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 small business owners have 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 while dropping the ball on accounting can cause business collapse or 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.
- 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 without updating your bookkeeping and the job becomes 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. In fact, industry data shows that nearly 75% of accounting tasks can be automated with software.
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
Oversight 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.
Here are seven features that make accounting software so impactful for small business owners:
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 software is an important feature of your accounting platform. 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.
By adding your invoices to your software solution, you are able to have a view of your accounts receivable. This means the amounts owed to the business. An overview of your accounts receivable is helpful for financial reporting.
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.
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. 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.
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 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.
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.
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.
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.
User reviews and trustworthiness
Our preference has been for companies that have received the most favorable customer service reviews from consumer-generated websites.
How Much to Budget for Small Business Accounting Software
What you spend will depend on what you need. If you’re a retailer, e-commerce 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.
Most accounting software subscription fees are under $20 per month and then increase with add-ons.Learn More
Best Free Accounting Software for Small Businesses
For small businesses looking for a free version of accounting software solutions, the good news is you’re in luck. Here, we’ll discuss the top free accounting software solutions for small businesses.
Wave Accounting is a comprehensive suite of financial tools that work well for freelancers and small businesses. Wave is known to have an easy-to-use interface some features that are completely free, and other options that can be enabled for a monthly cost.
- Invoicing and accounting available for free
Wave Accounting offers basic invoicing and accounting for free with many other advanced features available at pay-per-use or monthly/annual fees that can be added as your business grows—keep reading for more information on Wave’s paid features.
Only Wave Accounting’s invoicing and accounting features are available for free. More information on Wave’s paid plans is listed below.
- Transparent pricing and useful free options
- User friendly
- Made for small businesses
Limited options with the free version.
Zip Books is a feature-rich accounting solution that supports double-entry accounting, invoicing, and financial reporting. While this works well for small businesses, it also scales for larger businesses. Like most free accounting software solutions there is an entry-level free version and other options for more advanced features.
- Double-entry accounting
- Expense tracking
The basic packages allow businesses to send unlimited invoices, manage vendors and customers, accept digital payments, and view basic reporting. Paid plans start at $15 per month and custom pricing is available for more in-depth accounting capabilities.
- Advanced accounting capabilities are available
- User-friendly interface
Most advanced features are not available for free.
Unlike most of the other accounting software for small businesses, GnuCash is an open-source option that can work for both personal and small business use. GnuCash follows double-entry accounting principles and offers many extensive features.
- Double-entry accounting
- Income and expense tracking
GnuCash is a completely free, open-source accounting software.
- Open-source and community-supported
- Full accounting functionality
- Reports are customizable
There will be a learning curve for new users on this Linux-based software, so if an easy user experience is a top priority, this platform may be challenging.
Zoho Books is a part of the Zoho suite and is a free version suitable for small businesses. Features include invoicing, expense tracking, bank reconciliation, and integrations/upgrades with other Zoho products.
- Invoicing (up to 1,000 per year)
- Online and offline payments
- Customer portal
- Scheduled reporting
Outside of the free option, Zoho Books has paid plans starting at $15 per month for the standard package, ranging to $240 per month for more advanced features and functionality.
- Integration with other Zoho products and available upgrades
- User-friendly interface
- Cost to upgrade to more functionality is affordable
Limited options available with the free version.
While most of Xero’s functionality comes with a subscription, they do offer a free 30-day trial with full access to their suite of products. Zero is an accounting software targeted at small businesses.
- Expense tracking
- Advanced financial reporting
- Inventory management capabilities
Standard pricing after the trial period starts at $13 per month for basic capabilities and goes up to $70 per month for the full suite of features. Currently, Xero is running a promotion that ranges from $3.25 per month to $17.50 per month for the first three months.
- Robust accounting features
- Financial reporting
- Affordable paid plans are available after the trial period
Only free for the 30-day trial period and full features are only available with the top paid plan.
Manager is a desktop-based accounting software suitable for small businesses. It provides invoicing, expense tracking, and financial reporting capabilities.
- Expense tracking
- Financial reporting
Manager is a completely free software solution downloaded to your computer. They also offer a cloud-based option with additional functionality for $49 per month.
- Full accounting functionality
- Offline access
Requires computer installation for the free version, cloud-based option comes with a cost.
