Best Accounting Software for Small Businesses in 2023

• Accounting software is a computer program created to aid bookkeepers and accountants in recording and reporting their organization’s financial transactions.
• Since different firms have different needs, the features of every accounting software may vary as well. Some firms can choose generic and off-the-shelf accounting software, while others need customized, compound software.
• Accounting software makes it easier for people to perform, understand, and analyze accounting computations.
• If you only have a small office space, you can use accounting software instead of storing data manually. The use of physical data is obsolete as it may take up a lot of space from your small office.
• Accounting software makes it easier to retrieve old accounting data, which is beneficial for internal and external audits.
• Various companies offer accounting software for enterprise including Intuit, SAP, Oracle, and many more.

5 Key benefits of implementing Accounting Software in your business

Accounting professionals know that systems for accounting are a company’s valuable asset. Not only does it significantly improve the efficiency of the finance department; it also provides more important benefits, including:

1. Ensuring financial control

Even though some may not be experienced in accounting, accounting software aids business owners to control their cash flow automatically. The secret here is just a little training. And from there, you will be able to manage all accounting operations using your computer or mobile devices without having to pay for outsourced parties.

2. Saving costs

Since accounting software automates main computations and administrative processes, you don’t have to outsource an external party to handle your financial tasks. The accounts management software alone can take control of your revenue framework and accounting duties. Not to mention, accounting software can reduce costs related to printing and distributing documentation, because all data are already stored in the database.

3. Increasing data accuracy

One of the important benefits of good accounting software is it minimizes potential human errors during data entry. We all know that manual data entry is more prone to errors which can lead to crises. At its worst, these crises could shorten and damage your business life span. But with a good accounting management solution, you can greatly prevent these issues from happening.

4. Improving decision making

Every business is facing decision-making issues every day — and financial management decisions is one of them. One of the main advantages of accounting systems is it automates your solutions. From there, it can provide you with numbers and statistics that can help you figure out where to cut expenses or where to spend more. Since it provides you a clear overview of your financial state, it will be easier to develop smart strategies and allocate resources for your next decision-making duties.

5. Improving financial data security

We know that financial data is confidential information. It must be strictly protected so that it won’t get stolen and be used for malicious attacks. With accounting software, you are assured that your financial data remains safe because it is stored in a centralized system protected by firewalls. Only you and those who are granted access rights can see the confidential data.

How do you choose the Best Accounting Software?

Business accounting software offers a lot of benefits — from the reduction of human error to ensuring financial control. But with so many options available in the market, it may be difficult to find the right accounting software to suit your business needs. To help you find the best accounting system for your firm, we listed down five tips for you.

1. Consider two things: your needs and your accounting skills.

When choosing the best payroll software from the list we’ve provided earlier, your best bet is to look at how your business operates. Obviously, if you make a million dollars a year, you have different accounting needs than that of a company that makes less than a hundred thousand dollars a year.

No matter what your needs are,  you have a variety of options when it comes to accounting system for business. Accounting platforms offer all sorts of packages depending on the size of your business.

At the same time, you must also consider purchasing specialized accounting and finance software based on your business niche. For instance, there are accounting applications customized for manufacturing businesses, for restaurants, as well as many other types of commercial businesses.

If your business is an accounting service, there are cloud software for accountants that you can use. One of them is Quickbooks for accounting professionals.

Make sure that you do thorough research beforehand, as the software you choose will directly impact your revenue management. And while accounting software makes bookkeeping tasks easier, you still need to have a certain amount of financial literacy.

Spend some time studying basic financial tasks. After all, no matter how sophisticated your software may be, it is still only a tool. The users should still have a background regarding the financial processes.

2. Consider buying web-based accounting software.

While cloud computing becomes more prominent in today’s industry, it is important not to turn down the pool of accounting SaaS software available in the market.

Accounting cloud is jam-packed with a variety of benefits. For one, you can access your data from any location as long as you have a strong internet connection. And you don’t even have to purchase software licenses to run them too. You and your IT staff don’t even have to worry about updating the software — upgrades and patches are done on the back end or server end.

Not to mention, on line accounting software packages are flexible. You can run them using your tablet, laptop, or even smartphone. Furthermore, your records are safe and secure and far from the physical location of your business. With that being said, they are safe from any event of a local disaster or any other destructive event.

Here’s another twist with web based accounting software: some cloud-based business management software can be integrated with your accounting software. So if you are looking for software that provides integration with other business applications, you may opt for a cloud based financial software.

3. Always keep your budget in mind

No matter how small your budget is, there’s always an application perfect for your budget. Some general applications for a broader user base may even be downloaded for free or bought at a lower price.

But keep in mind that the more specialized our software is, the more expensive it gets. That’s because the user base for customized software is relatively small. If you are looking for custom-made software for finance and accounting, you must prepare your budget (and yourself) to pay a premium.

4. Look closely at the add-on features

Look for software that accepts add-on features. Add-ons bring extra functionalities to your accounting software. For instance, they may allow you to access your software remotely, make payments online, and integrate your software with your eCommerce system. Additionally, there are available add-ons that make accounting applications compatible with tax applications.

