Accounting is of the utmost importance to every business. As an entrepreneur, you need to develop basic accounting skills to run a successful business. Luckily, these days you don't have to crunch numbers by hand. There are accounting tools out there for small businesses that make accounting simple and quick, letting you focus on running your business.
Deciding on the right bookkeeping software or systems is all about knowing what your business needs and what each program offers. There's a lot of bells and whistles out there, though, with each approach offering its own advantages. Some companies focus on scalability, for instance, while others want quick access via the cloud. Others prefer a system that embraces elements like inventory management or website integrations.
Before you dive into these 10 great options for small businesses, it's important to have a firm understanding of bookkeeping and the options available to small business owners. [In the market for accounting software? Check out the options we recommend as being the best accounting software for small businesses.]
What is bookkeeping?
At its core, bookkeeping is the recording of financial transactions associated with accounting. This means keeping track of your business's income and expenses so you have a realistic idea of how much money is flowing in and out at any given time. Bookkeeping includes activities like logging income, tallying expenses, calculating payroll costs, determining fixed and variable costs, and noting other developments in the business's income.
The key to bookkeeping is organization and accuracy. You need to have all of your financial information organized in one place, and it needs to be correct down to the cent. This allows you to create accurate, usable books.
While there are many technical accounting systems for small businesses, the nature of bookkeeping has remained the same for hundreds of years. Whether you do it through an automated system or by hand, typical bookkeeping activities include handling the following:
- Records of sale of your good or service
- Receipts from customers
- Invoices from suppliers
- Employee payroll and governmental reports
- Individual accounts receivable
- Depreciation and other adjusting entries
What to look for in accounting tools
Accounting tools can benefit your business greatly, but not all companies require the same things from their accounting software. It's important to consider what matters to your own business most before choosing. While there are many factors to consider, the main ones are costs, features and usability.
- Prices depend on the level of service. Accounting tool pricing runs the gamut from free to more than $100 a month. Basic accounting tools won't break the bank, but if you need extra features, expect to pay more.
- Accounting tools have a wide range of features and services that meet the needs of all types of businesses. What matters to you may not matter to the business next door, so look at all the features a software vendor offers and determine which ones are worth paying for. If you need to generate detailed reports, you're likely willing to pay more for that feature. If basic accounting is all you require, all the extra features may not be worth it.
- Usability is another big factor in accounting tools. You may prefer accounting tools that live in the cloud or ones you install directly onto your computers. You may want several users to access the accounting software or only yourself. Whatever platform type you choose, it's critical to find a solution that is easy to use. Bookkeeping mistakes can be costly and time-consuming to fix, so you and your team should feel comfortable with the software. Many of these tools offer free trials, so take advantage of these offerings to see how each one operates.
- When you're mulling over your needs, it makes sense to talk to your peers in the business community to find out what they are using and what worked for them and didn't.
Once you've done your research, come up with a ranked list of features you want in your accounting tools, and balance that against your budget. If your wish list makes the software too expensive, scale back, removing the items at the bottom of your list. Your budget and needs will narrow down the list of choices, making it easier to find the right accounting tools for you and your business.
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What are my options for tracking my business's finances?
Accounting and bookkeeping practices have been around since before Roman times. The modern business owner has several options for a sound accounting strategy. If you have a background in mathematics or business systems, you may want to handle your accounting yourself. If this area isn't your strong suit, you can do like most small business owners and use a software solution, such as QuickBooks, or work with an accountant who directly oversees your business finances.
There are pros and cons to either system. Software solutions, for example, are less expensive and more hands-on – you'll have direct control over your business's accounting strategy. Working with an accountant, on the other hand, can give you more flexibility with your business; you won't have to worry about the books. The professionalism and experience of the right accountant may give you opportunities to better organize your business's financial systems and, when the time comes, save some money on taxes.
With either method, it's important to understand your choices, so we compiled 10 recommendations for the best bookkeeping systems from small business owners. By reviewing this list and researching other options, you can make a more informed decision about turning to a software solution or partnering with an accountant or bookkeeper.
1. Bonsai
"Bonsai is a great tool for small businesses just starting out and not wanting to invest in expensive bookkeeping software. It integrates seamlessly with your website, allowing you to create different packages on your site and tying it directly with your bookkeeping software in the back end. They also have an iPhone app, so you can access your financial documents from anywhere." – Syed Balkhi, WPBeginner
2. FreshBooks
"FreshBooks is a great cloud-based accounting software for small business. It's affordable, so it's a good option for businesses that are just starting out. You can send invoices, track time, accept credit cards, and manage receipts and expenses. Plus, it's super easy to use, and since it's cloud-based, you can access it on the go." – Chris Christoff, MonsterInsights
3. QuickBooks
"QuickBooks may not be the sexiest or latest-and-greatest option, but it is tried and true. In addition, it's the easiest to scale. Being able to pass off something to an in-house or outsourced accountant that they know well makes life so much easier, as opposed to having them learn a new software." – Ryan O'Connell, Boomn
4. Sage 50cloud
"Sage 50cloud is a great online accounting solution for small businesses. It's designed [with] small businesses in mind: The pricing is affordable, and it's easy to use. You don't need to be a bookkeeping pro to use this software easily and efficiently. It has everything you need to manage your finances, plus some extra features such as HR and payroll, credit card processing, and more." – Blair Williams, MemberPress
5. Wave
"I'm a huge fan of automation in business – but even more so in accounting! I currently use Wave, which has very capable free versions as well as paid versions. Wave actually imports all of our financial data automatically and makes accounting much faster and easier." – Ali Mahvan, Sharebert
6. ZipBooks
"Bookkeeping has long been discussed as an industry ripe for automation and disruption by AI. A VC-backed company called ZipBooks is leading the pack in this space. Our business uses ZipBooks, and each month our transactions are auto-categorized and a confidence interval is displayed so that we know which entries to manually verify. This saves us hours of work every month." – Colton Gardner, Neighbor
7. QuickBooks Online
"While QuickBooks has been the staple for many small businesses, the desktop version had limited integration capabilities. The updated QuickBooks Online solves many of these shortcomings. With multiple 'apps' that can be bolted on to the main software, it allows owners to customize the software to their needs. Additionally, the integrations can happen seamlessly while you sleep instead of manually." – Matthew Boersen, Straight Path Wealth Management
8. Zoho Books
"Zoho Books is a great option for small businesses. It's online accounting software that's easy to use and accessible from your desktop, tablet or mobile. Pricing is very affordable, so it's a great solution to help grow your business on a budget while staying on top of your finances." – John Turner, SeedProd LLC
9. The one your client knows (if you offer bookkeeping as a service)
"It depends on what the client and accountant agree upon. As a CPA, I think most software is similar, and although we do like QuickBooks and Xero, I tend to side with whatever the client is currently using unless we are not familiar with it at all. I always feel that the bookkeeper is responsible for learning the books while the client runs the business, so I don't want to burden the client with change." – Vincenzo Villamena, Online Taxman
10. The one that fits your business needs
"There is no 'best' bookkeeping software for all small business owners. Every business is different. Some businesses need inventory management, while others need professional time tracking and invoicing. Cloud software is nice, but it often lacks advanced features that desktop versions have. Identify your business's needs and find a solution with the features and automation to make your job easier." – Shaun Conrad, My Accounting Course
Donna Fuscaldo contributed to the writing and reporting in this article. Source interviews were conducted for a previous version of this article.