Running a small business often means wearing many hats—sending emails, paying suppliers, invoicing, crafting workflows, and building financial reports. All these are must-dos, in addition to actually delivering the job that customers or clients pay for.
Of all the extra tasks a small business owner has on their plate, none are quite as important as accounting. Solid accounting practices keep your business in top financial shape and help you make better decisions. On the flip side, dropping the ball on accounting can cause major headaches, especially if you run into trouble with the IRS.
Thankfully, accounting systems with small business solutions are making it easier to outsource tasks to technology. These accounting tools help business owners track accounts receivable and payable, pay sales tax, and be amply prepared come tax time.
Here is your complete guide to what accounting software does for small businesses and why it’s so important.
TL;DR: Free Accounting Software for Small Business
- Keeping track of your finances is critical, especially for small businesses with limited resources.
- There are several free accounting software for small businesses with the option to upgrade to more advanced paid plans.
- Whether you’re an independent freelancer or a growing business, there are many options to choose from for accounting software. The best practice is to evaluate your needs and choose the option that suits most requirements.
What Is Small Business Accounting Software Used For?
Managing business finances, as most small business owners will have experienced, is not as easy as it sounds. You need to budget, track expenses, pay suppliers, categorize transactions, and keep detailed, accurate books. Just a few days of not updating your bookkeeping can lead to a mountain of work.
Accounting software makes life easier for small business owners. Instead of doing everything manually, you can put various to-dos on autopilot. Additionally, many accounting software solutions help manage sales tax automatically, ensuring businesses meet their tax obligations effectively.
Most software also have easy-to-use interfaces, making it simple to carry out tasks like bookkeeping. Speaking of which, there can be some confusion between accounting software and bookkeeping software.
Bookkeeping Software vs. Accounting Software
The easiest way to understand the difference is to think of bookkeeping as the basic and accounting as the advanced. Bookkeeping software is used for data entry and storage—e.g., logging revenue and expenses. The best bookkeeping software will make that process smoother than, say, a spreadsheet. You can run double-entry accounting: managing incoming and outgoing expenses and payments for better oversight.
Accounting software is like the upgraded version of bookkeeping software. Accounting software should have the same functionality—data entry and storage. In addition, it gives you more analytics and actionable accounting features, like forecasting and cash flow analysis. While there are certainly both free bookkeeping software and free accounting software options available, a low-cost accounting package for small business is likely to be a huge benefit to you in the long run.
Bookkeeping and accounting software both reduce the amount of time spent on data entry. Users can simply sync business bank accounts and credit cards. Automation takes uploading out of your hands. For the purpose of this article, we will focus on accounting software.
Why Accounting Software Is Important for Small Businesses
The organization and insights you get from your accounting and bookkeeping software helps you to plan, spot potential issues, identify strengths, and prove business viability. With this information, you can confidently make investments, ask for loans, and predict what your tax requirements will be.
When selecting a solution, it is important to review the different features offered in accounting packages. Features like automatic payment reminders can streamline the payment process by sending reminders and updates for unpaid invoices.
Here are some of the features that make accounting software so impactful for small business owners. Additionally, mileage tracking benefits small businesses by allowing users to automatically track miles, categorize trips, and generate shareable reports.
Bank and credit card syncing
Syncing your bank account and credit cards with your accounting software is the greatest timesaver that accounting software can give you. Removing manual input of financial data gives you back hours of your working life to focus on other important business tasks.
Invoicing
Invoicing software is an important feature of your accounting platform. Automatic payment reminders can help ensure timely payments by sending reminders and updates for unpaid invoices. It means that once the payment is made, it’s automatically registered as paid. With your bank and credit card synced, and your invoice logged as it’s sent out, your accounting system will pick it up once paid. No data entry is required from you once the invoice is sent. Most solutions will include templates.
Accounts receivable
By adding your invoices to your software solution, you are able to have a view of your accounts receivable—i.e., the amounts owed to the business. An overview of your accounts receivable is helpful for financial reporting, because you see the money coming into your business and plan accordingly.
Accounts payable
Accounts payable is essentially expense tracking: all of the invoices or expenses that the business is due to pay. Your accounting software can make it easier to manage these by putting them in the system. Adding due dates and having this chart of accounts easily viewable helps you prioritize payments and not let any fall through the cracks. Registering this information also allows you to assess your profitability based on your incoming and outgoing payments.
Online payment collection
Most accounting software tools will have features that allow you to collect online payments from customers. This makes it easier for customers to pay their bills, which helps you secure payments in a timely manner.
Shared access
There are a few benefits to shared access that are both within and outside of your organization. Internally, you can share access with any team members who may send invoices to clients or are responsible for paying company bills. Outside of your business, you can share access with your bookkeeper, accountant, and tax professionals to make their life easier, saving them time and saving you money that would have been spent on their time.
Financial statement preparation
Your accounting software can help you easily prepare balance sheets, profit and loss statements, and cash flow statements. With all of your financial data in one system, the analytics capability lets you create complex reports quickly.