5. Ask your accountant to assist with the decision-making

Of course, your accountant should have a say in what accounting software your business will be using for the transactions. Your accountant may even prefer an application that is compatible with the one they use to manage accounting software.

While every business is different, your accountant can help you choose what’s best for your particular enterprise. After all, they are in the best position to offer an educated opinion about accounting-related decisions.

Whichever accounting software you choose, you aren’t committed to it for life. In the future, you may have to upgrade to much better and suitable software. Still, don’t take this decision lightly. At the end of the day, nobody wants to commit to one application, only to realize that they have to switch to a new one after a few months.

What are some accounting best practices?

Sure, your accounting software is there to assist you with your accounting needs and financial management. But as an owner, you are responsible for knowing how the processes work within the system. Learning accounting is important for business owners because it is what enables them to make good business decisions.

Even if you don’t have an accounting degree, you don’t have to be left in dark about your company’s cash flow situation. Using these nine accounting practices, you will be able to put your bookkeeping on the right track.

1. Determine your accounting method

Cash and accrual are the two methods in accounting. Accrual accounting is a method where a business puts transactions on the books immediately after a transaction is made. On the other hand, cash accounting is when a business records transactions once they received the payment. The most common of the two methods is cash accounting. However, each method still has its own advantages and disadvantages.

While cash accounting is more straightforward and better for cash flow management, it provides less clarity than that of accrual accounting. Accrual accounting provides a clearer view of your financial state because your expenses related to an item are recorded simultaneously as well as the revenue. But most of the time, accrual accounting can be deceiving and can be more complicated. The larger and more complicated the business is, the more you need accrual accounting. That’s because it provides business owners with snapshots that can be used for better decision-making tools.

2. Track all expenses

If you’re just starting out, it is easier to track your expenses and accounts payable. You may even simply list it down on a spreadsheet file. But as your business grows, there’s a higher chance that you will encounter more complex accounting methods. For starters, you have to include all the line items on your spreadsheet:

• Supplier/biller’s name
• Account number
• Expense type
• Date when the invoice was received
• Amount owed

It is also worth noting that you have to keep all receipts, credit card statements, and incoming bills in your accounting software management. Doing this will ensure that you’re properly managing your cash flow.

3. Keep business finances separate

Business owners must not give in to the temptation of mingling their finances with personal bookkeeping. This is especially common for very small businesses that are just starting out.

If you want a clear picture of your business finances, you need to keep your personal and business finances separate. Once you do this, it will be easier for you to track your cash flow, maintain accurate records for tax filing, and forecast financial performance in the long run.

At the same time, doing this will serve as proof of your business performance for your lender or investor. When business structures (like LLCs or corporations) mingle their business and personal finances, it could highly result in personal liability that you were seeking to avoid in the first place.

4. Monitor and maintain accurate records

Here’s the thing: one of the most common reasons why businesses fail is because they don’t keep accurate and updated accounting records. We want to highlight here the importance of keeping records; these records will serve as a guide to tax filing and decision-making.

Furthermore, records serve as proof for lenders or investors when deciding whether they should invest in a business. Even the IRS recommends that you use a journal to record every transaction and a ledger to record the totals from the journal. It is worth noting that you organized both your journal and ledger into different accounts.

5. Implement monthly accounting reviews

Always make time for monthly reviews of your accounts payable and receivable. This can be done by you– the business owner– or your accountant. Additionally, make sure to check your invoices to remind yourself of what has been sent or needs to be sent. Even the National Federation of Independent Businesses (NFIB) suggests that you should balance your book once a month at the very least. The more frequently you handle your accounting tasks, the less difficult they become.

6. Limit accounts receivable

Unfortunately, policies like weak accounts receivable happen frequently — even though no company intends to adopt them. Some companies don’t follow up with customers when accounts are past due. Instead, they override credit which results in bad debt or failure to keep accurate billing records. The sad part here is the cost of such failures is potentially high.  The worst thing that could happen is your business might wind up having to go into debt at a high APR due to poor accounts receivable management.

There are different strategies you can adapt to limit accounts receivable issues. First, you must find ways to take delivery upon payment of your services. Make sure to set clear and consistent credit policies, and require an initial payment from customers upfront. Most importantly, always check if your billing is accurate and apply payments to the right invoice the day they’re received.

7. Automate when possible

Automation is very prominent in this modern world of business. Just because owners should stay on top of the numbers, doesn’t mean you have to waste all your time on bookkeeping tasks, like invoice and payroll management. Choosing the best accounting software like QuickBooks and Sage can majorly save you time by automating most of the processes for you.

8. Backup financial records

Don’t forget to back up all the information, whether it’s stored on the cloud or on a paper spreadsheet. This is done to protect them from obvious physical threats as well as cyberattacks– like ransomware.

9. Consider hiring professional help

As your business progresses, there will come a time when you need to hire a professional bookkeeper or consult with a CPA (you may also do both). This is beneficial aside from the fact that it simply saves time. Your professional accountant will serve as your adviser and consultant, especially in times when you have to determine the best financial practices for your business.

