Best Accounting and Payroll Software for Small Business

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As a small business owner, the past few years have been challenging, to say the least. After navigating through the COVID-19 pandemic, supply chain issues have been causing serious problems.

The year 2022 has brought with it rising inflation, leading to further financial difficulties. In order to keep your business afloat, it is essential to manage your finances more closely than ever before.

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This is where small business accounting software comes into play. By automating and organizing your daily financial tasks, you can make better-informed decisions for an uncertain future.

We have tested and rated the best accounting apps for small businesses based on their ease of use, functionality, and pricing.

From sole proprietors and freelancers to larger and growing businesses, we have identified the top eight small business accounting software applications and provided explanations for what sets them apart.

FreshBooks

Why We Picked It

FreshBooks may seem like a simple and good-looking accounting system, but it actually offers a lot more. It’s a full-featured, double-entry accounting system with exceptional user experience.

This is why it has won the Editors’ Choice award and is highly recommended for small businesses. It’s easy enough for beginners to learn, but it supports all the necessary elements that larger businesses need, including payroll.

Who It’s For

If you’re a small business owner or a sole proprietor, we’d like to recommend FreshBooks for your financial management needs. This software is ideal for businesses with one or two employees, but it can handle more if necessary.

FreshBooks helps you manage your finances by allowing you to send invoices, monitor financial accounts, track income and expenses, and accept payments.

For more complex businesses, FreshBooks also offers advanced tools like project and proposal management, mileage and time tracking, and detailed reports. This software is particularly well-suited for service-based businesses.

PROS

  • Delightful user experience
  • Context-sensitive settings
  • Some unusual yet helpful features, like retainers
  • Projects and time tracking
  • Good mobile apps

CONS

  • Extra costs for team members
  • Dashboard could be better
  • Weak inventory tracking

Intuit QuickBooks Online

Why We Picked It

Intuit QuickBooks Online has been the leading small business accounting service for many years. It provides highly effective accounting functionality while offering an exceptional user experience. One of the standout features of the service is its customizability. It comes in multiple versions with hundreds of add-on apps and offers better mobile access than most of its competitors.

Who It’s For

QuickBooks Online by Intuit is a relatively expensive accounting software solution, which makes it more suitable for small businesses that have a technology budget. QuickBooks Online is relatively easy to learn for inexperienced bookkeepers, but it also offers advanced accounting tools for those who require them. Due to its high level of customization and user-friendliness, it has a broad appeal and is appropriate for a wide range of businesses.

PROS

  • In-depth contact records and transaction forms
  • Excellent inventory management, time tracking
  • Numerous customizable reports
  • Supports projects, payroll, and many add-ons
  • Terrific mobile apps

CONS

  • Expensive

Wave

Why We Picked It

Wave has been a free service unless you required payroll and payments. However, recently the company added an additional charge of $8 per month for scanning expense receipts. This new charge has slightly impacted its appeal. However, Wave is still an excellent service that offers a lot for free.

It follows standard accounting rules and is particularly skilled in invoicing and transaction management. The app supports multiple currencies and has a great selection of features for very small businesses. Nonetheless, it lacks a dedicated time-tracking tool, extensive mobile access, or inventory management.

Who It’s For

Wave is an online accounting service designed for sole proprietors and freelancers who need to manage their finances. It’s particularly useful for small businesses that send out a lot of invoices.

Although it offers integrated payroll and double-entry accounting support, it may not be the best choice for companies with more than a few employees. However, its user-friendly interface makes it easy for anyone, even those with limited financial knowledge, to use.

PROS

  • Most features are free
  • Good dashboard
  • Smart selection of features for very small businesses
  • Excellent invoice, transaction management
  • Works for businesses that use multiple currencies

CONS

  • Additional fee for scanning and uploading receipts
  • Sparse record templates
  • Invoice customization could be stronger
  • No dedicated time tracking

Zoho Books

Why We Picked It

Zoho Books is a part of Zoho’s business software ecosystem designed specifically for small businesses to manage their accounting. You can easily integrate your accounting data with other related apps and functions such as CRM, customer service, and email.

Zoho Books offers exceptional usability, flexibility, and depth in standard bookkeeping areas such as sales and purchases, time and project tracking, and inventory management. In fact, Zoho Books’ features are comparable to, and in some cases surpass, those offered by its competitors.

Who It’s For

Zoho Books is an affordable accounting software that has a free version too. It is an excellent choice for businesses that use other Zoho applications. However, it is not limited to such cases and can be beneficial for larger small businesses, growing businesses, and established businesses due to its customizability, depth, and usability. However, very small businesses may find its features overwhelming. On the other hand, companies with more advanced needs will welcome its depth of features.

