Accounting software benefits small business owners by allowing them to manage accounts receivable and payable, have a clear picture of their profitability, and prepare for tax season. A tiny firm in the field of accounting software can utilize out-of-the-box software without substantial changes. 

The 5 Best Accounting Software for Small Businesses in 2021

As a company expands, its accounting requirements get more complicated, necessitating a bespoke enterprise resource planning (ERP) system.

Accounting software for small businesses  comes in various flavors, each with its features and price tag. In general, the kind of industry and the number of employees is two criteria that might aid a small business owner to select proper accounting software.

For Example

A freelancer would not require the same accounting software capabilities as a restaurant owner.

Before choosing our top five accounting software providers for small businesses, we evaluated nineteen accounting software vendors.

We evaluated pricing at following

1. Simplicity of use
2. Features
3. Integration
4. and scalability.

Following Are Our Five Best Picks

• Best for Micro-Business Owners: Xero 
• Best for Service-Based Businesses: FreshBooks 
• Best Overall: QuickBooks
• QuickBooks Self-Employed is the best software for part-time freelancers. 
• Wave is the best free software.

Overall Best: QuickBooks Online

Of the accounting software for small companies examined, QuickBooks Online is the best overall. Not only do the vast majority of small company accounting experts utilize QuickBooks Online, but there are also a plethora of online training materials and forums where you may obtain help if you need it.

All accounting functions may be accessed from a single dashboard, making bookkeeping more manageable and more efficient.

QuickBooks Online has long been the most popular accounting software among small companies and their bookkeepers and tax preparers. The program is hosted in the cloud and accessed via a web browser or a mobile app.

Are the four membership levels available after the 30-day free trial

• Simple Start ($25 per month)
• Essentials ($40 per month)
• Plus ($70 per month), 
• and Advanced ($150 per month) 

For the first few months, most accountants provide a considerable discount, and some accountants can also offer wholesale rates to small firms.

This software's monthly subscription can increase as a business expands. The mobile app has various customization choices for receiving payments, reviewing reports, capturing a picture of a receipt, and tracking business miles. QuickBooks Payroll completely integrates with QuickBooks for companies seeking a payroll solution.

Advanced capabilities like inventory management, time tracking, extra users, and budgeting are included in each plan. Simple Start will fulfill all of the demands of most service-based small companies. Essentials or plus will provide additional inventory and customization choices for product-based small companies. 

The Advanced subscription is a brand-new service that includes Fathom-powered financial reports. Fathom is a high-end online financial report analysis tool utilized by many prominent corporations across the world.

All options allow for third-party app integration, such as Stripe or PayPal. The app shop for QuickBooks Online organizes all of their applications by function and gives functional samples of each product's benefits.

BEST FOR MICRO-ENTREPRENEUR: Xero

Xero was started in New Zealand in 2006 and currently has over two million customers across the world. In New Zealand, Australia, and the United Kingdom, this accounting software is quite popular. Xero has approximately 3,000 workers and is quickly expanding in the United States.

XERO.COM In our assessment, Xero is the best option for microbusinesses seeking fundamental accounting software. This program offers a straightforward user interface and ultimately connects with a third-party payroll provider. Through Xero's connection with Stripe and GoCardless, businesses can accept payments from consumers online.

Xero has three monthly membership packages and a payroll add-on:

• Early on, at $11 per month
• it grew to $32 per month
• It was established at $62 per month

Gusto provides a full-service payroll solution for an extra $39 per month + $6 per employee. The firm offers a 30-day free trial as well as a two-month 50% discount promotion.

The Early plan restricts usage to five invoices or quotations, five bills, and the reconciliation of 20 bank transactions each month. This restricted plan may be appropriate for a micro-business that does a modest number of high-ticket transactions each month, such as a consultancy or small service provider. 

Invoices, bills, and transactions are limitless in both the Growing and Established subscriptions. The main difference is that the Established plan includes more capabilities like multi-currency, expenditure management, and project costing. Hubdoc, a bill, and receipt capturing tool have in all three subscriptions.

Best For Service-Oriented Companies: FreshBooks

FreshBooks began as a simple invoicing software in Toronto in 2003. More features have been developed over time, and FreshBooks today employs over 500 people. There are four different options to select from, and corporations may save 10% by paying yearly rather than monthly. 

Invoicing is the most critical accounting requirement for most service-based organizations. In comparison to other accounting software, FreshBooks allows users more invoicing customization. Its primary purpose is to send, receive, print, and pay invoices, but it may also do basic bookkeeping for a company.

Service-based firms may use this accounting software to send proposals and invoices, seek deposits, collect client retainers, manage project time, and receive payments.

FreshBooks also provides a monthly discount of 60% for six months. 

The four levels are: 

• Lite ($6/month)
• Plus ($10/month) 
• Premium ($20/month) 
• and Select ($20/month) 

Select is a bespoke service with special pricing.

The number of different clients who can invoice each month is the significant variation between the four programs. It can be invoiced to five clients each month on the Lite plan.

The Plus package allows you to bill up to 50 customers each month. Can invoice Unlimited customers per month on the Premium plan. The Select program likewise doesn't restrict how many clients may be invoiced every month, but it has some unique features. 

The accounting software costs an extra $10 per month for numerous team members. The advanced payment function costs an additional $20 per month and allows users to charge a credit card in real-time or set up a recurring credit card charge for a customer.

