How to Choose the Right Accounting Programs for Small Businesses

What are good accounting programs for small businesses? This is a question that a lot of people come to us with. Small businesses will often start off using an Excel spreadsheet to record their business activity. But as businesses grow, so do the Excel files. The other problem with Excel spreadsheets is that there’s not a lot of room for details. Eventually small businesses want to see transaction details and be able to track vendors and customers. This is much easier to do using an accounting software than in an Excel sheet. 

Accounting programs for small businesses are really just software used to track the financial results of your business, whether you’re a solo entrepreneur, a start up, or a home grown small business. You can use these programs to track customer invoices, expenses, banking activity, loan activity, credit card activity, and anything else financial in your business. 

Top Accounting Software for Small Businesses

These are the most popular accounting programs for small businesses we’ve seen with our clients:

• Quickbooks
• Xero
• FreshBooks
• Wave

In a comparison of accounting software for small businesses, Quickbooks is the most popular. It’s also the most robust of the small business accounting programs and the most expensive. Xero is cheaper than Quickbooks and is also more user friendly. However, if you are a small business that’s planning to scale up to a larger business, you might want to stick with Quickbooks as most professionals you may end up working with will be familiar with them.

Wave is a free program and great for those first starting out. However, you get what you pay for with them. They don’t have as many features as the others. They make their money through selling other other types of products within their service. 

If you are a freelancer, FreshBooks has an edge as it has great time tracking capabilities as well as features for client billing.

Some accounting programs for small businesses will provide merchant services or payroll through their platform, but this will be paid for in addition to the basic accounting software subscription. QuickBooks and Xero have a lot of other apps that can be used in conjunction with the accounting software, such as apps for a more robust inventory or a job costing system.

The price structures for each of these subscriptions range depending on the capability of each system. Some of the newer programs are less expensive, or even have a free version. Each of these programs have all their different bells and whistles. 

What To Look for in Accounting Programs for Small Businesses

When picking a program, you’ll want to research what kind of reporting they have, how their customer support works, and if they have the right systems in place for your business. 

Some of the things that I would say a small business owner would need to look out for when they’re trying to determine what program is best for them is to ask yourself, “what kind of entity are you?” Some of these programs will only capture the profit and loss or don’t do a very good job at tracking the balance sheet (your assets, liabilities, etc). If you need certain program capabilities like balance sheets, making sure that you have a program that has this is very important. 

Another good thing to research is the user friendliness of the program. How easy for you will it be to set up? Having a basic understanding of accounting will help you get started as well. Some programs might be easy to get set up, but also easy to mess them up. So if you have a basic accounting understanding, that will help you make that transition into the accounting software go much more smoothly. 

What Are Some of the Pitfalls of Accounting Software for Small Businesses?

I have seen clients that have done a great job at trying to get their books set up and also do a good job at trying to enter all of the data. A lot of these programs will have some sort of link between the software and the bank. But often our clients will miss the boat with how they’re recording their expenses and income. They fall into a trap of either not capturing all of the transactions because they’re not following all of the steps with the bank reconciliations or the bank had a hiccup on their side. Some transactions may have not even been downloaded into the software.

We see it all the time where there’s duplicate expenses, or vendors haven’t been paid, or customers have paid and they’re not getting credited. So there could be all kinds of mishaps within the use of the software. Doing some sort of introductory course or class with software, or watching “how to” videos on Youtube can help you get started on the right foot.

This doesn’t mean you should opt out from getting accounting programs for small businesses, but the right training and research is necessary for you to get the most out of one.

Conclusion

Accounting programs for small businesses can be a real asset to your company. We highly recommend getting a program like Quickbooks, FreshBooks, Xero, or Wave. If you want to jump right in, Quickbooks is the way to go. If you just want to get your feet wet, though, give Wave a try for free. Knowing a little bit about accounting is a major plus when giving these programs a try, but finding tutorials online can give you a helping hand if you need one.

Are you ready to make sure your accounting knowledge is the best it can be? We have a free online masterclass for the 3 biggest financial mistakes new business owners can make . Make sure you’re using accounting programs for small businesses correctly by taking ourfree online masterclass today!