The Ultimate Small Business Accounting Software Guide

By Jamie Bsales | Posted May 01, 2012

Original post on 5/01/2012. Updated on 5/16/2012 – We're making our guide to small business accounting software even more awesome by adding two new products released today by Sage. If you own or manage a small business and need an entry-level option, take a look at the cloud-based Sage One, which specializes in bookkeeping and business management. The Sage 50 line of products is designed for companies that need a beefier accounting solution. You'll find more on each new release in the article below.

Money comes in, money goes out. And more money goes out. Allow that trend to continue for too long and you won’t be in business. That's why a small business accounting solution is critical: You need to be able to see at a glance the health of your finances and quickly identify trends and opportunities. And forget accounting jargon and inscrutable ledger screens. Today’s approachable packages generally hide the nuts-and-bolts and deliver top-level "dashboard" synopses so you don’t need your accountant to tell you where the business stands.

If you are starting a new business, switching to a new accounting platform, or Excel just isn’t cutting it anymore, you have myriad choices. Your first decision, though, is whether to stick with a traditional desktop application, or sign up for one of the newer cloud-based services that let you access your account from any Internet-connected PC.

When deciding between an online or desktop accounting solution, you should consider your access preferences. Desktop solutions can only be accessed on the PC where they reside, while online solutions can be accessed from anywhere -- but if your Internet connection is down, so is your accounting software.

On the plus side, online providers often roll new features into the service on an ongoing basis, so every time you log on you are using the latest version. With desktop software, you have to upgrade to get new features. Of course, buy that desktop package once, and it’s yours to use for the rest of time if you like. With an online service there’s a monthly fee stretching as far as the eye can see, and eventually you’ll pay more than you would have for a one-time purchase of the desktop software.

Intuit QuickBooks calendar

Figure 1: Intuit QuickBooks offers a convenient Calendar view that shows all your tasks and deadlines in one place.

One aspect that is no longer an issue with online services is security. Online services have evolved to a point where security for a financial management program is as safe as online banking with a reputable financial institution. Plus, online providers often host multiple backups of your files; with a desktop option, you are responsible for backing up that critical PC.

Another consideration is the developer’s mobility strategy. It’s great to be able to access an online service from any PC, but what if you tend to run your business life from your smartphone? Be sure to pick a provider that offers a robust mobile app for the mobile device you prefer.

To make your search easier, we’ve collected 10 of our favorite small business accounting programs that run the gamut from simple services aimed at sole proprietors to scalable platforms that can handle your needs as you transition from a small business to a medium one and beyond.

Top 10 Small Business Accounting Number Crunchers

QuickBooks: Synonymous with Small Business Accounting

You can’t talk small business accounting without starting with Intuit QuickBooks. This mature platform has spawned a line of offerings, not to mention an entire ecosystem of add-on products from independent developers that expand the product’s scope. From the impressive -- some might say overwhelming -- array of products in the QuickBooks family and related Intuit services, business owners will want to focus on three core products: QuickBooks Pro 2012, QuickBooks Premier 2012, and QuickBooks Online.

QuickBooks Pro (which starts at $229.95), is tailored for small businesses and delivers a centralized view of customer, vendor and employee information. Naturally, you can track income, sales and expenses to balance your books. The handy customizable Company Snapshot view lets you choose the at-a-glance reports that are most important to your business so you can keep tabs on your business’ financial health. The program also lets you pay bills, print checks, manage payroll and payroll taxes, and create professional-looking invoices and forms.

Unlike some other accounting packages, QuickBooks Pro goes beyond the ledger-related aspects of your business to include some basic contact management and even document management features. For example, you can use QuickBooks’ Lead Center to track sales leads, and if those prospects turn into customers you can move their contact information into the program’s Customer Center with just a click. And the Document Center acts as a central repository for your critical business documents, such as contracts and proposals, so you don’t have to hunt through Windows folders to find them.

