What is Accounting Software?

Accounting software automates tasks such as invoicing, accounts payable, accounts receivable, income tracking, and expense management. For small businesses, this type of software consolidates financial data into a single platform, simplifying data sharing both within teams and externally. It also helps prevent manual data entry errors and reduces the need for duplicate entries.

The best accounting software for small businesses typically falls into two categories: desktop accounting software or online accounting software. Desktop accounting software is installed directly on your company’s computers, while online accounting software, also known as software-as-a-service (SaaS), operates through the cloud, offering the same functionalities but with the added benefit of remote access.

What Are the Must-Have Features for Your Accounting Software?

At the very least, your accounting software should include essential bookkeeping functions such as invoicing, accounts payable, accounts receivable, income tracking, and expense management. However, the best accounting software for small businesses goes beyond these basics. Below are some advanced features to look for:

Tax integration: Your accounting software should be capable of generating balance sheets, profit and loss reports, and other customized documents necessary for tax filing. The best bookkeeping software also allows you to photograph and store receipts using a mobile device, ensuring everything is securely organized for tax season.

Payroll management: Payroll features are typically not included in accounting software but can be integrated with third-party payroll and HR systems. Once configured, your software will handle payroll calculations, tax filings, same-day direct deposits, and employee benefits management.

Business insights: Online accounting software collects extensive data about your business, so why not leverage that information? The top programs provide business insights and intelligence through intuitive reports and dashboards, helping you make data-driven decisions.

Custom invoices and receipts: Keep in mind that every interaction with customers and service providers is a chance to reinforce your brand. Some accounting software allows you to create custom invoices and receipts, making your brand more memorable.

Multi-user access: Depending on your business size, you may need to provide access to multiple users. The best accounting software offers plans that accommodate multiple users, including options for your accountant.

Support for mobile: You never know when you might need to capture or access data on the go. Most leading accounting software providers offer free apps for both iOS and Android devices.

Unlimited cloud storage: One of the key advantages of online accounting software is that all your data is stored in the cloud, offering virtually unlimited storage capacity.

Free support: When issues arise, it’s reassuring to know your software provider is there to help. Many premium plans include a dedicated account team to provide you with personalized support.

Scalability: Accounting software is ideal for rapidly growing businesses where manual data entry is no longer sufficient. As your business expands, you’ll need software that provides scalable accounting solutions to keep up with your growth.

User-friendly: Last but not least, user-friendliness is essential. Your accounting and invoicing software should be simple enough for anyone on your team to learn and use effectively within a few hours.

How Much Should You Expect to Pay for Accounting Software?

As with most software-as-a-service models, the cost of online accounting software largely depends on the features you require and the number of users. Pricing can vary significantly: some providers offer a fixed monthly rate that includes all or most features, while others use tiered pricing that increases as additional features are added.

Based on our research of the leading providers, accounting software can range from $12 to $300 per month. The most affordable plans typically cover basic accounting functions like income and expense tracking, invoicing, payment processing, cash flow management, sales tracking, and sales tax calculation. Payroll integration is usually an additional cost, either included in higher-tier plans or available as an add-on for $4 to $10 per employee per month. Advanced features, such as income tax return preparation, often come at an extra cost.

What Are the Best Free Accounting Software?

Believe it or not, free accounting software does exist—and we’re not just referring to Excel or Google Sheets. Some of the most well-known names in this space include Wave, ZipBooks, and SlickPie. These web-based accounting programs offer essential functions like managing accounts receivable, tracking expenses, and generating profit and loss statements as well as balance sheets.

Free accounting software is an excellent stepping stone for sole proprietors and very small businesses seeking an upgrade from spreadsheet programs like Excel and Google Sheets. These tools allow you to perform the same tasks that you could accomplish with Excel or Google Sheets—without the need to spend time programming all the necessary formulas yourself.

While free software is useful for basic tasks, it doesn’t come close to the features provided by paid accounting software. If you need capabilities like managing payroll, tracking inventory, or handling tax preparation, you’ll need to invest in a paid solution.

Conclusion

If you can afford to automate business tasks, it’s a smart investment. While handling accounting manually might seem cheaper at first, it quickly becomes time-consuming and increases the risk of costly errors. The best accounting software scales with your business, allowing you to start by automating core accounting tasks and gradually adding more complex functions like payroll and tax reporting as needed. Once you start using small business accounting software, you’ll likely wonder why you ever managed things manually.