PROS

  • Depth and flexibility in every module
  • Multiple sales and purchase form types
  • Excellent, customizable reports
  • Fast, clean user interface and navigation
  • Great mobile apps

CONS

  • May be too complex for some smaller businesses
  • Time tracking must be tied to projects
  • No inventory assemblies
  • Extra charge for turning uploaded documents into transactions

Sage 50 Accounting

Why We Picked It

Sage 50 Accounting, also known as Sage accounting or Sage Business Cloud Accounting, is a comprehensive accounting application designed for small businesses to use on their desktop. It is the most extensive accounting program we have reviewed and offers more features than many small businesses require, with a higher cost as well.

The software has built-in online connections that support remote work as it integrates with Microsoft 365 Business. Although it has a dated interface, no mobile app, and requires installation on a desktop or laptop computer, Sage 50 Accounting is still a powerful tool for managing your business finances.

Who It’s For

Sage 50 Accounting is an ideal choice for companies that require strong inventory-tracking capabilities. It is best suited for companies that need advanced accounting features, customization options and ample data storage.

It is recommended for companies that do not mind using desktop software and whose remote employees have their own installations of the software. However, they can still share company data through Sage’s Remote Data Access.

PROS

  • Great dashboard
  • In-depth record and transaction forms
  • Advanced inventory management tools
  • Voluminous reports
  • Microsoft 365 integration

CONS

  • For Windows only
  • Resource-heavy
  • Some UI elements look dated
  • No mobile apps

Xero

Why We Picked It

Xero is a comprehensive double-entry small business accounting solution that covers all the major financial elements such as sales, purchases, bills and expenses, inventory, and payroll. It provides advanced analytics and exceptional reports and enables project tracking.

Xero utilizes artificial intelligence to automate processes and improve connectivity with related financial websites. Its user-friendly interface, integrated features, and network of advisors make it one of the best small business accounting applications available today.

Who It’s For

Xero is an accounting software that is best suited for small businesses where multiple people require access to the software. It offers a wide range of well-integrated features and powerful reporting tools, making it an ideal choice for businesses that would benefit from them.

Additionally, Xero enables tracking of fixed assets, which is a unique feature in the category of small business accounting software. While the user experience may not be the most advanced, it is still relatively easy to learn.

It is worth noting that Xero may not be the best choice for sole proprietors or freelancers, despite having a starter pricing level that would be suitable for those on a tight budget.

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PROS

  • Exceptional online help
  • Some new reporting options
  • New 1099 support
  • Thorough contact records
  • Good mobile apps

CONS

  • No inventory assemblies
  • Time entries must be tied to projects
  • Confusing navigation
  • Email-only personalized support

Patriot Software Accounting

Why We Picked It

We have been reviewing the Patriot Software payroll application for years and decided to check out their integrated accounting counterpart. The software is affordable, simple to use, and backed by robust support.

The user interface is attractive and intuitive, with uncomplicated navigation and exceptional mobile access. Although it lacks some features that competitors offer and includes some language and concepts that rivals keep in the background, it is still a solid, inexpensive solution.

Who It’s For

Patriot Software Accounting is a suitable option for small businesses that have simple accounting needs and are unlikely to require extensive features in the future. While it does integrate with Patriot’s payroll application, it lacks depth in areas like contact records, inventory, and time tracking. However, its affordable price, extensive support, and user-friendly interface make it an ideal choice for beginners or small startups.

PROS

  • Competitive price
  • Useful Overview page
  • Uncomplicated navigation
  • Attractive, intuitive UI
  • Good mobile access

CONS

  • No time tracking
  • Can’t track inventory
  • References some advanced accounting concepts
  • Minimal fields in contact, product records
  • Can’t customize reports

TrulySmall Accounting

Why We Picked It

TrulySmall Accounting is a product from the same company that developed Kashoo, which we have been reviewing for many years. At present, it only offers support for transaction and contact management, invoices, and bills, and is likely to remain simple and straightforward in the future.

We appreciate it for its ease of use, simplicity, and unique approach to accounting, especially at a time when many competitors are adding more features and services to their offerings.

Who It’s For

“It’s admirable to see a software developer creating a simple accounting application for small businesses that process fewer than 500 transactions per year. The user experience is designed for novice bookkeepers who are just starting out, or for established but still small companies that do not require many accounting features.”

PROS

  • Exceptional user experience
  • No accounting knowledge required
  • Good mobile apps
  • Supports sales tax, payments, statements
  • New expense management

CONS

  • Expensive
  • No product or service records
  • Can’t save invoices as PDFs
  • Few reports

Buying Guide: The Best Accounting Software for Small Businesses in 2024

How We Pick the Best Small Business Accounting Software

Eight small business accounting applications have been identified as scoring high enough to be included in our list of the best small business accounting software.

