How to Choose Accounting Software
The Best Accounting Software for Small Businesses: Our Verdict & Recommendations
The top three products in our lineup offer the most comprehensive suite of accounting features, including invoicing, billable expense tracking, purchasing, inventory management, bank reconciliation and more. They also include automated features that save you time completing routine tasks. Below we've listed noteworthy features for our top picks. Read on for more accounting software recommendations for specific small business needs.
- Supports multiple locations or departments
- Bundles inventory
- Syncs with 400+ integrations
- Supports unlimited users
- Payroll included in Standard & Premium tiers
- Links with 500+ integrations
3. Zoho Books
- Offers a client portal
- Bill by project & tasks
- Reorder notification
What Can Accounting Software Do for Your Small Business?
Accounting software is a necessity for every small business because it gives you a clear picture of your company's financial health by tracking how much money you have coming into your business and how much you have going out. It can be used to create invoices, track expenses, generate a variety of reports and more.
Choosing accounting software can be challenging: There are so many different programs available, and there's a lot variation in the features each application offers and even between different tiers of the same program. For this reason, it's important to know what you need your accounting software to do before you purchase a program.
For this review, we looked for well-rounded accounting software applications that could be used by most small businesses across a variety of industries. We chose cloud-based accounting software that includes tools for both accounts receivable and accounts payable.
If you're looking primarily for invoicing software like FreshBooks, check out our billing and invoice software review. Or, if your business needs inventory-management tools that exceed the capabilities of most accounting software, our inventory software review can help you find a solution. Some of these inventory programs integrate with our top-ranked accounting software. Also be sure to read our articles on accounting for small businesses.
Accounting Software: What We Tested, What We Found
After asking experts what they look for in accounting software, we searched online for the best small business accounting systems on the market. We researched accounting software reviews and articles and identified nearly 40 accounting programs for small businesses.
We scoured each software's website and watched how-to videos or feature demos (where available) to weed out the products that lacked key features. This pretesting brought our list to 17 products. We then narrowed our scope to cloud-based versions, since they tend to offer lower upfront pricing, better product support and additional feature flexibility through integrations.
We signed up for trial accounts for the 14 finalists and began our testing. We created customer and vendor profiles, entered inventory into the system and customized invoice templates. We created estimates, invoices and purchase orders. We tracked expenses and ran reports. Along the way, we noted how user-friendly the software is, how easy it is to find key features and how capable each program is at accomplishing basic tasks. We used this data and the criteria listed below to calculate the ease of use score and then choose the 10 best bookkeeping software applications. You can read more about our findings in each product's review.
We evaluated each accounting software using the following criteria:
- Ease of use
- Accounts receivable and accounts payable functionality
- Inventory management, including tracking
- Bank connectivity
- Reconciliation tools
- Mobile app
- Timesaving automations
- Resources for ongoing accounting education
- Customer support
What Should You Expect from Accounting Software?
No matter which accounting software you choose, you should be able to complete a number of basic tasks such as:
- Managing customer contact information
- Creating invoices, with a minimum of two output options: email, print or convert to PDF
- Customizing invoices with your company's logo and payment terms
- Tracking business expenses
- Running a variety of financial reports
Additionally, the software should include free access for your accountant and should integrate with a payment processor so your customers can pay their invoices online in just a few clicks.
Is Online Accounting Software Secure?
The best online accounting software uses bank-grade data encryption to protect your account. Further, it should either require or allow you to opt into two-factor authentication, giving you another layer of security. Because the software is in the cloud, your data is safe even if your computer is stolen or destroyed.
If you have employees or an accountant accessing your accounting program, you can control what information they see by setting user permissions. The best accounting software also includes a detailed history, or audit log, that shows what changes were made to your records, on what date, and at what time by which user, giving you additional insight and control over any changes or entries made in your accounting program.
Accounting Software: What Features Do You Need?
The best accounting programs include a full suite of features for both accounts receivable and accounts payable as well as inventory and asset management. They sync with your business bank accounts to give you an up-to-date overview of the money flowing in and out of your business. They include features that help you move to a paperless system, such as the ability to attach images of receipts to expense reports and send invoices via email.
Most also include mobile apps that you can use to accomplish a variety of tasks, including capturing expenses and creating invoices. Below we've listed some of the features you'll want to look for in a program based on specific business needs.
You Want to Save Time
Many accounting tasks are repetitive, and online accounting software can automate some of these tasks to streamline your workflow and save you time. Look for software with the following automations:
- Convert Sales Orders & Quotes to Invoices: Once a customer accepts an estimate, sales order, or quote, you can convert the document to an invoice with just a few clicks. QuickBooks Online, FreeAgent and OneUp can do this with a single click. You can then edit the new invoice with any changes you need to make. Nine of the products we reviewed include this feature.
