A person in a blue button-up shirt, shot from the neck down, sits at a table scattered with papers showing various pie charts. The person's right hand holds a pencil and stretches in the direction of the camera to use a calculator.
Utilizing accounting software can help you save time, prevent errors, and gain critical insights into your company’s financial performance. — Getty Images/Jirapong Manustrong

Almost 40% of business owners surveyed by Intuit QuickBooks said, “Managing finances and accounting is a top challenge.” However, the right accounting software can streamline back-office workflows by automating administrative tasks and reducing manual data entry. As a result, you can save time, prevent errors, and gain critical insights into your company’s financial performance.

Online accounting tools should be easy to use and affordable. But how do you choose the best system for your needs? In this buyer’s guide, we’ll cover the top factors to guide your decision, the average cost of accounting software, benefits, features, and popular platforms for small businesses.

Factors to consider when choosing accounting software

According to Incfile, 46% of small business owners said “they do their own accounting,” whereas 40% have an employee handle it, and roughly 14% outsource bookkeeping. So, looking at your current situation is the best place to start your decision-making process. How much time do you or your staff spend on accounting monthly?

Think about the accounting activities you or your team do, from the mundane, like reconciling transactions, to the complex, like running job costing reports. Then, consider who needs access to the accounting program. Many bookkeeping platforms use a tiered pricing model; higher-priced plans allow more users. Some vendors let your accountant access the system for free.

Lastly, write down any software that needs to sync with your bookkeeping program. Integrated accounting systems simplify workflows. For example, any time you update a contact in your customer relationship management (CRM) or point-of-sale (POS) system, it also updates the accounting platform, ensuring you have the correct contact data for billing.

Other current or future integrations may include:

  • Online payroll services, like Gusto or OnPay.
  • A human resources information system (HRIS), like BambooHR.
  • E-commerce or marketplace platforms, like Shopify or Amazon.
  • Enterprise resource planning (ERP) tools, like NetSuite or Microsoft Dynamics 365.
  • Expense management software, like Expensify or Airbase.

[Read more: A Guide to Small Business Accounting]

Benefits of online accounting software for small businesses

One QuickBooks survey revealed that “small business owners spend more than 21 hours a week on accounting tasks.” CPA and Freshbooks freelance contributor Janet Berry-Johnson reported that manually entering data for one invoice takes two minutes versus 18 seconds with cloud accounting software. Depending on how many invoices you send monthly, you could easily save hours on just this one task.

What about business receipts? With online accounting apps, recording expenses is as easy as snapping a photo of your receipt and uploading it through the mobile app. Aside from saving time, bookkeeping software benefits small businesses in many ways.

Switch to a cloud-based accounting system to:

  • Boost productivity company-wide: An integrated accounting system automatically updates connected programs, ensuring your sales, marketing, and customer service teams have the latest account data without rekeying duplicate information.
  • Prevent mistakes: Accounting software features and integrations reduce the number of unrecorded or overlooked transactions (errors of omission). Also, it applies policies to limit errors of principle, like putting an equipment purchase under operating expenses.
  • Improve financial performance: Detailed financial reports and online dashboards increase visibility into business trends, potential issues, and opportunities. Leaders can use analytics to set goals and make informed decisions.
  • Ensure compliance: Accounting systems generate accurate balance sheets, cash flow statements, and other financial documents. The built-in templates are easy to use and share with investors, stakeholders, or regulators.

Aside from saving time, bookkeeping software benefits small businesses in many ways.

Bookkeeping software pricing and fees

Online accounting software is relatively inexpensive, with paid subscriptions starting at $10 monthly. Providers discount the services for businesses that prepay annually. Most vendors offer several plans, with more expensive versions allowing additional users and providing advanced features. Free accounting tools may have fewer features than paid software but work well for freelancers or startups.

Some accounting software providers charge fees to set up your account, integrate with third-party applications, or add users. Others have a lengthy list of add-ons, which can increase your monthly cost if you need multiple packages.

[Read more: 17 Accounting Terms To Know (Even If You Have an Accountant)]

Core accounting software features

Accounting software maintains your company’s general ledger and tracks costs and revenues. However, the best accounting software for small businesses offers automation features and real-time financial data. Indeed, 47% of respondents to a QuickBooks survey indicated that they wanted to automate running financial reports.

When choosing accounting software, consider the following features:

  • Number and types of integrations.
  • Operating system and device compatibility.
  • Number of users.
  • Multi-currency support.
  • Billing and invoicing.
  • Customer support channels and availability.
  • Expense tracking.
  • Project management and job costing tools.
  • Reports, graphs, and charts.
  • Budgeting and forecasting.
  • Tax compliance.
  • Accounts payable and accounts receivable.
  • Inventory and asset tracking.
  • Security options like role-based permissions and audit trails.
  • A dashboard for tracking financial key performance indicators (KPIs).

Top business accounting software vendors

In the United States, QuickBooks Online holds the largest market share (49.3%), according to Codat. BusinessDIT estimated that about 26.56 million U.S. businesses use QuickBooks. Xero is also a popular accounting service, with over 3.7 million subscribers worldwide. Yet, small companies have many options, so it’s best to compare multiple solutions before choosing.

Explore accounting software providers, such as:

  • FreshBooks: It has plans for freelancers, self-employed entrepreneurs, businesses with contractors, and companies with employees. FreshBooks provides client billing and payment options and unlimited time, mileage, and expense tracking.
  • Xero: Its three plans include online invoicing, bill payment, and bank reconciliation. Xero integrates with Gusto Payroll, and upper-tier packages add project and expense tracking.
  • Zoho Books: Companies with $50,000 per annum can use Zoho Books for free; otherwise, it offers five paid versions. Features include multilingual invoicing, custom reports, and expense and mileage tracking.
  • Oracle NetSuite: This feature-rich platform provides cash, fixed asset, tax, and payment management tools. Oracle NetSuite handles account receivables and payables. It charges an annual license fee and a one-time implementation fee.
  • QuickBooks Online: Track income, expenses, mileage, and tax deductions with QuickBooks Online. It offers receipt capture, general reports, invoicing, and payments.

CO— aims to bring you inspiration from leading respected experts. However, before making any business decision, you should consult a professional who can advise you based on your individual situation.

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