Shopify, Gusto, Stripe, G Suite, and other third-party software connections are also accessible. FreshBooks invoices may be fully styled and modified for a professional appearance and feel, a unique feature. FreshBooks is a fantastic tool for planning tasks, delivering estimates and bids, and collecting money from customers. 

Best For Part-Time Contract Workers: QuickBooks

QuickBooks Self-Employed is a program that allows you to keep track of your income and

For part-time freelancers and independent contractors who primarily want to monitor their income and spending for their tax returns, we recommend QuickBooks Self-Employed accounting software. This program is for small company owners who file a Schedule C on their tax returns.

Without utilizing software like this to track company activities, freelancers would have to sift through all of their bank and credit card statements at the end of the year to total up their revenue and spending, which can be time-consuming. QuickBooks Self-Employed will automatically total all business transactions.

QuickBooks Self-Employed is an Intuit solution with a mobile app and a cloud-based web interface. This program was to assist freelancers in staying organized throughout tax season each year. Tracking mileage, categorizing costs, collecting receipts, issuing invoices, and calculating and filing taxes using TurboTax are all features of QuickBooks Self-Employed.

The Self-Employed plan is $15 per month, the Self-Employed Tax Bundle costs $25 per month, and the Self-Employed Live Tax Bundle costs $35 per month. For the first three months, there is a 50% discount. A TurboTax subscription for income tax filing is included in both tax bundles.

WAVE OF THE BEST FREE SOFTWARE: Wave

Wave is a Toronto-based company that was formed in 2010. H&R Block just bought the firm, which employs over 250 people.

Wave is an excellent accounting platform for a service-based small firm that doesn't need to monitor inventory or conduct payroll. Wave's free features will meet all of a freelancer's or service-based company's accounting needs, making it the top free software in our assessment.

Online Accountants  may use Wave to pull the reports they need to compile a company's tax return at the end of the year.

 This free accounting software includes all of the essential accounting functions that most small businesses require, such as income and spending management, financial reporting, invoicing, and receipt scanning.

These functionalities are available both online and through the mobile app. Customer payment processing and payroll are regarded as premium services that incur additional fees, although all online bookkeeping, invoicing, and reporting functions are available for free.

The payment gateway is where Wave makes its money. Wave charges 2.9 percent plus 30 percent plus These costs are slightly higher than those set by other accommodations.

These costs are slightly higher than those associated with alternative accounting software. Wave also charges 1% on every transaction with a $1 minimum cost to handle an ACH payment rather than a credit card. The majority of accounting software does not charge a fee for ACH payment processing. Thus, this is unique to Wave.

As an add-on service, Wave provides two payroll options. The initial plan is $20 per month plus an additional $6 per employee or contractor. Wave will handle payroll and calculate payroll taxes under this plan, but the user will be responsible for manually filling out payroll tax forms and making tax payments. The second option is $35 per month + $6 for each employee or contractor.

What Does Small Business Accounting Software Do?

Accounting software allows customers to link their corporate bank accounts and credit cards with the program, which cuts down on data entry time. Transactions will flow into the accounting software once they have been synchronized, where they may classify into various accounts.

While most accounting software is simple to use, a basic grasp of accounting concepts must generate accurate financial reports. As a result, many firms engage bookkeepers or accountants to keep track of their accounts or evaluate them.

Businesses may view their accounts simultaneously as their bookkeeper or accountant with cloud-based online accounting software.

Accounting software for small businesses has the following basic features:

• Invoicing
• Syncing of bank and credit card accounts
• Accounts receivable
• Receivables (accounts receivable)
• Customers' payments are collected online.
• Preparation of basic financial reports, such as profit and loss statements, balance sheets, and cash flow statements
• Accountants and tax experts have access to the system.

What Is Accounting Software and How Does It Work?

Transactions will show in a queue once a company's bank accounts and credit cards have been synchronized with the accounting software. May categorize into the categories listed on the chart of accounts. Following the selection of the appropriate variety, transactions begin to populate the financial statements of the company.

In seconds, business managers may assess profitability, compare income and costs, verify bank and loan balances, and forecast tax liabilities by running a financial report. Having instant access to this financial data empowers business leaders to make critical decisions.

In addition, several accounting software packages allow for the integration of third-party applications. For example, suppose a business owner employs a point of sale (POS) system to collect sales transactions. In that case, the POS system and accounting software may connect to record particular transactions, sales tax obligations, sales by subcategories, and more.

A time tracking program integrates with accounting software to add labor to a customer invoice in a service-based firm.

How Much Does Small Business Accounting Software Cost?

The monthly cost of small company accounting software ranges from $0 to $150. Basic plans vary from $0 to $40 per month and are an excellent place to begin. A small firm can classify income and costs, send invoices, and create financial reports with a simple strategy. 

Most software is scalable as a firm expands, and n may readily modify the plan to suit new business demands. Businesses can track inventory, create more personalized financial reports, conduct payroll, and select from additional invoicing choices with more sophisticated plans.

How We Picked Small Business Accounting Software

Before deciding on our top five software alternatives, we looked at nineteen accounting software providers that offer specialized products for small businesses. Cost, scalability, simplicity of use, reputation, and accounting features were all taken into mind.

The longer a firm has been operational, the more likely any technology faults have been fixed, ensuring that a company's vital financial data is present properly. The second most essential factor was scalability, since as a company expands, making its accounting demands and moving financial data to new software may be time-consuming. 

Finally, because all users must be able to access and analyze financials simultaneously, simplicity of use and cooperation for business owners, employees, and accountants were considered.