- Recurring Invoices: You can set up the system to send invoices for recurring charges, such as subscriptions. More than half of the products in our lineup offer this feature.
- Automatic Payment Reminders: This feature helps you remind customers about upcoming and past due payments. Half of the programs we reviewed include this feature, and some, such as Zoho Books, have sample email text that you can use as is or that you can customize. You can then choose when you want the reminders to be sent. Some programs also give you the option of sending thank-you emails to customers after you receive their payments.
- Bank Feed: Each program in our review gives you the option of connecting with your business bank accounts to receive a daily update of your transactions. This saves you the time it would take to manually upload statements into the system. It also gives you a daily, rather than monthly, overview of your accounts. This also assists with reconciliation, allowing you to make it a small daily task rather than a monthly ordeal.
- Reconciliation: This tool identifies potential matches between your bank transactions and the bills and invoices that you've entered into the accounting software, saving you the hours it would take to sift through records for this information. You can then approve or deny the suggested matches. The majority of the products we reviewed suggest potential matches as you reconcile your accounts, and a few also include a reconciliation feature on their mobile apps.
You Stock Physical Inventory
While each small business accounting software application we reviewed can support service-based businesses and those with virtual inventory; companies that sell physical inventory have fewer choices since many applications have limited inventory-management functionality. If the accounting software you like best lacks inventory management, or if you need additional functionality, check the program for an inventory add-on or integration. Look for the following features:
- Manage Vendors: All of the programs in our review allow you to add vendors to your system, though you many need to purchase a higher service tier to receive this feature.
- Create Purchase Orders: Although six of the products we reviewed allow you to create purchase orders, three require you to purchase a higher service tier to access this feature.
- Inventory Management: Six applications on our list have inventory-management features that include tracking; however, one of these doesn't show you inventory levels as you create invoices, which could be problematic. OneUp can be set up to automatically reorder stock and also has a one-click reordering feature. Xero can handle up to 4,000 inventory items. QuickBooks Online allows you to bundle inventory items that are frequently purchased together, which can speed up your invoicing.
You Have a Sales Team
Most accounting programs offer tools that may be useful to your sales team, particularly if they visit accounts or work outside of the office. Each program allows you to add additional users and manage their access, though some companies may require you to purchase higher service tiers, depending on the number of users. Consider these features:
- Create Estimates, Sales Orders or Quotes: If your sales team bids out jobs or if your customers require you to submit sales orders for approval, this can be an important feature to look for. Nine of the products we reviewed include at least one type of pre-invoice.
- Track Expenses: The majority of the accounting software we reviewed can track expenses. However, if you rebill expenses to your clients, only six of the programs have this ability. Several programs also offer integrate with expense tracking programs, some of which are featured in our expense tracking services review.
- Mobile App: Nearly every accounting program we reviewed has a mobile app, and most are compatible with both Apple and Android devices. The functionality of the apps varies; nearly all of the apps allow you to create and send invoices and snap images of receipts for expense reports. Some also allow you to view client contact information and accept payments.
Accounting Software: Additional Features to Consider
Other features that may help you decide which accounting software is the best for your business include the following:
- Track Billable Hours: If you're a consultant or your business is an agency that bills its clients by the hour, you want accounting software with this feature. Only four of the programs we reviewed allow you to both track and bill your time. FreeAgent allows you to combine multiple timeslips on a single line or list them separately. Some programs integrate with time tracking programs, including some of the systems in our time tracking management software review.
- PayPal Integration: Every accounting software we reviewed either offers payment processing or integrates with a credit card processing company so you can accept invoice payments online. Seven of these products also integrate with PayPal, allowing your customers to pay their invoices through this popular platform.
- Supports Multiple Businesses: More than half of the programs we reviewed allow you to add more than one business to your account, though some companies charge extra for this convenience.
- Payroll: If you're looking for accounting software with payroll, four of the products on our list may suit your needs as they either include this feature or offer it as an integration. Xero includes payroll with its standard and premium tiers; QuickBooks Online and Wave offer it as an add-on for an additional cost, and Kashoo integrates with Paychex, which you would setup and pay for separately. Check out our online payroll services review for additional options.
The variety of features included with different accounting software lets you choose a program that fits your business's needs. It also automates your workflow and saves you the time and tedium of repetitive accounting tasks.
The best online accounting software for small businesses include both accounts receivable and accounts payable tools, integrate with your bank accounts, and make reconciling your accounts less time consuming and difficult. They're also intuitive to use, so you can easily figure out how to accomplish basic tasks. QuickBooks Online, Xero and Zoho Books met these requirements and more, earning top spots on our lineup.
Our hands-on testing is designed to simulate typical, real-world experiences with products and services. For our tests on accounting software, we evaluated free trials. The software companies had no input on our testing methodology, and our rankings were not shared with them prior to publication.