Two of them, Wave (which is free except for a $8 per month charge for scanning receipts) and TrulySmall Accounting ($20 per month), are best suited for microbusinesses such as independent contractors, freelancers, and sole proprietors.

The other six target small businesses with at least a few employees and offer multiple tiers of service to meet the varying needs of such businesses in terms of size and functionality.

Our rating of these applications is primarily based on their ease of use, functionality, and price. We also consider anything we encounter during our hands-on testing.

What Do Small Business Accounting Services Do?

Managing financial bookkeeping for a small business is a complex and time-consuming task. Business owners find it challenging to handle basic tasks like paying bills and tracking incoming revenue, let alone answering critical questions like, “Are we profitable, and why or why not?”

Additionally, it can be tough to determine if the business will have enough money to make the required tax payments on time, invest in new equipment, or explore financing. Lastly, it’s important to ensure that the appropriate staff can access accounting data if they have to work from home.

Thankfully, a good small business accounting service can help you answer these questions by providing insights based on the input you supply. Once you provide the service with details about your financial accounts, customers and vendors, and the products or services you buy and sell, you can use that data to create transactions.

The software can then use these transactions to provide you with insights about your business’s performance. You can also use instant search tools and customizable reports to track down the smallest details and view overviews of how your business is performing. Additionally, mobile apps and websites give you access to your finances no matter where you are.

What’s the Best Free Accounting App for Small Businesses?

Wave, also known as Wave Accounting, is a free accounting software that offers core accounting features that are good enough for many small businesses. However, if you want to enjoy additional features such as scanning and uploading expense receipts, you’ll have to pay $8 per month. Payment services and payroll software also come at an extra cost.

On the other hand, Zoho Books offers a surprisingly robust free version with features such as client management, multilingual and recurring invoicing, expense and mileage tracking, and reports. It’s an excellent choice for businesses that plan to grow and for anyone who already uses other Zoho software. While you can import bank and credit card statements, you can’t set up direct connections to your financial institutions. 

How Are Completed Transactions Handled?

After creating an invoice, you have a few options. You can save it as a draft or a final version, and then either print or email it. If you choose to email it, and you have an established relationship with a payment processor, you can include a payment stub in the invoice, which explains how the customer can pay via credit card or bank withdrawal. Additionally, you may be able to create a PDF version of the invoice, copy it, record a payment on it, and set it up to recur on a regular basis.

Can You Manage Expenses and Bills With Accounting Software?

Accounting services are focused on monitoring your company’s expenses, which are purchases made rather than bills entered and paid. This is an important financial area that requires close attention to avoid going out of control. Small business accounting software categorizes these expenses into different types and compares them to your income using charts and totals.

When you are on a trip, you can use your smartphone to take pictures of receipts and upload them to your accounting app. Some accounting services attach these receipts to an expense form, while others read the receipts using Optical Character Recognition (OCR) technology.

This technology transfers some of the receipt data, such as the date, vendor, and amount, to an expense form in accounting software like Intuit QuickBooks Online and Xero.

How Do You Set Up Accounting Software?

If you’re planning to use a small business accounting service, the time it takes to get started will depend on how long your business has been operating. You can sign up for a free trial or a demo account, but once you’re ready to commit, you’ll need to pay a monthly subscription fee. The more you need from the accounting service, the longer it will take to set up, and the higher the monthly payment will be.

To get started, you’ll need to create an account and answer some questions about your business, such as your business type and when your fiscal year starts. You’ll also need to decide if you want to access your transactions from online financial accounts like checking and credit cards.

If so, you’ll have to enter your login credentials, and the software will import your recent transactions for the last 90 days and add them to an online register. However, this process is not as simple as it used to be as banks have increased their security measures, so you may have to go through some security checks to get connected. Sometimes, you may need to set up the connections again if they break.

If you want to accept payments through credit cards or bank withdrawals, you’ll need to sign up with a payment processor like PayPal or Stripe. You’ll also need to browse through the accounting software’s settings to see if any specific features like purchase orders and inventory tracking need to be turned on or off. This can help you simplify the user interface or maximize its functions.

You can choose to do a minimal setup and start creating invoices, paying bills, and accepting payments right away. All the accounting services allow you to add customers, vendors, and products during the process of completing transactions.

However, as your business grows, you’ll need to invest more time in building your records. You can import existing lists from CSV and XLS files, which can help you save time and effort.

What Is the Best Accounting Software for Small Businesses?

Selecting an appropriate small business accounting application can be a daunting task. The best fit for your business depends on your unique needs. You want the product to have the potential to accommodate your business growth, while avoiding extra expenses on features that you may not require.

Most of the accounting services we evaluated offer multiple versions, enabling you to start with a basic package and later upgrade to a more advanced edition with similar functionality.

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We recommend thoroughly reading our comprehensive review of any service that attracts your attention, to ensure that it aligns with your specific requirements and budget.

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