Best Online Accounting Software For Small Business

Accounting software is a computer program that helps businesses manage their financial activities. The software records and processes accounting transactions within functional modules such as accounts payable, accounts receivable, journal, general ledger and trial balance.

The software may also be customized to suit the specific needs of the organization.

The best online accounting softwares for small business come with a host of benefits:

• It is simple to use – The best online accounting softwares are easy to use, even if you have very limited technical knowledge. Most products come with templates that make it easy to create invoices and other documents with just a few clicks. Some are even capable of tracking your income and expenses automatically.
• It can save time – You don’t have to spend time entering data into your accounting system by hand. You can do this online where the data is stored in a secure database and can be retrieved any time you need it.
• It saves money – If you want to save money on your accounting software, then using an automated solution can save you a lot of money in the long run. A good example of how this works is when you’re using a service like QuickBooks, which has an automatic backup feature that allows you to restore all your data if anything

Best Online Accounting Software For Small Business

•  Best Overall: QuickBooks Online
•  Best for Micro-Business Owners: Xero
•  Best for Service-Based Businesses: FreshBooks
•  Best for Part-Time Freelancers: QuickBooks Self-Employed
•  Best Free Software: Wave

BEST OVERALLQuickBooks Online

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QuickBooks Online is the best overall accounting software for small businesses of those reviewed. Not only do the majority of small business accounting professionals use QuickBooks Online, but there are also endless online training resources and forums to get support when needed. All accounting features can be conveniently accessed on one main dashboard, making bookkeeping more fluid and efficient.Pros

• Scalable
• Commonly used by accounting professionals
• Integration with third-party applications
• Cloud-based
• Mobile app

Cons

• Upgrade required for more users
• Occasional syncing problems with banks and credit cards

Intuit’s QuickBooks Online has been one of the most common accounting softwares used by small businesses and their bookkeeping and tax professionals. The software is cloud-based and can be accessed through a web browser or through the mobile app.

After the 30-day free trial, the four options for subscription plans include: Simple Start at $25 per month, Essentials at $50 per month, Plus at $80 per month, and Advanced at $180 per month. Typically there is a significant discount offered for the first few months, and some accountants are able to offer wholesale pricing to small businesses, as well. 

The monthly subscription for this software can be upgraded as a business grows, and there are many customization options with the mobile app that can be used to receive payments, review reports, capture an image of a receipt, and track business mileage. For businesses looking for a payroll solution, QuickBooks Payroll fully integrates with QuickBooks Online.

Each plan offers more advanced features like inventory management, time tracking, additional users, and budgeting. Most service-based small businesses will find that Simple Start meets all of their needs. For product-based small businesses, Essentials or Plus will have more options for inventory and customizations. The Advanced subscription is a new offering and provides robust financial reporting that is powered by Fathom. Fathom is an elite online financial report analysis tool used by many large companies all over the world.

All plans allow integration with third-party apps such as Stripe or PayPal. QuickBooks Online’s app store breaks down all of their apps by function and provides helpful examples of the benefits of each app.

BEST FOR MICRO-BUSINESS OWNERSXero

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Xero is the best in our review for micro-businesses that are looking for very simple accounting software. This software has a clean interface and also fully integrates with a third-party payroll service. Businesses can collect payment online from customers through Xero’s integration with Stripe and GoCardless.Pros

• Cloud-based
• Mobile app
• Payroll integration with Gusto
• Third-party app marketplace
• Simple inventory management

Cons

• Limited reporting
• Fees charged for ACH payments
• Limited customer service

Xero was founded in 2006 in New Zealand and now has over 3 million subscribers worldwide. This accounting software is popular in New Zealand, Australia, and the United Kingdom. Xero has over 4,000 employees and is growing rapidly in the U.S., as well.

Xero offers three monthly subscription options and a full-service payroll add-on: Early at $12 per month, Growing at $34 per month, and Established at $65 per month. The full-service payroll option is offered through Gusto and is an additional $39 per month, plus $6 per employee. The company offers a 30-day free trial. 

