A Quick Guide to Small Business Accounting Software

Friday Apr 8th 2016 by Pam Baker
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Small business accounting software makes meeting tax deadlines easier, but choosing the right software can feel overwhelming. No worries, this quick guide will help you narrow the field.

Feeling the weight of the April 15 tax deadline yet? Or rather April 18 because Emancipation Day—a national holiday—falls on April 15 this year. The amount of stress-fueled scrambling to meet that tax deadline differs for just about every small business, but one year-round tool can make it a whole lot easier: good small business accounting software.

Maybe you always meant to research small business accounting software options and just never got around to it. Maybe your company has outgrown its current accounting software, and now you need something better. Or perhaps you haven't checked on accounting software in a while, so you have no idea what's changed and what's new. Whatever your situation, this quick guide will help you find the right small business accounting software for your needs.

Small Business Accounting Software Versus Finance Software

First, it's important to note that not all software marketed as accounting software actually does accounting. Software that does not satisfy all accounting functions is finance software—not accounting software. It handles one or more finance functions such as invoicing, banking, expense accounts, or payroll.

small business accounting software

Some finance software plays well with other finance software, but it's a mistake to assume that any of it integrates well with anything else. You'll have to research the necessary integration APIs to figure that out. If you cobble together several finance apps into a larger, integrated accounting software package, you're probably making a mistake because the patchwork won't do everything you need.

Play it smart: invest in a true accounting software package that integrates with your favorite apps rather than trying to work with a loose collection of finance apps.

For most small businesses, it's better to choose accounting software based on its own merits rather than according to which product works with the finance apps you already use. Why? For one thing, truly good small business accounting software already integrates with the most popular SMB apps—from finance software to CRM and ERP systems. After you narrow down your choices, you can always check to see if they support your favorite finance apps.

However, finance app makers do have an insider perspective, and they can sometimes offer unique insight on how accounting software is changing. Case in point:

"Intuit's QuickBooks, which was long relegated to a legacy desktop-only interface, has embraced the cloud with QuickBooks Online and brought to bear the design talent it acquired in the purchase of Mint," said Ed Buchholz, CEO of ExpenseBot. "Intuit's made incredible strides over the last year in increasing application usability and aesthetic appearance, spurring even quicker growth in cloud-based accounting market share," he said.

Buchholz added that the changes might have come as a result of pressure from Xero, which he said offers "a beautiful interface and had the luxury of being a Web-based product from day one without the baggage of desktop installs." Other competing companies, like FreeAgent and Freshbooks, have what Buchholz called "a design-focus to their market entrants, and they've set the standard for business-meets-consumer application user experiences."

The Small Business Accounting Software Feature Test

The first step in evaluating accounting software is to check and compare features against competing products.

"You can now choose from a whole host of cloud-based accounting applications, and it's important to consider company size, available features, integrations, and price when deciding on a solution," said Suzie Blaszkiewicz, research analyst and content editor at GetApp, a Gartner website that helps businesses compare small business accounting software.

"At a minimum, look for something that offers billing and invoicing, financial reporting, expense tracking, and real-time account consolidation," said Blaszkiewicz. "Beyond that, integrations with banks and the ability to access data from a mobile device are additional features to consider."

Another must-have feature: analytics. Look for small business accounting software that provides a dashboard with easy-to-read visuals that show you everything about the financial health and standing of your company. The InDinero product demo is a good example of how analytics can help you stay in the black. Several accounting software packages offer analytics, but some are more useful than others. Be sure to look at those capabilities before you select a product.

Specialized Small Business Accounting Needs

Your company may have accounting needs that go beyond the capabilities of standard accounting software. For example, some industries must adhere to specific compliance regulations. Companies that sell or do business overseas may also require multiple-currency accounting.

"You may need accounting software that works on a variety of devices and that focuses on the international client," said Jeff Eichel, CEO of FeaturedCustomers, a website that provides a list of accounting software with customer reviews. "It accepts and makes it easy to juggle exchange rates and different sales taxes, plus it's ready for new monetary systems like Bitcoin and cryptocurrency."

Your business might also benefit from tax automation capability, so look for that feature. Several accounting software packages offer it, but you may need additional help if you're an etailer. If so, take a look at Avalara, which also provides connectors to most leading accounting software.

small business accounting software

Familiar SMB Accounting Software Offer New Features

It's easy to think you know all about the accounting software capabilities of the brand you already use. And you might assume that you need to change brands to get something better. However, accounting software capabilities grow across the board at a rapid pace. If you're using an older version, you may be surprised by what newer versions can now do for you.

"Years ago it was a forgone conclusion that your company would eventually outgrow QuickBooks, and when that happened you would be pricing servers and hiring staff to support your investment," said David Valade, vice president of operations for Alta Vista Technology, a reseller of Microsoft Dynamics GP and Intacct.

"That's still a viable option, but I've seen consumers value having a cloud-based subscription service or a hosted offering over traditional, on-premises small business accounting software," said Valade. "For many people, not having to worry about backups and hardware matters almost as much as the features."

Circling back to Quickbooks, a perennial small-business favorite, it keeps growing. You can look at the full list of product innovations, but a few highlights include:

  • More automation across features that range from recurring invoices and bill payments, reconciling and categorizing expenses, to the syncing of data across bank and credit card transactions
  • Integrations with more than 150 third-party apps, the most recent additions being PayPal and Shopify
  • A collection of apps ranging from Google Docs and Sheets to a Windows App
  • A new POS system for restaurants (powered by Revel) that automatically syncs sales, payments, inventory, CRM, and payroll data to QuickBooks Online

Yes, QuickBooks offers a ton of useful and important upgrades. Probably a good bit more than most people expected, but the old favorite still faces stiff competition.

Experts Rank Small Business Accounting Software

"Xero is a rising star that now goes head-to-head with QuickBooks Online and even edges ahead in some areas," says Katherine Miller, accounting specialist at MerchantMaverick, a website that provides merchant account reviews on accounting and other merchant software, including POS and mobile payments software.

Miller calls Xero "one of the best options available for small businesses for ease-of-use, scalability, feature selection, and competitive pricing. Recent developments include improvements to the reporting system and the rollout of payroll for the US that currently supports 20 states."

Zoho Books, Wave—free, cloud-based accounting software—and FreshBooks round out the top five small business accounting programs on her list.

But the top lineup of accounting software varies according to who you ask.

"We definitely recommend QuickBooks online," says Mariah Tompkins, director at UK-based WKM Accountancy Services . "Xero offers different packages, but its cheapest package is very limited, and it also restricts the number of invoices you can create a month." Her other top small business software choices include Sage and Wave.

Indeed, asking your accountant what small business accounting software they prefer is a good place to start your research, for more reasons than one. "As a small business you may have to outsource services, your accounting software has to make it easy for your accountant and tax representatives to access it all," says FeaturedCustomers’ Jeff Eichel.

Now you're armed and ready to choose the small business accounting software that's right for you. Just don’t put it off for another year.

Pam Baker has written for numerous leading publications including, Institutional Investor magazine, CIO.com, NetworkWorld, ComputerWorld, IT World, Linux World, Internet News, E-Commerce Times, LinuxInsider, CIO Today Magazine, NPTech News (nonprofits), MedTech Journal, I Six Sigma magazine, Computer Sweden, the NY Times, and Knight-Ridder/McClatchy newspapers.

Do you have a comment or question about this article or other small business topics in general? Speak out in the SmallBusinessComputing.com Forums. Join the discussion today!
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