New in QuickBooks Pro 2012: the convenient a Calendar View combines your appointments, to-do list items and key business tasks (invoicing customers, paying bills, executing payroll and so on) into one centralized calendar, so you won’t miss an important accounting-related chore because you were focused on your datebook appointments. Even better, the calendar automatically updates based on new transactions -- such as a sale -- entered into QuickBooks, so you can’t forget to add a task.  

QuickBooks Premier (starting at $399.95) includes all the features of QuickBooks Pro, but offers industry-specific reports tailored to particular vertical markets such as contractors, manufacturing and wholesale, retail, professional services and nonprofits. This edition also includes forecasting tools so you can estimate future income and expenses, and adds the Inventory Center feature, which centralizes your inventory data in a single control panel for faster access to inventory data and tasks.

The Power of QuickBooks, No Install Required

While QuickBooks wasn’t the first to the online accounting party, Intuit has caught up in a big way. QuickBooks Online is a cloud-based offering that aims to give you anytime, anywhere access to your financial data from any connected PC or mobile device with a supported browser. As with the desktop product, you can buy additional "seat" licenses so that multiple employees can access the program. Intuit offers three levels of service.

QuickBooks Online Simple Start ($12.95 per month for access for one person plus your accountant) requires essentially no accounting knowledge. It lets you create and manage invoices, track sales and expenses, run any of the 20 customizable reports (such as profit and loss statements, balance sheets, and sales), and more. The searchable Customer Center serves as the "hub" for your customer data and provides access to important customer information such as contact details, outstanding balances and recent transactions.

QuickBooks Online Essentials ($24.95 per month) adds online banking support, 40 customizable reports, a Company Snapshot that provides a real-time, 360-degree view of vital business information and your bottom line, and other features. Most notable is the handy Scorecard, which offers a quick "health check" of how your business is doing vis-a-vis three key ratios: Net Profit (how much money is left after paying everything?), Margin Sales Growth (is the demand for products increasing or decreasing?), and Cash Flow (is there enough money to pay the bills?).

QuickBooks Online charts

Figure 2: Where has all the money gone? The handy charts of QuickBooks Online’s "company snapshot" will show you in graphic detail.

At the top of the food chain is QuickBooks Online Plus ($39.95 per month). Designed for established and expanding businesses, QuickBooks Online Plus offers advanced tools such as purchase orders, class tracking (so you can categorize income and expenses by department, type of business or any category designation you choose), time tracking, 1099 creation, inventory tracking, budgeting and planning, and much more.

Adding to the appeal of both the desktop and the online QuickBooks platforms is QuickBooks Mobile. Available for Apple and Android devices, the app lets you create estimates, manage invoices, view customer details and more -- all from your smartphone or tablet.

The application automatically syncs with QuickBooks, arming you with the most up-to-date information, whether you are in or out of the office. The app is free (and downloadable directly from the Android Market or Apple iTunes App Store), and QuickBooks Online subscribers get free access to their data, while users of the desktop programs pay a small subscription fee.

Sage 50: A Real Peach

One of the oldest names in PC-based accounting, Peachtree, has been put out to pasture. In its place comes Sage 50 Accounting 2013 (available May 2012 in editions ranging from $129 for First Accounting to $569 for Premium Accounting). But worry not, Peachtree fans: The name change is more a branding strategy than a retirement of the product you’ve come to rely on. The new version still delivers the look and functionality you’re accustomed to, while adding new features and services.

This desktop accounting package delivers features such as invoicing (by email or snail mail), cash-flow monitoring, online bill paying, job management and inventory management. Along the way, automatic accounting checks ensure the integrity of your data.

The customizable interface lets you create shortcuts to your most common tasks, access key screens with a click, and easily access your most important business information. Also handy are the various "Centers" -- Business Status Center, Customer Management Center, Vendor Management Center, Inventory Management Center -- that put all information related to those aspects of your business in one place.