The Early plan limits usage and only allows entry for 20 invoices or quotes and five bills per month. This limited plan may be suitable for a micro-business with high-ticket transactions, but only a few per month, such as a consulting or small service provider. Both the Growing and Established plans offer unlimited invoices and bills. The only difference between the two is that the Established plan has additional features like multi-currency, expense management, and project costing. All three plans offer Hubdoc, a bill and receipt capture solution.

BEST FOR SERVICE-BASED BUSINESSESFreshBooks

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The most crucial accounting need for most service-based businesses is invoicing. FreshBooks offers more customizations for invoicing compared to other accounting software. Its primary function is to send, receive, print, and pay invoices, but it can also take care of a business’ basic bookkeeping needs as well. This accounting software makes it easier for service-based businesses to send proposals and , track time on projects, and receive payments.Pros

• Cloud-based
• User-friendly interface
• Third-party app integration
• Affordable
• Advanced invoicing features

Cons

• No payroll service
• Mobile app has limitations

Founded in 2003 in Toronto, FreshBooks started as just an invoicing software. Over time, more features have been added and FreshBooks now has over 500 employees. There are four different plans, and businesses can get a 10% discount if they choose to pay yearly, rather than monthly. Additionally, FreshBooks offers a 60% off discount per month for six months. The four plans are: Lite at $6 per month, Plus at $10 per month, Premium at $20 per month, and Select, which is a custom service with custom pricing.

The main difference between the four plans is the number of different clients that are allowed to be billed per month. In the Lite plan, up to five clients can be billed per month. In the Plus plan, up to 50 clients can be billed per month. In the Premium plan, unlimited clients can be billed per month. The Select plan also does not have a limitation on the number of clients that can be billed per month, but adds unique features. It costs an additional $10 per month for multiple team members to use the accounting software and it costs an additional $20 per month for the advanced payment feature, which allows users to charge a credit card in real-time or set up a recurring credit card charge for a client.

There are many third-party app integrations available, such as Shopify, Gusto, Stripe, G Suite, and more. A unique feature of FreshBooks is that invoices can be highly stylized and customized for a professional look and feel. FreshBooks is a great tool for budgeting out projects, sending estimates or proposals, and collecting customer payments.

BEST FOR PART-TIME FREELANCERSQuickBooks Self-Employed

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QuickBooks Self-Employed accounting software is our top choice for part-time freelancers and independent contractors who primarily want to track their income and expenses for their tax return. This software is designed for business owners who file a Schedule C on their individual tax return. 

Without keeping up with business activity using a software like this, freelancers would need to dig through all of their bank and credit card statements to add up their income and expenses at the end of each year, which can be quite daunting. QuickBooks Self-Employed will total up all business transactions automatically.Pros

• Cloud-based
• Mobile app
• Track mileage
• Differentiate between business and personal expenses
• Syncs with TurboTax

Cons

• Data cannot be easily transferred to other accounting software
• Limited reporting
• Limited invoicing functionality and customization

QuickBooks Self-Employed is an Intuit product with a cloud-based online interface and a mobile app. This software was created to help freelancers stay organized each year for tax season. Features of QuickBooks Self-Employed include tracking mileage, sorting expenses, organizing receipts, sending invoices, and estimating and filing taxes seamlessly through TurboTax.

Users can choose between three plan options: Self-Employed at $15 per month, Self-Employed Tax Bundle at $25 per month, and Self-Employed Live Tax Bundle at $35 per month. There is a 50% discount for the first three months. The two tax bundles include a TurboTax subscription for income tax filing. The Self-Employed Live Tax Bundle also gives you access to a CPA to answer questions throughout the year and during tax season. The CPA will also perform a final review of your tax return in TurboTax prior to filing. 

