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Allison Martin is a Certified Financial Education Instructor (CFEI) and entrepreneurial-enthusiast. She’s also worked as a digital content strategist…
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You’d never fly a plane without knowing how much fuel was onboard, right?
So why are you piloting your side hustle or small business without knowing how much money is coming in and going out each month?
Small business accounting software helps entrepreneurs track their money efficiently, and the good news is that expense tracking is easier than ever. Online accounting software can help you get organized and keep tabs on your company’s financial health, and there are many options to choose from to ensure good income and expense tracking.
“There is not one best accounting software,” says Dr. Tim Yoder, Certified Public Accountant (CPA) and accounting expert. “Each business must assess their needs and budget to pick the best software for them.”
Finding the best accounting software for your small business can be overwhelming, as many services now offer additional features like time tracking, accounts payable services, recurring invoices, and financial reporting tools. Which features are best for you?
We asked several financial experts to weigh in on which accounting software for small business they recommend and why. Here’s what they had to say.
QuickBooks Online features flexible plans for small businesses of all shapes and sizes, along with an option that caters explicitly to independent contractors. You can use the software to get a glimpse of your company’s overall financial health, pay your employees, invoice customers, receive payments, and monitor expenses. Or, you can hire a professional to maintain the books for you through the Live Bookkeeping feature. The accounting features in QuickBooks online will help you track your cash flow and keep your business bank accounts in check.
“[QuickBooks Online] is my top accounting software pick for beginners because it has a huge selection of QuickBooks ProAdvisors to assist you,” says Yoder. “It offers a very basic Simple Start that doesn’t overwhelm you with features. As you become more familiar, you can upgrade all the way to QuickBooks Online Advanced, which can be used for fairly large companies with up to 25 users.”
QuickBooks lets you give your accountant direct access to your account with their own login and password, and this login doesn’t count toward your number of allotted users. Very small businesses and medium sized businesses alike use QuickBooks Online to conduct their day-to-day business accounting and bookkeeping.
With over 30 million users, it’s no surprise FreshBooks is a top choice for small business owners and freelancers looking for a simple accounting software solution. It’s a great option if you’re a consultant, freelancer, or solopreneur who’s doing it all yourself, because the platform has built-in invoicing tools and over 100 app integrations. FreshBooks takes the guesswork out of bookkeeping with its simple accounting features and affordable price.
“FreshBooks is known for its ease of use, with a straightforward interface that makes it simple to track expenses and invoices,” says Bryan Sharpe, senior accountant at Solar Panels Network USA, a company that offers home solar panel installation services. “FreshBooks also offers a number of handy features, such as the ability to track time spent on projects, send automatic payment reminders, and generate detailed reports.” It’s important to stay on top of accounts payable and accounts receivable when you’re a freelancer; FreshBooks makes the process simple.
Three words: Free accounting software.
If your budget for expense tracking is, well, zero dollars, you can still use online accounting services. Wave dubs itself a one-stop money management solution and the best free accounting software option for small business owners. The software helps you manage your money like a boss with both free and paid a la carte services for things like accounting, payroll, invoices, receiving payments, and even financial advice that can be purchased by the hour, a cost-effective way to get help for any small business owner.
“The significant advantage of Wave is its free accounting, invoicing, and receipt scanning services,” says Mark Stewart, in-house CPA for Step By Step Business, a small business education platform. “This program supports freelancers’ accounting needs.” Stewart also notes that with Wave you can run multiple businesses on one account.
Zoho Books is a holistic accounting solution for small businesses, offering basic and advanced tools, including invoicing, accounts payable tracking and inventory management, bank reconciliation, and time tracking. Plus, there’s a free option if your company earns less than $50,000 annually. The big draw is that all of your accounting management can be done from your phone, making it a great online accounting service option if you’re someone who needs to check your business finances or track inventory on the go.
“For small business owners who want to complete 100% of their accounting with their mobile device, Zoho Books is the best choice,” says Yoder. “While there is an online desktop interface, you can perform all the accounting functions through the mobile app.” The option to have both small business accounting and purchase invoice management all in one place makes Zoho Books a popular choice, especially for entrepreneurs who are also responsible for inventory tracking.
Xero currently has more than three million users and features many tools to help you track your cash flow and run your business more efficiently. However, the accounting software stands out amongst the competition because of its simplicity and user friendliness. 24/7 online support is available with all plans, so if you’re someone who likes to have help available at all times, it might be the easiest accounting software option for you.
“The [Xero] application has a very clean interface that is easy to understand,” says Stewart. “It can also help your business administer payroll and employment tax obligations. Xero is cloud-based, provides a safe space for storing your information, and has a mobile app for easy access.” Small businesses that also need to tackle payroll may want a more comprehensive accounting software to better see everything all in one place.
The most comprehensive accounting software for you will be the one that you find easy to use and that has the additional features you want. Small businesses are unique; if you mainly send customized proposals, invoicing tools might be more valuable to you than some other business that mainly sells physical products in an online store.
“Many accounting software programs have great features that businesses can avail themselves of,” says Nathan Watson, CEO of Lion Locs, a vegan hair products company. Watson says that relying on his small business accounting tools has helped his company significantly improve work processes, especially during tax season.
The advantage to having accounting software is that you can focus on what you do best in your business rather than track and crunch numbers all day long. Once you’ve connected your accounts and set everything up in your accounting software, you shouldn’t need to spend more than a few minutes each month managing transactions. Skip the advanced features, but don’t abandon tracking your money entirely.
The benefit to having good accounting software is that you can log in to your account at any time and get a good sense of how money is moving in and out of your business, which may inform future investment decisions you make.
Tracking your expenses as an entrepreneur builds financial discipline and helps you ensure you don’t paint yourself into a corner with regard to cash flow.
If you have a side hustle or small business, but haven’t yet registered an LLC or C corporation, you’ll be classified as a sole proprietor when you go to file your taxes. In sole proprietorship, you’re taxed on revenue minus expenses, and you need to demonstrate that you had expenses by showing receipts.
Related: LLC or S Corp? The Tax Decision New Business Owners Need to Make
You’re certainly welcome to track your side hustle or small business expenses manually, but when tax time rolls around, having all of your transactions already filed and categorized in an online accounting software will make filing your taxes way easier. You’re also less likely to miss out on potential tax write-off opportunities that help you keep more of your side hustle or small business income in your pocket.
Accounting software can feel like a splurge when you’re just getting started with a side hustle or small business. However, having a birds-eye view of your numbers can help you see what’s working and make smart decisions. Get crystal clear on your numbers and you’ll have a roadmap to scale your business as far as you want to go.
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