New features in this release include more convenient bank reconciliation that can be done on your timetable, not just in sync with an accounting period; support for currency amounts up to $99,999,999,999,999.00 (we should all be so lucky); and enhancements to the Business Intelligence Center, including a new inventory analysis report, a dashboard that shows a graphical summary of key performance indicators (such as profit/loss, top five expenses, top five customers and more) and a Report Designer for creating customer reports.

This release now includes Sage Business Care for all new customers. This service includes free upgrades and updates, unlimited access to customer support, online training, a dedicated account manager and more.

As with other mature platforms, you can expand Sage 50’s functionality with Sage Connected Services. Most notable is the new Mobile Payments Integration, which lets you accept credit card payments on the go with you smartphone; and the integrated Sage E-marketing service, an email marketing tool that includes customizable templates, a survey tool and campaign reports.

You can also pay bills electronically with Sage 50 Online Bill Pay, plus process payroll, e-file taxes, and get tax updates with Sage 50 Payroll Solutions. These add-on services all integrate directly with Sage 50, so you don’t have to worry about double-posting transactions as you might with some third-party services.

Sage One: Integrated Accounting, Contact Management and More

If you prefer a cloud-based solution, you may want to consider the new (so new, it’s still in beta) Sage One service. For a monthly fee of $39 for two administrators and an unlimited number of read-only "collaborators," Sage One combines several tools you need to run your business all in one place: accounting, project management and contact management. Granted, each area is not as full-featured as a best-of-breed product you might buy, but each delivers essential functionality in an integrated, easy-to-use environment.

The site’s main interface features self-explanatory menu choices for Dashboard, Projects, Tasks, Contacts, Money and Reports. The Dashboard is a handy landing page, with frames for Recent Activities, Unpaid Invoices, Tasks and Projects. Each of those areas has a "Create" button so you can create a new invoice, project, and so on quickly.

Naturally, the Dashboard shows your business’ health at-a-glance, and highlights things that need attention. You can manage projects and proposals by tracking estimated and actual revenue/expenses, organize tasks and even assign them to others; employees and contractors (an example of the "collaborators" mentioned above) can see what has been assigned to them and track their time.

Add Another Xero

Another cloud-based offering worth a look is Xero. The service focuses on the finance needs of companies with 0 to 50 employees and lets you see cash flow in real-time anytime, anywhere. Xero aims to shield non-accountants from accountant lingo: Instead of labels such as receivables and payables, it speaks of "money in" and "money out."

The solution provides online accounting, reporting, bank reconciliation, invoicing and bill payments, plus a handy built-in expense reporting tool. Xero can handle payroll chores, letting you track wage expenses and run payroll (or connect with your existing payroll service). Plus, daily bank feeds let you automatically import and code your bank transactions.

Xero's clean, modern design makes using it a pleasure -- and finding what you need easier. The Dashboard shows line graphs for your account balances and bar graphs for money coming in and money going out. This lets you see how the business is faring at a glance.

You can also populate an account "watch list" to keep tabs on important (or troublesome) accounts and see outstanding expense claims on the Dashboard. Also welcome are the add-ons and connectors to popular services that augment Xero’s core functionality to enable inventory management, CRM, point-of-sale tracking and more.

On the go? Log into m.xero.com from any mobile device to view accounts and follow up on outstanding invoices. iPhone and Android phone owners can also create and send invoices, submit expense claims, and add customer notes.

Xero's customized accounting dashboard

Figure 4: Xero’s customizable Dashboard gives you a quick overview of your business finances in real time.

The Xero service comes in three versions. Small -- aimed at independent contractors and small investment property owners -- costs $19 per month. That version supports five accounts payable and accounts receivable invoices per month and reconciliation of up to 20 bank statement lines per month. Medium ($29 per month) provides unlimited invoicing and bank reconciliation. Large ($39 per month) adds support for multiple currencies, with the capability to reconcile foreign currency accounts.