The mobile app makes it easy to track mileage while driving and capture photos of receipts for business expenses. Most accounting software is not designed to separate business transactions from personal transactions, but a special feature of QuickBooks Self-Employed provides an option to mark each transaction as business or personal. This is helpful for freelancers who don’t have a separate bank account for their business activity.

BEST FREE SOFTWAREWave

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Wave is an ideal accounting software platform for a service-based small business that sends simple invoices and doesn’t need to run payroll. For many freelancers or service-based businesses, Wave’s free features will cover all of their accounting needs and is the best free software in our review. At year-end, accountants can pull the necessary reports from Wave to prepare a business’ tax return.Pros

• Free accounting, invoicing, and receipt scanning
• No transaction or billing limits
• Run multiple businesses in one account
• Unlimited number of users
• Mobile app

Cons

• Limited third-party app integrations
• Higher fees for credit cards and ACH payments
• Full-service payroll is limited to only 14 states

Wave was founded in 2010 and is based in Toronto. The company has over 250 employees and was purchased by H&R Block in 2019. The foundational accounting features that most small businesses need, such as income and expense tracking, financial reporting, invoicing, and scanning receipts, are all included with this free software. These features can be accessed online or on the mobile app. Customer payment processing and payroll are considered premium services that cost extra, but all of the bookkeeping, invoicing, and reporting features are completely free.

Wave makes its money on its payment gateway. To process payment from a customer, Wave charges 2.9% plus 30¢ per transaction for Visa, Mastercard, and Discover, and 3.4% plus 30¢ per transaction for American Express. These fees are slightly higher than other accounting software. Additionally, to process an ACH payment, rather than a credit card, Wave charges 1% per transaction with a $1 minimum fee. This is unique to Wave, as the majority of accounting software does not charge a fee for ACH payment processing. 

Wave offers two payroll plans as an add-on service. The first plan is $20 per month plus $6 per employee or contractor. In this plan, Wave will process payroll and prepare payroll tax calculations, but the user is responsible for manually completing payroll tax forms and submitting tax payments. The second plan is $35 per month plus $6 per employee or contractor. In this plan, payroll is full-service, which means that all tax filings and payments are completely managed by Wave. This full-service payroll option is only available in 14 states.

types of accounting software

Accounting software is used to collect information about and report on the financial viability of a business. This software is critical to the proper administration of an organization. Before deciding upon which software package to use, it is important to understand the different types of accounting software, and under what circumstances each one should be used. The following list itemizes the general classifications of accounting software.

Spreadsheets

Quite a small business can be run just using an electronic spreadsheet for its accounting software. The spreadsheet software is inexpensive and the system can be configured in any way at all. However, spreadsheets are prone to error, since information may be entered in the wrong place, incorrectly, or not entered at all, resulting in inaccurate financial statements. Consequently, spreadsheets are typically only used by organizations that have very low transaction volumes.

Commercially-Available Software

Commercial off-the-shelf (COTS) software is the predominant accounting software used throughout the world. It is moderately configurable to the needs of a business, contains multiple layers of error detection to prevent the entry of incorrect information, and produces standard reports that can usually be configured to the needs of the user. There are COTS packages that are specific to certain industries, with extra features to address the needs of their target markets. COTS software may require the services of consultants to install, and can require a lengthy installation process, as well as on-site staff to maintain the software. A variation on this concept is accounting software that is available as an online service, which requires users to log into the vendor’s site to access the software. The latter approach requires the payment of a per-user fee each month, rather than an up-front purchase of the software.

Enterprise Resource Planning Software (ERP)

ERP software integrates information from all parts of a business into a single database. This approach eliminates the problems associated with having independent department-specific software that does not share information. However, it is also painfully expensive and may require more than a year to install. This software is usually only needed by the largest and most complex organizations.

Custom Accounting Software

This software is custom developed for an organization. This approach is usually only taken when an entity’s needs are so specific that they cannot be met by a COTS or ERP package. However, this approach is rarely taken, since custom software tends to be buggy and requires more maintenance than commercially-available packages.

Conclusion

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