NCH Software is a professional business accounting software that offers invoicing, accounts payable, and basic reporting.
- Expense tracking
- Works for Windows or Mac
NCH Software is free for very small businesses with fewer than five employees. Other options available for purchase range from about $10 per month to $50 per month if paid software add-ons are bundled together.
- Simple interface
- Customizable, with additional features available for purchase
Only suitable for very small businesses with the free version.
TrulySmall is an accounting software for small businesses, entrepreneurs, and freelancers that offers a free trial, and paid subscriptions for a small fee.
- Free mobile app
- Free templates
While TrulySmall has a free trial, other paid plans range from $9 to $20 per month, making it affordable for even the smallest of businesses.
- Built specifically for small businesses
- Chat customer support
- Multiple currencies are accepted
Only free for a trial period with limited functionality.
Best Paid Accounting Software for Small Businesses
Got room in your budget for paid software solutions?
Here are the best small business accounting software solutions to explore:
Quickbooks Online, by Intuit, has long been the favorite accounting software used by small businesses, as well as bookkeepers and tax professionals. Quickbooks Online accounting software is cloud-based, accessible via desktop and mobile apps, from wherever there is an internet connection.
- Inventory management
- Time tracking
- Additional users (Essential and up)
- Customizations (Essential and up)
All plans allow integration with third-party apps such as Stripe or PayPal. QuickBooks Online’s app store breaks down all of its apps by function and provides helpful examples of the benefits of each app.
Quickbooks Online offers a 30-day free trial and four subscription plans thereafter: Simple Start ($25 per month), Essentials ($40 per month), Plus ($70 per month), and Advanced ($150 per month).
- Integration with third-party apps, including Stax for payment processing
- Mobile app
- Favored by accounting professionals
Upgrades are required for additional users
Xero is an accounting software provider that has a first-class, user-friendly interface to make actions as intuitive as possible. It’s a rather simple system, which is perfect for smaller businesses that just need a sturdy, cloud-based solution with third-party app integrations that can build out the capabilities of the platform.
- Bank reconciliation
- Multi-currency (Established)
- Expense management (Established)
- Project costing (Established)
Xero offers a 30-day free trial and a promotion for 50% off for two months. Afterward, there are three monthly subscription options: Early ($11 per month), Growing ($32 per month), and Established ($62 per month). They also offer a full-service payroll option through Gusto, which is $39 per month, on top of the subscription cost and attracts a further $6 per employee.
- Integration with third-party apps, including Stax by Fattmerchant for payment processing
- Can collect payments online through Stripe and GoCardless integrations
- Payroll integration with Gusto
- Third-party app marketplace
- Mobile app
- Simple inventory management
- Limited reporting
- Limited customer service
- Fees for ACH payments
Another notable mention is Sage 50cloud. Sage has been around for a long time and works well for established businesses that need generous customizability. Unlike other solutions mentioned, Sage is Windows only. But its integration with Microsoft 365 makes it a hybrid solution: It’s hard-drive-based but shares information, via the cloud, with other applications. If you’re a Windows user with high customization needs, Sage could be a good option, but it has a very involved setup process, and it’s not very user-friendly. Hence it’s just an honorable mention for us.
Best accounting software for freelancers and solopreneurs
For service-based freelancers and businesses, the following high-value solutions could meet all your accounting software needs:
FreshBooks is the most flexible solution for invoicing, suiting service-based businesses in particular. This solution really comprehensively covers bookkeeping needs and invoicing customizations.
- Send invoices
- Receive payments
- Print invoices
- Pay invoices
- Send proposals
- Request deposits
- Collect retainers
- Track time
Freshbooks has four plans: Lite ($6 per month), Plus ($10 per month), Premium ($20 per month), and Select, a customizable solution with pricing based on the customizations. The price for all plans can be discounted for businesses that pay annually (10% off). They also have a starter deal of 60% off each month for the first six months.
- Intuitive interface
- Third-party app integrations
- Advanced invoicing features
- No inventory management
- No payroll service
Wave is another platform that suits service-based small businesses that don’t have inventory to track or need for payroll. It also has a free starter plan that covers most needs for freelancers, including easy reporting for accountants to prepare tax returns. You likely noticed Wave was mentioned on the list of free options as well. The free version offers several helpful capabilities, and the paid plans deliver more advanced features and better functionality.
