If you run a small business, keeping track of your finances is a must. But data entry, calculations, and analysis can take hours out of your week and reduce the time you have to grow your company.
Accounting software (and working with a proactive bookkeeper) fixes this. The software automates many accounting tasks, so you get the insight you need with less work.
If you're ready to invest in accounting software for your small business, you're in the right place. Keep reading to find our list of the top accounting platforms for small companies.
How Does Accounting Software Work?
Most modern accounting software uses a Bank Feed - a direct and automated connection to your bank accounts. One of the primary steps you must take in getting started with a new accounting system is linking your company's bank accounts and credit cards. Once you've done that, transactions will auto-populate in a queue. You can then classify them based on the categories you choose.
These categories are "accounts," the buckets to which every transaction gets categorized. Every accounting software comes with a pre-formatted Chart of Accounts (COA), but, to get the most out of your accounting system, you should work with an accountant to customize this COA to fit your business.
As transaction data flows through your accounting software, you'll be able to start running instant financial checks to determine profitability, compare costs, look at year-over-year performance, and more.
Many accounting platforms also integrate third-party services like point-of-sale (PoS) systems. Tracking data directly from your point-of-sale and other data sources helps ensure you receive the most accurate information possible.
Every dollar counts when you're running a small business, so it can be daunting to think about adding a new expense to your budget. But accounting software is absolutely worth the nominal fee. When consistently kept up-to-date, the software may save you upwards of 10 hours a week on data entry, calculation, and analysis.
The Best Accounting Platforms for Small Businesses
Now that we know what accounting software is and why you'd want to use it, let's look at our top five list of the best options for small businesses.
QuickBooks Online: Best Overall
QuickBooks Online is our selection for the best accounting platform overall. It's used by most small businesses, which means many online resources are available to help you get the most out of it.
The platform puts everything that you need on an intuitive main dashboard and offers plenty of integrations with third-party applications. QuickBooks Online is also cloud-based and has a mobile app that you can use to manage your business on the go.
The only downside to this option is that you will need to upgrade to a more expensive plan if you want to add more users to your account.
Wave Accounting - Best Free Option
Wave Accounting is an excellent choice for small business owners looking for a free way to manage their finances.
Wave offers a free version of its platform that covers basic needs like invoicing and receipt scanning. It can be used by an unlimited number of employees and will even help small businesses get ready for tax returns.
Wave integrates with Zapier, which opens up possibilities for what you can do with it. Though, it needs to improve its capabilities to track more complex accounting structures. The platform charges higher ACH and credit card payments than other accounting software options.
Xero - Easiest to Use
Xero is a straightforward and easy-to-use accounting software that's best for people who run very small businesses. The platform offers third-party integrations with Stripe and GoCardless, which make it easier for companies to process online payments.
Xero also has a third-party app marketplace that you can use to fine-tune your company's approach to accounting. Whether you want to upgrade inventory management or more in-depth payroll integration, you should be able to find what you need on the app marketplace to make it happen.
The big downside with Xero is that its customer service leaves something to be desired. If you choose this platform, you may need help to resolve your issues and get answers to your questions.
Zoho - Good for Existing Zoho Users
Zoho is a cloud-based accounting platform that can help you automate business workflows and improve invoicing. It also offers easy integration with other Zoho applications, such as invoicing and CRM, so it's a good fit if you're already using those tools.
Thanks to its clean interface, Zoho is straightforward to use and even has a free option for new businesses. However, the platform could scale better as your team grows: it only offers a maximum of 15 users. You're also limited to the Zoho ecosystem.
Freshbooks - Best for Invoicing
Freshbooks stands out as one of the best accounting software options for invoicing. It offers a wide variety of customization options, so you can create in-depth and detailed invoices if you wish.
Freshbooks also has many features that make it easier for service-based businesses to track hours worked, receive payments, and send proposals. Its affordable options and user-friendly interface make it a good fit for companies at the beginning stages of their development.
The Freshbooks mobile app is weaker than what the competition offers. This means you should look elsewhere if you manage your finances primarily on your mobile device.
What's the Best Accounting Software for My Small Business?
Overall, most small businesses will benefit from using QuickBooks Online. It offers numerous integrations, is highly scalable, and has a mobile app that stands out as one of the best in the industry.
QuickBooks Online is also widely used in the world of accounting. That means it's easier to find resources and integrations for QuickBooks than for the other platforms on our list. Working directly with an accountant through QuickBooks Online is seamless and easy!