make strategic decisions for success.
Accounting software provides one way to simplify this process by generating financial reports with just a couple of clicks.
These reports may cover essential documents such as profit and loss statements or balance sheets. Some accounting solutions also create cash flow forecasts. These documents and reports can provide valuable insights into your organization’s financial performance.
This visibility can help you identify your enterprise’s strengths and areas for improvement. With this knowledge, you can generate plans to capitalize on opportunities for further growth.
Reduces errors
Manual accounting processes have been the norm for decades. However, they can be prone to human error, leading to discrepancies and inaccuracies in your company’s financial records.
To mitigate this risk, you can use accounting software that automates calculations and ensures consistency, especially in data entry.
Many accounting software solutions also offer built-in error detection features that flag potential issues before they escalate. These features further safeguard the reliability of your financial records.
Reducing the chances of making errors improves the accuracy of your financial data. As a result, you ensure the integrity of your financial records and the effectiveness of your decision-making processes.
Factors To Consider When Choosing Accounting Software
Selecting the right accounting software solution is a critical decision for any business, no matter the size. This software tool can directly impact your financial management and overall operational efficiency.
With so many options available, it can be challenging to make a decision. Here are five factors to consider when choosing accounting software for your small business.
Budget
Software costs money. For this reason, your budget is often the first consideration when selecting accounting software.
Your financial resources can be limited, and it is essential to find a solution that fits your financial constraints while still providing the necessary tools and features.
When evaluating software based on your budget, consider the initial upfront costs and ongoing expenses associated with a specific solution. Many modern software solutions aren’t a one-and-done deal. They often involve subscription fees and costs for upgrades and support services.
While strictly following your budget is often necessary, the cheapest option isn’t always the best. Make sure to evaluate the features and perks offered at each price point.
Sometimes, investing a bit more can provide significantly greater functionality and support, leading to long-term savings and efficiency.
Usability
While bells and whistles in terms of features are nice, it’s still vital to consider the accounting software’s usability. This factor determines how quickly your team can adapt and use your new system.
Look for the best accounting software for small businesses with an intuitive and user-friendly interface. These features help minimize the learning curve and reduce the need for extensive and expensive training sessions.
If you can, book a demo with the software provider. These trials allow you to test out your prospects and see how your team responds to them. They help you see whether a prospective accounting software can serve your needs and integrate well with your existing processes.
Features
A software’s features are its main selling points. These features should align with your business needs and help you achieve short-term and long-term goals.
Before trying out or settling with a specific piece of accounting software, list all the features you need.
Look at the list of features your prospects offer. Ensure your top contenders have all the essential features you need in your day-to-day accounting operations. These features could include invoicing and expense tracking. Payroll management and financial reporting features are also nice to have for some companies.
Software integrations
As more businesses seek to digitize their processes, it’s highly likely that you’re already using software for some aspects of your business. Your accounting software must have integration capabilities for seamless workflow and data consistency across your business applications.
Check if the accounting software integrates with your other tools, like CRM systems or e-commerce platforms. Software providers usually list these integrations on their company website.
If your business has unique software needs, having software with an open API (Application Programming Interface) allows for custom integrations. These software options can provide greater flexibility and scalability.
Scalability
Growth is a primary goal of any business. As your enterprise grows, your accounting needs will evolve. You must then choose software that can grow and scale with your company and its evolving requirements.
Look for solutions that can handle changes in scale and workload, such as increased transaction volumes and additional users. As your business expands, you may also want to consider software that can handle more complex financial operations.
Check if the software offers different plans you can upgrade to without switching platforms. This flexibility can help accommodate your business’s evolving needs without much disruption.
Empower Your Small Business’s Finances
Accounting and bookkeeping processes can seem tedious, especially for small businesses with limited resources. Accounting software presents a helpful solution. These tools can make your financial processes more efficient and easier to manage.
Understand the features you need and assess your options carefully. This process will help you select the best accounting software for small businesses to support your business’s financial health and future growth.
