A Guide to Small Business Accounting Software

Thursday Nov 11th 2010 by Pam Baker
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Do you need full-blown small business accounting software or would a good invoicing and expense program suffice? Our guide helps you decide which type works best for your business.

Small Business Accounting Software or Invoicing and Expense Software

Updated on 5/01/2012

Editor's Note: Back in 2010 when we first posted this article, it offered great information on small business accounting software. But if you’re looking for the best picks and the latest information for 2012, be sure to read The Ultimate Small Business Accounting Software Guide.

The impulse to buy small business accounting software and just run with it can be tempting. Leading brands such as QuickBooks and Peachtree leap to mind followed by a quick price evaluation. Pick, click and done, right? While this approach is very common it is also commonly wrong. Why? Because you end up buying the tool before you properly define the job.

The best plan is to make a list of all the tasks you need small business accounting software to do. This is the list by which you will judge all small business accounting software packages. Your top consideration should be whether you need a full accounting program that can do everything or a lighter-weight invoicing/expense program that simply helps you to stay on top of your cash flow. You can give your accountant data from either type of program for tax filing purposes, and many of these software programs let you import the data into one or more tax preparation programs.

GNUCash; small business accounting software
GNUCash is a free, open-source accounting program with a Plain Jane interface, but it's chock-full of in-depth accounting functions and features.
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The choice is really more about the details you want to see in your daily operations. Want to know how your business and your investments are doing? Go for the full accounting programs. Want to know who owes you money, who is in arrears and whether you’re on budget? Then go for one of the lighter programs. This guide includes both types of accounting software to fit a variety of needs.

There are the obvious needs common to all small businesses: payables, receivables, expenses, and tax reporting. You may also need inventory, CRM, business intelligence, and sales projections, for example, depending on what type of business you run. Whatever it is you need, put it on the list. If you are unsure what you need, ask your accountant or consult with a business expert at a local university or with a reputable organization such as SCORE.

Now that you know what features you need, all you have to do is compare the products to your list. This will allow you to narrow product choices to those that can do what you actually need. Next, compare those software choices based on their security features, ease-of-use and price. The descriptions and chart (at the bottom of page 2) will help you sort your choices.

Free Accounting Software for Small Business

BizFusion

This free online small business accounting system consists of nine modules all on a single interface that resembles Microsoft Outlook 2007. BizFusion also offers a mini-mode option that pushes menu items to a menu bar and makes screen space available for more data; this option is ideal for smaller screens such is found on laptops and netbooks.

The system focuses on inventory, project and asset management with a full small business accounting solution built-in. the provides a more complete business picture (including an analysis of your competitors) in a single system. BizFusion's easy enough for beginners but comprehensive enough to satisfy people with more advanced skills.

Outright; small business accounting software
Outright automatically pulls information from your checking accounts, credit cards and scanned receipts and presents clear reporting charts so you can see where you stand at a glance.
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FreshBooks

While not a true accounting system, FreshBooks is a good fit for service companies that are primarily interested in an invoicing application with expense and time tracking. There is a free version, but it's extremely limited in terms of the number of users and customer accounts. You can, however, upgrade the free version to add users or customer accounts -- or both -- starting at $10 per upgrade unit.

The system will mail invoices for you at roughly $1.79 per invoice, which covers printing, mailing and enclosing a return envelope. FreshBooks works with several online payment services too, including PayPal.

GNUCash

This open source freeware is a double-entry bookkeeping system with a boring-but-familiar user-interface that closely resembles many online banking interfaces. GNUCash is easy to use immediately if you are familiar with accounting terms. If you are not familiar with accounting terms, be sure to view the tutorial first to avoid confusion on where to enter what figures.

The small business accounting software includes an installation wizard, which helps to simplify that particular task. GNUCash is an ongoing project, and it updates frequently. However, new updates are labeled "unstable," which merely means they are in beta and may or may not work well at the moment. For this reason, most people should avoid installing updates until the update label changes from unstable to stable.

Reconciling checking accounts, tracking investments, viewing spending reports and other functions are easy to use and understand. The large open source user community is also helpful in resolving problems. Overall, GNUCash is a better choice for people who understand accounting basics and are tech savvy enough to get the most out of open source's customization capabilities.

Lots of Small Business Accounting Software Options

Outright

Outright's free small business accounting software is designed for people who absolutely hate bookkeeping and only do it to avoid problems with the IRS. It is incredibly easy to use and designed for very small businesses (which the company defines as one-to-three person operations in any field that requires no inventory).

The system pulls in spending from bank accounts, credit cards and scanned-in receipts. It works with invoicing services ranging from PayPal to FreshBooks and Harvest. In other words, the system works very hard at not requiring you to enter any data at all. Of course, you'll still need to scan receipts and identify which category they go to. But still, for very little effort you can instantly see costs of goods, operating fees, profits and who your best customers are.

You can also deduct mileage, estimate your taxes, generate tax forms and be ready for tax filings in an instant. Outright will offer premium services in the future, but for now it's basic, low-sweat accounting that's easy to use on the run.