Factors to Consider When Choosing Accounting Software for Small Businesses
There is quite a broad range of accounting software solutions available to small businesses. When you choose free accounting software, it’s crucial to evaluate features, ease of use, and customer reviews to make the best decision. What industry you’re in and how many employees you have will determine what features you need, but it’s also important to consider the following.
Ease of use
Yes, the features matter, but if you can’t figure out how to use the system, you may not get the greatest benefit from it. If you need a system that’s user-friendly, it’s important to assess this before selecting your solution. An integrated accounting software that will work directly with your CRM or project management software may be a helpful tool for your business.
Accessibility
Most newer solutions offer cloud accounting, so they can be accessed anywhere through any device. Still, you’ll want to check if it’s mobile-friendly. Is there a mobile app? Does it work on both iOS and Android? Then, of course, does this matter to you?
Additional users
Additional users would include your internal staff. This is important if you have multiple people invoicing clients. It’s also important that the software enables access for your tax professional or accountant, which is important come tax time.
Scalability
Adding all of your financial information into your accounting software is a time-consuming process. There is a level of commitment that comes with that, and it’s likely you won’t want to change once you have a system in sync with your finances. For this reason, it’s really important that you find an accounting solution that will remain viable if you’re planning to grow your business. Look for those that have upgrade options and no limits on features.
Integrations
At a minimum, most businesses will probably want to integrate their accounting software with their payment processor and POS system. If you can integrate with your POS, all of those bank transactions can be added in real-time automatically. Other helpful integrations include payroll services, CRMs, and more.
Features
Before you even look at accounting software options, it’s worth making a list of what features you need. Do you need unlimited users? Multi-currency? Inventory management? Built-in payment processing? Software integrations that connect with existing products? With your list, you can better qualify which solutions cover your accounting needs.
How Much to Budget for Small Business Accounting Software
What you spend will depend on what you need. If you’re a retailer, ecommerce business, or restaurant with complex inventory requirements, your budget is going to need to be higher to meet all those needs. If you’re a services provider, such as a software development business, with just a few full-time staff and fairly straightforward incoming and outgoing payments, your budget would be lower.
While pricing is definitely a factor to consider, it’s more important to weigh up what value the solution will give your business. Accounting software does bring an inherent value that improves your profitability. Pricing shouldn’t be the only deciding factor.
Now, if you’re just starting out and don’t have a lot of budget to spend, then consider free bookkeeping or accounting software. These solutions are a great entry point for small business owners because they cover essential features like tracking income and expenses, generating profit and loss statements, and even preparing basic financial reports.
Many comprehensive free accounting software options also let you automatically import bank statements, track expenses, and send professional invoices—saving you valuable time while keeping your financial health in check.
Here are some tips to help you zero in on the best software for your needs:
List your must-have accounting features – Decide if you need essentials like expense tracking, profit and loss statements, or more advanced tools such as inventory management and sales tax calculations.
Check integrations with your existing business software – Look for free accounting software that connects with your bank accounts, POS system, or payment processor to automatically import transactions and save time.
Prioritize ease of use – A user-friendly platform helps you and additional users send invoices, set automatic payment reminders, and access financial reports without a steep learning curve.
Evaluate scalability – Choose free bookkeeping software that offers a free plan now but also has a paid version you can upgrade to when your business grows.
Look for mobile and multi-platform access – If you’re often on the go, cloud-based tools with apps for Microsoft Windows, iOS, and Android let you track income, manage expenses, and send invoices anywhere.
Review security and support – Even free versions should protect your financial data and offer at least basic support, whether through FAQs, live chat, or a community forum.
Final Words
Using accounting and bookkeeping software is pretty much table stakes when running a modern business. The good news is you don’t necessarily have to spend a ton on these solutions. If you’re just starting out or have basic needs, using free business bookkeeping software or accounting tools can enable you to track expenses, send invoices, and stay on top of cash flow without adding extra costs to your business.
Need help figuring out which software best fits your business? Contact Stax to get expert guidance tailored to your needs.
FAQs About Best Free Accounting Software
Q: Why should small businesses use free accounting software?
Small businesses typically operate on tight budgets, and investing in a free accounting program can save significant capital. Additionally, such software simplifies complex financial tasks, improves financial analysis, assists in invoicing and allows easier management of book-keeping and tax obligations.
Q: What features should I look for in free accounting software for small businesses?
Quality free accounting software can offer numerous essential features like invoicing, tracking time and expenses, integrating with a bank, financial analysis, and business reporting. Some of them even allow processing credit cards and managing bookkeeping needs.
Q: Can I use free accounting software for financial analysis for my small business?
Absolutely, several free accounting software options provide tools for financial analysis. Many platforms are praised for their capabilities in this area, enabling businesses to understand their financial position better and make informed decisions.
Q: Is it possible to integrate bank accounts with the free accounting software?
Yes, most free accounting software for small businesses allow integration with bank accounts, enabling real-time tracking of income, expenses, and overall cash flow.
Q: Which free accounting software allows credit card processing for small businesses?
Certain free accounting solutions offer a feature to process credit card payments, making it more convenient for businesses to handle transactions.