On the final note, getting professional guidance doesn’t mean you’re off the hook. You are still held responsible for the financial details of your company.

What are the 4 basic phases of accounting?

Basically, there are four phases of accounting: recording, classifying, summarizing, and interpreting accounting data. While communication is not formally considered as one of the accounting phases, it is still considered as a crucial step. Communication is important to deliver the accounting information to appropriate parties after analyzing. Additionally, accounting reports should be prepared and distributed. It needs to include all the basic income statement, balance sheet, and additional information, like accounting ratios, diagrams, graphs, and funds flow statements.

1. Recording

Also known as bookkeeping, recording is the first basic phase of accounting. In this phase, the bookkeeper systematically and chronologically records all financial transactions in their appropriate books or databases. Accounting recorders are the documents and books used when preparing financial statements. It includes all the records of assets, liabilities, ledgers, journals, and all the supporting documents.

2. Classifying

In this phase, the bookkeeper has to sort and group similar items under the designated category or account. Classifying uses systematic analysis of recorded data where the transactions are grouped together. For instance, “employee benefits” might be a category that bookkeepers use when classifying expenses for employee compensation. Ledger is referred to as the book in which you record all the classifications.

3. Summarizing

From the term itself, the summarizing phase is when you summarize the data after each accounting period — it could be monthly, quarterly, or yearly. When summarizing data, it is important that they are presented in a clear manner because it is used by both external and internal users. Graphs and other visual elements are used to summarize and complement the text data.

4. Interpreting

The interpreting phase is relative to analyzing financial data. It is a critical tool used by data analysts, business owners, and accountants for decision making. This final phase is where you interpret the recorded data in such a way where end-users can make meaningful judgments regarding the financial condition of a business. Moreover, interpreted data is used to prepare future plans, forecast future data, and create policies to execute financial plans.

Accounting FAQ

Q: How does accounting software work?

A: Simply put, your accounting software records all transactions and tracks different accounting metrics. If you want your software to automatically receive information from your bank, you can do so by setting it up. Or, you may also use the most basic version of accounting software which requires manual input of data. But for small business owners, we encourage you to use software that automatically receives information from your bank and credit card provider to help you track your business finances.

Furthermore, most software solutions store information in the cloud. Rest assured that your data will always be secured and safe when instances like computer crashes or technical issues happen.

Q: Which small business accounting system is best?

A: Based on our research, it’s safe to conclude that the top software for accounting is QuickBooks Online. It is the best small business accounting system out there. But of course, it still depends on your specific needs — there might be a better fit or better value for your business. For instance, if you work with clients on a project basis, FreshBooks might be the best choice because it provides project management features. You may want to look at our best picks above for our specific recommendations for various business sizes and necessities.

Q: What do you need from your accounting software?

A: Overall, you need accounting software that keeps track of your cash inflow and outflow using accounts payable and accounts receivable features. However, some software solutions don’t include accounts payable and accounts receivable information.

Furthermore, the accounting software must be connected to your bank accounts and must automatically download your transaction.

If your business is a service provider, you may need project management features. Otherwise, if your business sells products, you may want to opt for an accounting solution with inventory management functionalities.

Lastly, look for a software solution that can provide you greater advantages by integrating itself with other business applications, like point-of-sale system, email marketing software apps, and customer relationship management.

Q: Do you need online bookkeeping software instead of accounting software?

A: Oftentimes, “online bookkeeping software” is mistaken for “online accounting software,” but they’re not the same. All the best online accounting programs have bookkeeping features that authorize you to record debit and credit transactions. It also permits you to run reports and analyze your financial status. The technique here is to look for more than just a bookkeeping solution; remember that your accounting software should be detailed and must generate invoices and comprehensive reports.

Q: Should your accounting software also act as an invoice generator?

A: Depending on your business. If you need to generate a lot of invoices for your clients and customers, we highly recommend that you look for a particular accounting application with invoice functionalities. We suggest that you look for software that has invoice generators like Freshbooks.

Q: What does an online accounting service do?

A: Online accounting service is a saving grace for busy business owners. It performs a wide range of tasks, including bookkeeping duties. Such bookkeeping duties include entering and classifying transactions, reconciling accounts, generating reports, and financial statements which you can bring to your CPA during tax time. It also provides payroll and tax preparation services. Some people, like virtual controllers, CPAs, and CFOs, may supply high-level accounting services, like internal audits and financial planning.

Q: What are the types of accounting software?

A: 1) Spreadsheets – like Google Spreadsheet or Microsoft Excel. 2) Commercially-available software – these are the popular accounting software we mentioned above. 3) Enterprise resource planning software (ERP) – ERP software integrates information from all parts of a business into a single database. 4) Custom accounting software – This software is custom developed for an organization.

Q: What is the most used accounting software?

A: QuickBooks is one of the most used accounting software in the market. Quickbooks is an accounting software in USA. It is a widely used software for accounting professionals and small businesses.