Zoho; small business accounting software
You can use Zoho's suite of business modules to just track invoices and expenses or add modules to handle everything from business intelligence to CRM.
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SkyLedger

SkyLedgeris an expense and income reporting system that is available in both free and premium paid versions. The freebie limits you to three users, 20 transactions per month and 50 MB of space. The premium account costs only $5 a month for unlimited users, unlimited transactions and 10GB of space.

The system has a real-time dashboard, advanced ledger editing and custom reporting, but it is still simply income and expense reporting. You can get nice P&L graphs and custom reports that will granulate your expenses and income into a variety of categories -- by label, customer or vendor, for example -- but there are no further accounting functions available.

Zoho

Zoho is a comprehensive suite of Web-based productivity and collaboration programs that also includes invoicing and CRM applications. It's primarily designed for small businesses. Zoho's personal version is free, although the company charges a premium for business use.

However, the main difference between Zoho's business and personal versions is that Zoho Business provides company-level subscriptions and an administrator console, plus it accommodates several office or store locations and multiple users. Many businesses -- from solo freelancers to small, one-location businesses -- will do fine with the freebie personal edition.

Zoho is incredibly easy to use and can be up and running in mere minutes. The business edition is built in modules that are easy to mix and match with other applications ranging from PayPal to Google Docs and Microsoft SharePoint Servers. Small businesses can thus assemble modules and third-party applications to create a set-up uniquely suited to their business. Zoho is equally useful to beginners and advanced users. It offers everything from basic accounting to invoicing to CRM and sophisticated business intelligence.

Paid Accounting Software

QuickBooks

Intuit's QuickBooks is by far the best-known small business accounting software. The company also produces TurboTax, the popular income tax software. QuickBooks may be one of the most widely used programs, but it's not perfect. For one, it's pricey. The upgrade to QuickBooks 2011 Pro alone is a whopping $200. Secondly, it's a bit harder to use than some of its competitors, such as Peachtree Accounting.

However, many accountants use QuickBooks and are thrilled when your books are on that system too. QuickBooks Online is a better option for most small businesses, although the pricing system is a bit nickel-and-dime. The Simple Start version limits you to 20 customers and few reports, but it's good for the self-employed who do not use online banking.

Unfortunately QuickBooks Online offers limited capability to import data from a QuickBooks desktop version, which makes it challenging if you want to move from the desktop to the Web version.

According to an Intuit spokesperson, "You'll have the opportunity to import your desktop data as many times as you wish within the first 30 days of signing up. Your existing QuickBooks desktop data will convert to comparable features in QuickBooks Online where applicable. When comparable features do not exist (such as customer or vendor types), the data will not be converted."

We're not wild about that phrase "where applicable," and we look forward to when the online version lets you import all of your QuickBooks desktop data without restriction. You can try the QuickBooks Online service for free for 30 days, after which it costs $12.95 a month.

QuickBooks Online Essentials costs $24.95 a month and allows more, though still limited, reports and includes online banking support. Quickbooks Online Plus will give you custom invoicing, purchase orders, billing by customer, and tracking options. Quickbooks Online Plus Payroll goes for $63.16 per month and will even handle direct deposits.

Credit cards payments require an add-on (at an additional fee) to all of these options. All of the QuickBooks' options easily export data to TurboTax, so you can file your taxes, but that too is at an additional fee. However, the IRS officially accepts QuickBooks records -- a very helpful feature during a tax audit.

Peachtree Accounting

Sage's Peachtree Accounting, another comprehensive small business accounting suite, is also accepted by the IRS as official taxpayer records. Only Peachtree and QuickBooks can claim this distinction. Sage has announced it plans to discontinue its Peachtree Web Accounting Service on Nov 30th. This means the software is now available only in an on-premises version.

Xero; small business accounting software
Xero provides double-entry accounting with a user-friendly interface that resembles Google Chrome's tab layout. Functions range from fixed asset integration to annual report generation.
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Peachtree integrates with Bill.com to continue a form of Web services primarily in billing and payments. Peachtree does have remarkable business intelligence modules that are more advanced than QuickBooks and much easier to use. It also allows for monthly close-outs, which means catching and repairing errors is a much simpler task. Another plus: Peachtree lets you manage your business as an asset so that you can sell it or pass it on to family at an increased value from where it stands today.

Xero

This double-entry accounting system offers several useful functions ranging from fixed asset integration to annual report generation and advisor collaboration. Xero supports online banking and multiple currencies. It also works well on PCs, Macs and mobile devices.

The user interface is easy to use and resembles Google Chrome's multi-tab presentation. While most accounting software these days works with PayPal, Xero goes a step further: PayPal co-founder Peter Thiel recently invested $4 million in Xero.

Xero doesn’t offer a free version; however, it is an affordable system. The smallest plan costs $19 a month, which limits you to five receivables and five payables a month. It also includes up to 20 reconciled bank statement lines. That isn't much of a bargain for most SMBs. The better deal by far is the medium plan at $29 a month, which includes unlimited invoicing and bank reconciliation.

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.

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