There are so many different options available when it comes to accounting software. It can be a bit like looking at the recommendations for a baby registry as a first-time parent. Overwhelm slowly takes over as you realize you have no idea what items you’ll actually need – or how to even use half the items on the list. You often don’t know what you don’t know, and attempting to piece together little bits of information your Google searches provide just adds to the confusion.
Let’s work to breakdown that overwhelm and help you overcome some of the unknowns. Many business owners use Excel spreadsheets to track their accounting when first starting out. That tool may work for the first few months, but growing your business will require you to adopt a proper accounting software. The right software can help you track expenses and income more efficiently, provide critical tax documentation, and run reports to assist in your decision-making process.
In an effort to overcome the overwhelm, we will be covering 5 items to review for your own business before making a decision. Do not let this list scare you! These are simply considerations to help you avoid common pitfalls or wasted time on accounting software that won’t work long-term.
- Consider your budget for software
- Plan to Implement the System
- Reporting Capabilities
- Integrations & Industry-Specific Software
1. Consider Your Budget
Free and Low Cost Accounting Software
If you are a solopreneur or freelancer and don’t need bells and whistles, there are free solutions available. While these are better than Excel, you get what you pay for and a free software will not provide all the functionality offered by other options. Some free accounting solutions available to small business include Wave and ZipBooks.
Wave – Advertised as “free accounting software for small businesses,” Wave charges absolutely no fees for the accounting software, invoicing and receipt tracking. Wave also allows you to accept payments with per transaction fees and run payroll for monthly rates. The freelance writer we work with, Amy Ragland uses Wave to manage client billing. “The Wave system makes my invoicing process easy,” said Ragland. “I can send invoices electronically, and the system tracks when payments are received. I can even set up reminder emails to clients when invoices are approaching or past their due date.”
ZipBooks – The free version of ZipBooks is limited to invoicing, vendor and customer storage, and one bank account connection. Paid options provide time tracking, additional users, advanced reporting, and more. Our team doesn’t have any firsthand experience with ZipBooks, so we cannot make any recommendations on its performance as an accounting tool.
Paid Accounting Software
QuickBooks is usually the best solution for small to mid-size businesses. The number of features you get for the price provides the best value. If you partner with certain accountants, you may be able to get a discounted account with wholesale pricing. QuickBooks Online Plus is sufficient for many of our clients, which costs $30/month through wholesale pricing. Even if you don’t purchase through an accounting firm, Quickbooks offers special introductory pricing for new users. An important note is that Intuit recently took away the option to transition an existing account to wholesale pricing, and wholesale pricing is only available for new accounts.
There is a self-employed option available for $5/month, but the features available in this option are not very robust. We usually suggest at least the Essentials if you choose QuickBooks Online as your accounting tool.
Another nice feature of QuickBooks Online is that Mac users won’t face any roadblocks because of its cloud-based nature. Previously, accounting software has played nicely on PCs and the Windows operating system but Mac users often faced some difficulties. The ability to login through Chrome or a browser of your choice makes the user experience much more uniform and less dependent on your operating system.
Xero is another accounting software similar to QuickBooks better known for its simplicity rather than functionality. There are, of course, other programs available like Netsuite that are much more robust and offer a CRM component and serve as a business management software. We tend to lean more toward QuickBooks for our client base because it has everything needed at a reasonable cost.
2. Implementing the System
Ultimately, it is worth the cost to hire a professional who knows what they are doing and has experience with the program you choose. It is well worth the initial investment to get your chart of accounts, automated bank feeds, and more setup correctly from the beginning. Attempting to figure this out on your own is risky business and can lead to a larger cost if you have to pay a professional to come in after the fact to clean up the mess. Plus, the time investment needed to learn a new system and implement it properly takes valuable time away from other business activities that need your attention.
3. Reporting Capabilities
All accounting programs will offer different reports. Depending on your needs when it comes to tracking and reporting, this is another factor to throw into the mix. You may be more focused on Accounts Receivable and need customizable and saved reports or maybe you need more in-depth inventory tracking.
While your industry, budget and the learning curve all play a role in your decision to go with a certain accounting program, the other thing to consider is scalability. Once your business has grown past the point that you can handle all the accounting, you might consider hiring a bookkeeper or entire accounting team. The accounting software you choose can dictate your future hires and processes. If you choose a free software, the limitations can often be met quickly and you may find yourself spending time and money to convert to a more robust software. If you choose a specialized or lesser known software, you may pay more to hire an accountant who is familiar with that software or have a longer ramp up as they learn how it works. If growth is a priority for your business within the next few years, it may be worth the investment and time to adopt QuickBooks now in anticipation of future needs.
5. Integrations & Industry-Specific Software
It’s also important to think through all the integrations you will need with your accounting software. QuickBooks has a robust list of applications that sync seamlessly to allow further personalization and automation. You may also need your accounting system to work with an existing system like PayPal or Shopify, so that’s another thing to keep in mind as you consider your options.
Some industries offer specialized software for specific needs. You may want to look into integrations for these solutions or hiring a knowledgeable CPA who can make the necessary journal entries to update your accounting software.
For example, property management companies might look at options such as AppFolio or Buildium for software that can accommodate their unique needs. A demo and a free trial is available for each of these software tools, allowing you to get a feel for its benefits and if it might be the right option for you.
Dentrix and Open Dental are two of the practice-management software options we work with when it comes to our dental clients. While the QuickBooks integrations are a little more clunky than other software we work with, we are able to pull information from these programs to get the necessary information into QuickBooks.
LeanLaw is a billing software made specifically for small law firms and solo practitioners. We like this tool because they boast the best QuickBooks integration. They offer a free trial and affordable monthly fee per user.
QuickBooks integrates with applications that can help tackle industry-specific challenges. Apps like Corecon, Buildertrend and RedTeam can assist with tracking clients, scheduling, production, and AIA invoices. There are more robust accounting software solutions, like ComputerEase and Foundations that completely replace QuickBooks Online, but come with a higher price tag.
It is important to take a step back to consider all of the factors above. As business owners ourselves, we are always sensitive to the cost of the product, so of course price usually tops the list when we are looking for a solution. It’s crucial not to lose sight of the other aspects you need the accounting system to do for your business and the goals for your business in the next 5-10 years. You don’t want to invest hundreds of hours and potentially hundreds or thousands of dollars into a system only to outgrow it in a few short months. On the other hand, you don’t want to frivolously pay for a system that has unneeded features you’ll never use.
You know your business best, including the systems you currently use and what is missing. A CPA can help guide you and help fill knowledge gaps, giving you the capacity to make an educated decision regarding what is best for you and your business moving forward.
Take a step-by-step approach to each of the above items. As you work through each one, you may develop your own questions, which will be important as you complete your search and make your final decision! Each business is unique and presents its own challenges and opportunities. Utilizing an accounting software that fits your business to help you better manage and achieve your intended goals is an integral piece of the puzzle. As with any business process, you need to budget, plan and implement a system that will ultimately help you achieve your business goals. So to review, the steps are:
- Consider your budget for software
- Work this into you business plan from the start and review this regularly during your strategic planning sessions.
- Set goals and a timeline and hold yourself accountable to completion.
- Step back and think about what it is you would want to know about your business, does this system have the capability to provide this?
- Will this system grow with you and your business? How large? When do you expect to meet the limitations of the software?
- If you are in an industry with specialized accounting needs, review the integrations or specific software to make sure they will suit your processing and reporting needs.