A Fresh Look at FreshBooks

FreshBooks was one of the early entrants in the cloud-services market, and is best known for its online billing service aimed at professional service providers and independent contractors. As the company points out, sending invoices out and tracking payments in is 90 percent of the accounting nut for a small business, and FreshBooks now offers the remaining 10 percent of features required of an entry-level accounting package.

As always, FreshBooks lets you handle billing chores quickly and easily. It can handle recurring invoices (say, billing monthly retainers) automatically, and you can choose to have it follow up with customers and clients when a bill is past due without further input from you. This combination of ease-of-use and automation not only saves you time, it means you’re less likely to put off your billing duties. Invoices go out sooner, and you have a better chance of getting paid faster.

The service also offers time-tracking to log billable hours, the capability to create and manage work estimates, expense tracking (and automated tracking for recurring expenses), and it lets you click a button to generate a report at tax time along with other critical reports that let you get a snapshot of your business.

If you need more functionality, FreshBooks offers integration add-ons for more than 70 software and service offerings including PayPal, ExpenseCloud, Basecamp, MailChimp and Salesforce.com. Since it’s an online service you can access FreshBooks from any Internet-connected computer, and the free mobile app lets you log billable hours, manage clients, send invoices and more straight from your iPhone. A free version of the FreshBooks lets you manage up to three clients, and for $19 a month you can manage up to 25 clients.

Outright

Another online tool aimed at sole proprietors is Outright. Specifically, the service is geared toward any entrepreneurs who file the Schedule C tax form, and Outright customers fall into two main categories: online sellers (product-based businesses) and freelancers (service-based businesses). The service automatically downloads and organizes all of your small business finance data -- bank accounts, credit card statements, eBay and PayPal transactions, FreshBooks entries and more -- into one place.

With all of your sales and expenses data in one location, Outright lets you easily see where you are making money (and not), who your best customers are, and identify your biggest expense and more. The service also automates your small-business accounting tasks by pulling all of your accounts into one place and organizing them intuitively, so you can quickly see your income and expenses. Conveniently, Outright organizes all of your business information into a Schedule C worksheet so that the data is ready to go for tax time with just one click.

The cloud service is available from any Internet-connected computer, and the company currently offers an iPhone app (an Android app is in development). The mobile apps let you see all of your account balances on the go, which lets you make decisions about jobs and purchases on the fly. You can also add and edit transactions from your mobile device.

The base service is free to use -- not just a free trial -- and the company offers Outright Plus ($9.95 per month) that adds advanced features such as annual, quarterly and sales tax tracking and reporting.

Open Source Small Business Accounting Options

Edoceo Imperium: Open Source Online Accounting

Fans of open source software know that the lack of a slick homepage and big marketing budget doesn’t mean the solution isn’t as good as the proprietary offerings. Imperium, from Edoceo Inc., is a freeware solution that delivers basic CRM, job tracking, invoicing and accounting features for small businesses. Imperium aims to keep your critical business and financial data in one place, rather than in "silos" that might or might not offer integration.

Started in 2001, Imperium was initially conceived as a way to track business contacts (clients and vendors), invoices and tasks. Those roots show, as the core of the offering is still its capability to store company, contact and vendor data, along with direct access to complete histories for associated work orders, invoices and notes.

Over time Imperium gained more functionality, and now boasts features like Google Calendar integration, which lets you view your agenda and calendar items and add events; Google Map integration, which lets you click to view client and other addresses; and Gmail integration for sending and receiving messages from within Imperium. You can also read and reply to messages from any IMAP-enabled email account, plus copy messages and attachments to Contact Folders.

On the accounting and bookkeeping front, Imperium delivers a wide range of features. The heart of Imperium is the Dashboard, where you can see active Work Orders, outstanding invoices, to-do list items and more. The navigation panel to the left of the main interface gives quick access to contacts, alerts, transactions, timesheets, your calendar and email, and tasks.

You can have unlimited accounts, and entering data does not require a degree thanks to Imperium’s simple journal-based transaction entry. Plus, the handy Transaction Wizard records transaction patterns for easy "replay" and data entry later.