Features (of the free plan)
- Unlimited collaborators
- Unlimited bank and credit card connections
- Unlimited invoices
- Automated payment reminders
Wave pricing starts at free. They do this because they make money through payment processing. For functionality such as payroll, the fee is $40 per month plus $6 per month per active employee or independent contractor paid. Advisory services start at $149 per month and additional accounting and payroll coaching is available for a one-time fee.
- Great value
- Limited features for bigger SMEs
- Limited scalability
6 Best Accounting Apps for Small Businesses
Bookkeeping is an essential part of managing your business and it’s something you must oversee in order to remain profitable. Finding the best accounting apps can be overwhelming and difficult, as there are so many options to choose from. Thankfully apps are constantly making it easier to track and organize important data. Here’s a list of the six best accounting apps for your business.
Best Accounting Apps
FreshBooks is a user-friendly accounting software that simplifies the bookkeeping process for your business. With beneficial features like time tracking, accounting reports, and expense tracking, you can efficiently manage your expenses and deviate from the dependence on Excel spreadsheets.
GoSimpleBooks allows you to concentrate on the larger aspects of your business so you don’t waste time focusing on time-consuming tasks. With an easy-to-use interface and automated math functions, GoSimpleBooks makes small business accounting much simpler for accountants managing small business finances, sole proprietors, and small companies.
Sage One takes over the small, technical accounting tasks and automates them to save you time. This app can create and send invoices from your phone, record expenses as they occur, and enable you to view your entire business at a glance in their dashboard.
Sellsy Invoicing is a great app for small business owners and freelancers alike. It helps you with automatically sending invoices, managing your products and services, and sending payment reminders. It also has communication features that allow you to chat with the rest of your team, send tasks, and maintain an agenda.
This accounting app is cost-effective and great for small businesses. Aside from the expected accounting features, Nutcache integrates with your favorite tools and even helps with project budgeting to avoid exceeding costs. It also offers invoicing, time tracking, and support for multiple languages.
FreeAgent helps you make invoices for customers as well as manage your expenses and bank accounts. This cloud-based, accounting software automatically backs up your data so you don’t have to worry about missing information. It also features automatic bank feeds, timesheet reporting, and multi-currency invoicing to empower small businesses with their accounting needs.
Accounting is the backbone of every business and it’s something that requires careful attention. These apps will help you make the task of bookkeeping an easy, stress-free experience.
If you’re also looking for a simple solution to credit card processing, contact Stax and speak to a Payments Consultant to find out how you can stop losing money to markups and surcharges.
Getting the Most from Your Accounting Software
Whether you’re a business that transacts in person, manages inventory, or deals in project management, it helps to have a solution that integrates with your payment processor and POS. These integrations ensure your accounting solution is comprehensive, covering the entire breadth of your business’s financial requirements.
For that reason, Stax recommends Xero and Quickbooks Online. To learn more about comprehensive accounting software solutions, contact our team today.
Learn more about Stax and how we integrate with your accounting software.
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FAQs about Free Accounting Software for Small Business
Q: What is accounting software?
Accounting software is a digital tool that businesses use to track financial transactions, generate reports, manage invoices, handle payroll, and streamline other accounting processes. It helps in maintaining accurate financial records and ensures compliance with regulatory standards.
Q: Should merchants consider using free accounting software for small business?
Yes, as a small business, you can consider free accounting software if you’re on a tight budget or have simple accounting needs. Just make sure the software meets your requirements and provides adequate security and support. Over time, as your business grows, you might need to upgrade to a paid version for advanced features.
Q: What should SMBs look for in accounting software?
You should consider the software’s user-friendliness, security features, integration capabilities with other tools, and availability of customer support. Beyond it’s also helpful to have features like invoicing, expense tracking, payroll, and reporting.
Q: What are the top free accounting software for small businesses?
Some of the best free accounting software for small businesses include Wave, Zip Books, GnuCash, Zoho Books, and more.
Q: How can small businesses select the right accounting software for their company?
Start by listing your specific needs and priorities. From there, do your research, compare features, and check user reviews of various software options. It’s also helpful to take a demo of the software as this will give you some hands-on experience.