Last Updated on February 24, 2024
There’s a common misconception among many entrepreneurs that small businesses can thrive without some form of accounting. Nothing can be further from the truth.
Every business, regardless of its scale or scope, requires accounting. Whether you operate a multinational company raking in billions in annual revenue or a startup still absorbing losses, you’ll invariably require an accountant to be able to streamline your books.
However, hiring an accountant may not be in your best interest. This is especially true for the self-employed or small and medium enterprises (SMEs) still struggling to break big. Remember that accountants typically earn between $60,000 and $100,000 annually. It would make no economic sense to part with such a colossal amount of money when your returns are considerably low. And that’s where accounting software come in.
In this article, we delve deep into what accounting software constitute and their core benefits. We’ll also highlight some of the factors to consider while shopping for these services and recommend a few software for the self-employed.
What Is Accounting Software?
Accounting software refers to a service, usually web-based or application-based, that manages and records the day-to-day financial transactions of a business or organization. Some of the core business elements managed by an accounting software include fixed assets, revenues & expenses, accounts receivable & payable, and sub-ledger accounting.
Accounting software are nearly as reliable as human accountants, sometimes even more effective. Depending on the tool you opt for, you can enjoy real-time reporting and analytics, giving you unhindered access to your financial position at different points in time.
Benefits of Accounting Software
1. General Ledger (GL) and Sub-ledger Management
The design of most accounting software is such that they allow journal entries as well as automated sub-ledger entries to populate the general ledger automatically. In consequence, business owners can access their financial data in real time.
2. Cash Management
The process of reconciling cash transactions to bank statements can prove quite long and tedious for small business owners. This is another area where you may benefit immensely from accounting software.
The right accounting software will automatically reconcile your cash transactions with bank statements, thereby providing accurate reporting on your cash positions. Such capabilities can be instrumental in helping you make prudent cash decisions, such as investments, payments, and borrowing.
3. Asset Management
Cash isn’t the only asset-related element you can manage using accounting software. These tools also come with management capabilities for fixed assets.
Accounting software can offer useful insights that give you control over the entire financial cycle of your business assets. They can enable you to determine when to make important procurements or sales, and whether an asset is appreciating or depreciating.
4. Accounts Payable (AP) and Accounts Receivables (AR)
Accounts payable is an accounting term for short-term liabilities. Examples include raw materials purchased from suppliers or money owed to creditors. Accounts receivables, on the other hand, are funds your business expects to receive from customers and partners. Notable examples of accounts receivables include proceeds from the sale of goods and services.
Most accounting software are designed to manage both APs and ARs. This reporting can help you reduce redundancy in your financial records and enable you to draft a robust budget. It also reduces the burden of auditing while offering integrations with various banking systems.
5. Revenue Management
Efficient cash and asset management translates into better revenue management. The fact that many accounting solutions can help manage your current and fixed asset transactions speaks to their capability in revenue management.
With the right accounting software, you can predict revenue rises or dips depending on the current financial position of your business.
6. Collections Management
Collection management services entail all functions involved in the identification, acquisition, storage, and maintenance of business assets. It’s another area where accounting software have proven remarkably useful.
But accounting solutions not only help in managing physical assets. They can also be crucial in collections involving your customers and partners.
7. Risk Management
Every business operates with some form of risk. Certain risks may be foreseeable and avoidable. But others can strike when least expected.
Having the right accounting software can be a proactive way to cushion your business from any adverse impacts in the event a risk occurs. Some of these tools are engineered with powerful fraud detection and audit control features that can help detect potential financial risks and flag them down before they hit home.
8. Reporting & Analytics
In addition to recording the financial transactions relating to your business, accounting software can also report on certain key performance indicators (KPIs).
Using these solutions, you can be able to analyze your business across various parameters, such as current & quick ratio, debt-to-equity ratio, and inventory turnover. And the best part is that such reporting typically happens in real time.
Features To Look For In Accounting Software
All accounting software are not made equal. These solutions differ considerably in their core features. However, the best accounting software should have most of the following features;
a) User-friendliness
Accounting software can range from basic to highly sophisticated. Unless you’re an accountant by profession, it would be best to consider a tool that comes with a user-friendly interface.
The dashboard should be neat and clean. It should also come embedded with intuitive features and charts that clearly reveal your company’s financial position.
b) Web-based Applications
Most accounting software are internet-based. While some of these tools come with downloadable apps, it’s always prudent to insist on web-based ones.