Imperium; open source small business accounting software

Figure 5: The Dashboard Edoceo Imperium delivers isn’t as slick as the graphical views in some for-pay products, but it does contain a wealth of information.

The Account Statements View offers standard statements like Balance Sheet, Cash Flow, Owners Equity and Income (Profit & Loss) statements. Imperium also lets you print tax forms such as Schedule C, E and many others. The Work Orders feature lets you track parts, time and expenses for projects, be they a single job or a recurring one. You can print checks and create invoices from existing Work Orders or from scratch. You can even remotely share data with your accountant.

The downside to this free solution? You have to be comfortable downloading and installing the server component onto a Linux server running the Apache 2 Web server and a PostgreSQL database. After that, you’ll be able to access Imperium from any browser-equipped PC; but the open-source bias continues here, too, with Firefox and Epiphany being fully supported but browsers such as Internet Explorer listed as "not tested." And tech support comes via community forums.

LedgerSMB Offers Accounting and Custom Apps

Also on the open-source front, LedgerSMB is a freeware platform that focuses on accounting and ERP features for small businesses. You get the basic Accounts Payable, Accounts Receivable and General Ledger functionality, along with inventory and fixed-assets handling. But the real draw for many is the platform’s customizability. With LedgerSMB you can build a platform to suit your business and integrate with other programs thanks to its open architecture and the army of open-source-savvy consultants and developers.

LedgerSMB began in 2006 as a fork of the popular general ledger software package called SQL-Ledger. The accounting features include General Ledger and journal entry to help you manage your accounts, transfer money between them, and get a picture of the general financial health of your business. The sales tools let you track customers, quotes, sales orders and invoices, while the purchasing side lets you track vendors and create purchase orders.

You also get a contact management area to store customer/vendor orders and other business relationships. LedgerSMB also handles cash in and cash out and lets you write checks, track receipts, and reconcile your books with bank statements. There are even inventory-management features suitable for light manufacturing so you can track goods and services. Point-of-sale and reporting tools round out the out-of-the-box functionality.

LedgerSMB open source small business accounting software

Figure 6: LedgerSMB can reconcile your accounting entries with those in your bank statements so you won’t inadvertently miss a transaction.

LedgerSMB offers more deployment flexibility than does Imperium. The LedgerSMB server works on any UNIX-type platform, including Linux, BSD, and Apple's OS X; it has been tested on Windows, although the company states that performance and scalability are stronger on UNIX platforms. The LedgerSMB client can be just about any Web browser, including FireFox, Opera, Chrome and yes, Internet Explorer.

GnuCash

Another popular open-source accounting program is GnuCash. Suitable for personal finances and very small businesses – it's more of a replacement for Quicken than for QuickBooks -- GnuCash runs under GNU/Linux, BSD, Solaris, Mac OS X and Microsoft Windows. And no prior accounting knowledge required here: If you can use a checkbook register you can use GnuCash to track bank accounts, stocks, income and expenses. But unlike your checkbook register, the program is based on professional double-entry accounting principles to ensure balanced books and accurate reports.

When entering data into the register, GnuCash gives you the capability to enter split transactions and mark a transaction as cleared or reconciled. The register also features autofill of entered transactions (handy for recurring entries), and you can display multiple accounts in a single register window and set recurring transactions. The program even supports account reconciliation with your bank statements to spot untracked transactions. A summary bar displays all of the relevant account's balance information.

On the reporting side, GnuCash offers a full complement of standard and customizable reports, including Balance Sheet, Profit & Loss and many others. Other small business accounting features include customer and vendor tracking, job tracking, invoicing, and bill payment, and tax and billing terms. You can even manage payrolls for your employees, and GnuCash gives you a tool to manage your business’ budget so that you can plan your financial strategy.

Jamie Bsales is an award-winning technology writer and editor with more than 18 years of experience covering the latest hardware, software and Internet products and services.

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