Do you need to start tracking your numbers or move from a spreadsheet to real accounting software? Here’s a look at the most popular small business accounting software options for small and very small businesses.
What is self-employed accounting software?
Accounting software helps small business owners keep track of their finances while also providing detailed information about how much they earn and spend. These details can be useful for helping them run an efficient business. Business owners who run a business need to use accounting software that helps them easily pay themselves, record earnings as income, and keep track of expenses.
The best self-employed accounting software should help you manage all aspects of your business. It should allow you to:
• Track sales and purchases
• Pay yourself automatically
• Record earnings as income
• Keep track of expenses
• Manage inventory
• Generate reports
• Create invoices
• Send payments
• Print checks
• Set up payroll
There are many different types of accounting software available.
QuickBooks is one of those programs that everyone uses because everyone uses it. It has one of the most robust sets of built-in features, add-on apps, and integrations with banks and other services. It’s also widely criticized for being slow, overly complicated, and lacking strong customer support. It’s about what you’d expect from any large business software provider.
The software comes in two core versions desktop and online. Each core has additional tiers depending on how complex your needs are. As usual, the Mac desktop software is significantly more limited than the Windows software. Mac users may want to lean towards the online versions for this reason.
All users may also want to use the online versions because they allow you to collaborate with others in your business in real-time, including those working remotely. The online version also gives your accountant 24/7 access.
In summary, QuickBooks is a good, safe choice if you want to follow the crowd.
Wave was the first mainstream online-only accounting and bookkeeping software. It’s developed a steady core of users, although it isn’t anywhere near as large as QuickBooks.
The main differentiator is that Wave provides free bookkeeping software for small businesses. Wave makes money by offering payment processing, payroll services, and other business services as add-ons. However, they aren’t pushy about it, and you can easily only use the free services.
Wave also trades features for a simpler, more streamlined process. It will probably meet your needs if you run a service-based business or simple retail operation. If not, you’ll probably need QuickBooks.
Xero and Zoho
I put Xero and Zoho together because they’re probably the next two largest providers, but I haven’t really used them. I took them for a spin and wasn’t impressed.
In my opinion, they’re not any easier to use than QuickBooks but don’t have as many features. They’re also paid subscriptions, so they don’t have the free factor that Waze does.
I’d still say take a look to decide for yourself.
QuickBooks Self-Employed is a basic version of QuickBooks designed for Schedule C filers with simple accounting needs. It allows you to track income, categorize expenses, and save receipts.
It also tracks your business mileage either by manual entry or by automatic tracking via an app. However, if you decide to use automatic mileage tracking, you’ll want to keep an eye on it. Performance varies by phone, and the app may miss shorter trips.
Other features include basic invoicing, a draft Schedule C that you can view throughout the year, estimated tax payment calculations, and exporting to your tax software.
This version does not have detailed invoice tracking, the ability to create financial reports, or the ability to classify and track different sources of income.
Personal Finance Software vs. Small Business Accounting Software
Many brand new sole proprietors ask about using personal finance software to track business income and expenses. This comes out of a desire to save money or to keep everything in one place.
If you have a straightforward side job with minimal expenses, you might be able to pull it off by adding categories for your business transactions. However, I’d strongly recommend looking into something like QuickBooks Self-Employed instead.
Is small business accounting software enough, or do you need an accountant?
Accounting isn’t magic, and everyone can do it if you’re willing to learn. However, small business accounting software isn’t magic either. If you don’t have the underlying accounting knowledge, you may be misclassifying things for tax purposes or making other common bookkeeping errors. An accountant can also suggest proactive steps to reduce your taxes or increase your profits that you may not be aware of.
In short, if you don’t have a strong accounting background along with the time and desire to really understand how your accounting software works, you probably still want to work with a small business accountant.
If you have self-employment income, you probably need accounting software. Which software is best for you depends on how complex your income and expenses are.