Do I Need Accounting Software for My Small Business?
Are you currently using pen and paper or Excel to manage your company's books? If so, you could be spending significant time and effort on tasks that could be automated. Accounting software is often very affordable and saves small businesses the headache of manually managing finances.
Throughout this article, we'll explain the top reasons small businesses should invest in accounting software, rank the top accounting software tools by usability, and recommend accounting platforms for different types of businesses.
Table of Contents
- Why Do Small Businesses Need Accounting Software?
- Common Signs That You Need Accounting Software
- What is the Easiest Accounting Software for Small Businesses?
- Consider a Combined Accounting Software & Service
- Software Recommendations
Why Do Small Businesses Need Accounting Software?
You're considering accounting software, but might not know exactly why you should purchase it. If this describes you, read our top four reasons that small businesses should invest in accounting software.
The Benefits Typically Outweigh the Costs
Accounting software can be extremely cheap - some solutions like Wave are even entirely free. Most small businesses can pay less than $100 per month for an accounting software that will streamline multiple processes.
Case studies conducted by QuickBooks demonstrate how small businesses save hours on payroll, reduce frustrations with record-keeping, and feel more comfortable with handling finances. These businesses all report that investing in accounting software has paid off, both financially and in terms of their comfort.
Accounting Software Saves Time
Accounting software includes automation tools that automate tasks such as issuing repeat invoices, sending invoice reminders to clients, and updating data when you connect your business software systems.
These automations take an incredible amount of strain off of business owners who have hectic days and don't have the time to remind each client to pay their invoices, for example.
This software also saves time because multiple tools are often combined into a single platform. For example, QuickBooks Online has features that facilitate payment processing, receipt capture, inventory management, payroll, time tracking, and more. If you pick one of these full-featured tools, you can complete many business tasks from one interface rather than five.
Accounting Software Improves Accuracy
There's always the possibility of human error when you manually enter your financial information into Excel. If there's just one incorrect number, it can give you the wrong idea about the financial state of your business.
Because accounting software tools have features like receipt capture and bank reconciliation, you can have more confidence in the accuracy of your financial data. Capturing images of receipts will provide proof of your purchases while automatically recording the proper charges. When your accounting software is connected to your bank, any differences between your account balance and your books will be flagged and rectified.
Overall, accounting software makes it easy to keep up with business bookkeeping. Read our article about small business bookkeeping basics to learn more about how accounting software can help.
Accounting Software Generates Advanced Reports
Most small businesses know the basic reports they need to maintain: a Balance Sheet, a Cash Flow Statement, and an Income Statement. However, there are many more reports that you could consult to measure your financial success.
This is where accounting software truly comes in handy. Most tools have reporting sections that provide between 30 and 50 financial, tax, payroll, and time tracking reports. QuickBooks Online includes more than 70 reports.
Common Signs That You Need Accounting Software
As businesses grow, they typically encounter signs that they need accounting software. The three most common signs are below.
1. You Spend Hours on Manual Tasks
Keeping your books up to date takes a significant amount of time. So does managing payroll for your employees, inputting all expenses, managing inventory if you are a product-based business. Accounting software can be programmed to update and run these tasks automatically, saving you hours of time that you can apply to other business tasks.
2. You Find Yourself Switching Between Many Software Tools
It's likely that any small business will need software to manage payroll, track projects, maintain a CRM, and track inventory. Rather than having separate systems, you could pick accounting software that houses all the systems you need.
3. You Scramble At Tax Time
If you've neglected your books throughout the year, whether that's because it takes a long time to keep them up to date or because your entries are not accurate, tax time can be hectic for many small businesses. Eliminate some of this anxiety by using accounting software to automate tasks and check your financial statements throughout the year.
What is the Easiest Accounting Software for Small Businesses?
Before deciding which accounting software to purchase, you should first determine whether or not you want to manage the accounting for your business. Some business owners outsource the management of their books to certified professional accountants, or CPAs.
According to a survey from Onpay, only 30% of small businesses hire an accountant.
If you hire an accountant, it's likely that they're highly trained in a popular accounting software solution, like QuickBooks. It's best to ask your accountant which software they prefer and purchase that.
However, if you decide to manage your books yourself, you should closely examine how user-friendly an accounting platform is. The whole point of accounting software is to improve your workflows and make life easier, so usability is crucial when deciding on a platform. Here's how we rated each accounting solution's usability:
| Accounting Software | Usability Rating |
|---|---|
| Wave | 10 / 10 |
| Xero | 9.5 / 10 |
| FreshBooks | 9 / 10 |
| Sage Business Cloud | 9 / 10 |
| QuickBooks Online | 8 / 10 |
| Bench | 8 / 10 |
| Zoho Books | 7 / 10 |
We ranked Wave the highest in usability. The Wave Dashboard, shown in the image below, has a clean design with intuitive directions for performing the most common tasks.
We interviewed Mark Hayes, the Head of Marketing at Kintell, who said of Wave:
"The tool is probably the best mobile and cloud accounting software available right now. There's such a multitude of all-encompassing features that it will probably service your needs regardless of what they may be. It has certainly lived up to expectations."
Consider a Combined Accounting Software & Service
Recently, innovative businesses that combine accounting software and services have launched. These businesses have a dashboard that you'll be able to log into to examine your cash flow and run reports, while providing you with an in-house accountant or bookkeeper who manages your business finances.
Bench is one of these companies. They are a software-enabled service that gives customers their own industry-specific bookkeeper. Options like Bench are ideal for businesses that don't want to manage their own software and either don't have an accountant or don't want to find one.
If Bench sounds like a good choice for you, sign up for a free trial.
Software Recommendations
While we believe that all small businesses should use accounting software, no one tool is ideal for everyone. Our accounting category page includes full software reviews, direct comparisons between tools, and how-to guides. Here is a quick rundown of who we recommend each platform for:
- If you're a freelancer or a small, service-based business, consider Wave or Freshbooks
- If you need to manage large amounts of inventory, check out Zoho Books
- If you want the best small business accounting tools on the market, QuickBooks Online and Xero are the best choices
- If you want pricing capped at $25 per month, Sage Business Cloud serves as a cost-conscious option