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Accounting Money

How to Choose the Best Accounting Software for Your Small Business

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Most entrepreneurs would rather do almost anything instead of keeping their books. Fortunately, today, thanks to accounting software that connects to your bank account and credit cards, you don’t need to spend hours and hours doing data entry to keep everything up to date. Plus, thanks to an explosion of innovation in fintech, your accounting software may be able to do much more than just track income and expenses. It becomes a powerful information platform that can provide insights to grow your business and warning signs to help avert disaster. But that same fintech revolution has also spurred a bewildering array of choices for accounting software.

If you choose the right accounting software, you’ll have a powerful tool to help you take your business wherever you want to go. But if you make the wrong choice, it may be too expensive, too complex, or too limited in features. To help you make the best choice, here are some questions to consider.

How Much Do I Know About Accounting Now?

The saying garbage in, garbage out is especially appropriate for accounting software. To keep your own books, you’ll need at least a rudimentary understanding of accounting. Without this basic knowledge, your records may be of little use as a strategic planning tool. You may be better off outsourcing your accounting to a bookkeeper who can walk you through your reports on a regular basis.

That said, many entry-level software packages are designed to be easy for non-accountants to use. Nearly all include automations that minimize data entry and incorporate invoicing and online payment options for customers. However, some packages have a steeper learning curve along with expanded capabilities. A one-person operation will need something quick and easy to use, while an organization that has an in-house bookkeeper or accounting team won’t have that same limitation.

What Kinds of Transactions Do I Have in My Business?

The nature of your business will determine what kinds of transactions your system will need to handle. A retail location will need POS software, while an e-commerce business will need to handle online transactions. Non-profit organizations need a system that handles fund accounting and donor contributions. For some businesses, industry-specific accounting software may be the best solution.

What Features Do I Need?

A manufacturer with multiple locations will need accounting software with robust inventory management capabilities, while an online seller will need something that easily interfaces with an e-commerce platform like Shopify. A solo entrepreneur may only need the basic reporting required to file an annual tax return, while public companies need sophisticated reporting and planning capabilities.

Beyond the basic functions of financial statements, invoicing, and managing accounts receivable and accounts payable, consider the full list of features you need to run your business, which may include some or all of these:

  • Online payment processing
  • Payroll
  • Purchase orders
  • Planning and budgeting
  • Inventory management
  • Shipping and customer order management
  • Project management

Also, consider what the rest of your tech stack looks like now, and what it may look like in the future. What accounting software — if any — do those apps connect to?

Keep in mind that with an ever-expanding universe of business apps, you may be able to stitch together all the features you need without the need to invest in a high-dollar platform. And as your company grows, the set of tech tools you’ll need will grow. Besides tools that help process customer orders and payments, tools like accounting reconciliation software will help your team get through their monthly work and close the books faster.

What Are My Long-Term Goals for This Business?

A company that’s not going to grow much beyond a sole proprietorship or a side gig has vastly different software needs than a tech startup whose founders are planning on an eventual IPO. For a very small business or a freelancer, you might not need much more than basic financial reporting, the ability to import transactions from a bank feed, and invoicing. Free or nearly free options like Wave or FreshBooks might do the trick.

But if you plan on growing your business well beyond a sole proprietorship, and especially if you have your eye on the IPO prize, you may be better served with a cloud-based ERP like Netsuite or Intacct. These software applications integrate all of the back office functions in one platform to include accounting, cash management, reporting, planning, purchasing, inventory management, and order processing. They are also useful for consolidating the activities of complex businesses with multiple entities and locations.

ERPs tend to be pricey and complex, and may require an advanced understanding of accounting to operate, so this may be overkill when you’re starting out. However, upgrading and migrating your data to a new platform can be messy, expensive, and time-consuming. Investing now in the software you’ll need later can be a better option than switching in the middle of a rapid growth phase.

What Is My Budget?

This may be the most important consideration for cash-strapped small businesses. Fortunately, most software providers follow a SaaS model and provide access to their cloud-based software on a subscription basis with affordable monthly payments. Some, like Wave, offer a free version, while other options may cost as little as $15 per month. ERPs like Netsuite tend to be highly customized to each customer, and may cost more than $1,000 per month.

What Systems Does My Accountant Work With?

Establishing a relationship with a proactive accountant early on can improve the odds that your business will succeed. But you may find it easier to work with your accountant if you choose the accounting software they are most familiar with. A tech-savvy accounting firm that specializes in your industry may even be able to help you set up the right tech stack for your business, and help you keep all the pieces working well together.

Most accounting software offers a free trial version, so feel free to try out a few side-by-side before you commit to one. Do your research, consider these questions, and you’ll find the right option at the right price.

About the Author

Adam-Headshot Adam Zoucha is a CPA-certified dual US/British citizen serving as Managing Director of EMEA for FloQast. He heads a team responsible for all client activity in all of Europe, the Middle East, and Africa.

Prior to joining FloQast, Adam worked in the audit practice at Deloitte and Touche in San Francisco, auditing both private and public clients and seeing the inter-workings of accounting departments meeting deadlines for SOX compliance and internal management. Adam holds a Bachelor’s Degree in Business Entrepreneurship and a Master’s Degree in Accounting from University of Southern California.

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