Best Accounting Software for Small Businesses of March 2023

Here are NerdWallet’s picks for the best small-business accounting software and why we like them, plus tips on how to choose the right software for your business’s specific needs.

Accounting software helps entrepreneurs keep track of how money moves into and out of their business, and provides a detailed overview of the business’s financial health. The best accounting software for small businesses should be easy to use, include strong reporting and invoicing capabilities and integrate with your payroll software and/or point-of-sale system at the very least. Also consider cost, ease of sharing with accountants, customer support and scalability.

As far as locally installed desktop accounting software goes, QuickBooks Enterprise is one of the most feature-rich. While QuickBooks Online and other cloud-based products are typically easier to use, they don’t usually come with industry-specific features like QuickBooks Enterprise does. These include specialized reporting for construction companies, nonprofits, manufacturers, wholesalers and distributors.

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Sage Accounting, also known as Sage Business Cloud Accounting, offers two affordably priced plans that cover the basics for small business with up to 10 employees. And unlike Wave Accounting, another budget software product, it includes audit trails and some third-party integrations. As an added bonus, the more expensive $25/month plan accommodates unlimited users and lets you forecast cash flow.

Unlike some “freemium” software products, Wave doesn’t put out a bare-bones free product as bait, then load it down with costly upgrades. The free accounting software lets you add unlimited collaborators, along with unlimited bank and credit card connections. It can be a simple solution for small, service-based businesses.

FreshBooks is a simple and affordable option for freelancers and very small businesses that don’t require many users and prioritize being able to operate on the go via mobile app. It’s an especially inexpensive choice for those who can work within lower-tier plans’ billable client limits, and all plans include time tracking.

Zoho Books packs an impressive collection of features and capabilities for an affordable price, and higher-tier plans let users automate workflows and track project profitability. It’s an especially good choice for users that already use the company’s other in-house apps.

Xero allows unlimited users at every subscription tier, a valuable feature for businesses where several users may need at least limited access to the system to run reports or analyze performance. In terms of functionality and features, Xero is one of QuickBooks Online’s biggest competitors and has a more customizable dashboard that lets each user rearrange or hide panels.

QuickBooks Online is an industry leader in the accounting field, thanks to its strong feature set, scalability and ability to accommodate small businesses with more complex financial needs. With millions of users worldwide, your accountant will likely be familiar with it.

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How does accounting software work?

Accounting software helps small-business owners keep track of where their business’s money is coming from and going to. It also ensures that the business’s financial data is accurate and up to date, which is especially important come tax season. Just as importantly, software makes accounting tasks much easier to understand. Without it, you’d have to debit one account and credit another for every transaction — many products will do this double-entry accounting behind the scenes for you.

Most accounting software goes beyond basic bookkeeping tasks (like recording transactions and reconciling accounts) with additional built-in modules for invoicing, bill pay, inventory management and reporting, among other functions. The more your accounting software becomes a one-stop shop for these financial chores, the fewer integrations you need to consider.

How to choose accounting software

Think about accessibility

Most accounting products today are cloud-based and can be accessed through any device with an internet connection. This generally allows for easier collaboration with accountants and seamless integration with other business software . Some accounting products are still desktop-run and can only be accessed from a single computer.

Ask your accountant what accounting software they use

If you’re working with an outside bookkeeper or accountant , find out which accounting software they work with. QuickBooks is almost ubiquitous, but other companies, such as Xero, are making inroads as well.

Take scalability into account

You want accounting software that can grow with your business. If you’re planning to scale, look for options that come with enough users and can be upgraded to serve a larger organization with more complicated financials.

Make sure subscription costs fit your budget

Subscription fees for most accounting software start at under $20, but add-ons could increase the price. See NerdWallet’s picks for best free accounting products if you run a micro business or are self-employed and want to keep costs down.

Decide which features are most important to your business

If inventory management is a priority, look for a system that comes with useful tracking features or integrates with your point-of-sale system. Solid invoicing features and reporting are typically must-haves. Some businesses, like nonprofits and construction companies, might also require industry-specific features or reports. If you’re not sure whether a product fits your business’s needs, try out the free trial offered by most providers.

What accounting software features do you need?

Reporting

Most businesses will need accounting software with basic report templates — think a profit and loss statement and balance sheet , along with reports on aged receivables and sales tax. Some business owners might also want to run reports on customer balance, accounts payable aging, vendor balance and sales by product or service. Consider the types of reports your company needs, as well as customization options and the ability to filter by date and tag.

Invoicing

Invoicing features are key, especially for service-based businesses. You should be able to customize the invoice with your logo, easily turn estimates into invoices, add terms and due dates, and accept online payments . Some products’ plans cap the number of clients you can invoice, which could force you into a higher pricing tier. If you work with dozens of clients and send a high volume of invoices each month, this is important to consider. Another invoicing feature to look for is automatic payment reminders to save you the admin of tracking down unpaid invoices. While it might not be as convenient as having invoicing features built into your accounting system, third-party invoicing software is also available.

Mobile app

Accounting apps help you access your financial data quickly and easily, even if you’re away from a computer. A capable app can also allow you to invoice a customer from anywhere. If you drive to different project sites, built-in mileage tracking can help you claim deductions come tax season . Other conveniences include being able to view reports and photograph receipts so they’re automatically turned into expenses.

Extras

Basics aside, some businesses might benefit from inventory management features, the ability to manage multiple businesses from one account, industry-specific reports, project tracking and transaction tracking tags.

What is the best accounting software for small business?

QuickBooks Online is NerdWallet’s pick for best overall accounting software, but that doesn’t mean it’s the right fit for every business. Wave might be sufficient for very small businesses, and people who already use Zoho business apps might find that Zoho Books is the most convenient option. Xero and Sage Accounting are both good deals for businesses that need to grant software access to more than a handful of users. While cloud-based software is usually more user-friendly than desktop software, QuickBooks Enterprise is an option for business owners who don’t want their data in the cloud. Consider which features matter most to you, and which user interfaces are easiest for you to navigate.

Is QuickBooks for small businesses worth it?

QuickBooks Online scores especially high for its key feature set — including reporting, invoicing and inventory management — as well as its advanced features like project tracking and transaction tracking. Its popularity makes it easy to share with accountants, and with four plan offerings, small businesses have room to scale up. Other QuickBooks products include QuickBooks Desktop options and integrated payroll solutions.

However, QuickBooks prices can be steep. Freelancers and contractors are good candidates for products, like FreshBooks and Wave, that cost less per month. Other companies, like Zoho Books, offer free accounting software plans, too.

When to switch accounting software

Ideally, your accounting software will make your day-to-day routine easier through automation. When it regularly causes headaches or requires plan upgrades that break your budget, it might be time to consider switching to a new product. Alternatively, if you’re overwhelmed by the workload as your business grows, you could try hiring an online bookkeeping service to take some of those tasks off your plate.