A web-based accounting solution offers real-time analytics, allowing you to keep tabs on your business on the move. You can make purchases, settle invoices, and collaborate with your partners remotely. Such capabilities can be particularly beneficial for freelancers and digital nomads.
c) Data Security
Accounting software needs to be hacker-proof. There are no two ways about it.
Insist on an online accounting tool that lets you save your sensitive financial transactions on external servers. The last thing you want is to have your financial data slip into the hands of malicious third-party entities.
d) Multi-currency Transactions
Whether you’re an SME or multinational, it’s possible to have clients spread across borders. Therefore, it would be best to consider an accounting solution that supports transactions in multiple currencies.
The tool must also come with an in-built calculator that handles foreign exchange rates. And needless to mention, it needs to be configured to report all transactions in your base currency.
e) Multi-user Access
Many accounting software support multi-user access. In other words, these tools allow you to invite collaborators into the system.
Despite being self-employed, there may be times when you need assistance managing your books. Besides, you can invite your employees to use the system for time tracking and invoice payments. That underscores the importance of choosing accounting solutions that come with multi-user access.
f) Seamless Integration
The best accounting software should integrate seamlessly with your other productivity applications. This is especially important if you undertake most of your transactions online.
Poorly-integrating software can hamper the smooth running of your business. It can also cause unnecessary time and resource wastage.
g) Customer Support
Navigating new accounting software requires an extra helping hand. Whether you’re an accountant or not, you’ll need to contact the tool’s support from time to time.
So, it’s important to select solutions that offer 24/7 customer support. That’s regardless of your time zone.
h) Pricing
Accounting software may be way more affordable than hiring human accountants. But these services don’t come cheap.
So, it’s important to strike a perfect balance between reliability and affordability. You want a service that offers most of the above features without costing exorbitantly high.
It’s also worth noting that, although some companies may not indicate it, most accounting software charge different rates depending on whether you make monthly or one-time annual payments.
10 Best Accounting Software for the Self-employed
1. Quickbooks Online
Pricing: Plans start from €4.80/month
Quickbooks Online is arguably the best accounting software for self-employed entrepreneurs and SMEs. In fact, most small business accounting professionals prefer this tool.
Quickbooks Online maintains one dashboard where you can conveniently access all the financial transactions relating to your business at any point in time. The dashboard also contains analytics that you can leverage to gauge your business’ performance over a given duration.
As the name implies, Quickbooks Online is mainly a cloud-based service. Therefore, you can safely access your accounting data on the go. However, the tool also comes with a downloadable app.
2. FreshBooks
Pricing: Plans start from $1.50/month
FreshBooks was designed exclusively for small business owners with zero or basic accounting knowledge. This tool promises to help you undertake the simplest accounting tasks, including invoice writing. Its custom invoicing capabilities allow you to send branded invoices to your customers, thereby enhancing your brand’s appeal.
FreshBooks supports seamless bank connectivity and integrates with over 100 apps. It was one of the first software to incorporate an Automated Clearing House (ACH) system that makes it incredibly easy to receive online payments.
There’s live support to address your queries at any time of day. And with plans starting from rock-bottom rates of $1.50/month, what else could you possibly want in an accounting tool?
3. Zoho Books
Pricing: Paid plans start from $9/month; a free plan also available
Zoho Books is a perfect fit for self-employed entrepreneurs who deal in goods (as opposed to services) and need to manage their inventory. Much like FreshBooks, Zoho Books is user-friendly and takes care of all types of accounting responsibilities.
Zoho Books offers bank connectivity and reconciliation. As already indicated, this can be a useful feature in reconciling your cash transactions to bank statements.
Zoho Books works on all devices and operating systems, including both Android and iOS devices. Its other noteworthy features include expense tracking, automated workflows, and custom invoicing.
4. Xero
Pricing: Plans start from $3.25/month
Xero is another popular accounting software for small businesses that pretty much needs no introduction. The tool boasts a clean and tidy interface, with all the important features located within first glance.
Xero stands out for its integrations with numerous third-party applications. These include payment services like Stripe and GoCardless.
Being a cloud-based service, you can use Xero with the peace of mind knowing that your financial data will not slip into the hands of malicious individuals. Besides, the solution has multi-user capabilities. This feature lets you determine who can access the service and what they can do in it.
5. Wave
Pricing: Paid plans start from $20/month; free plans also available
Every small business owner deserves accounting software that gets the job done without breaking the bank. And that’s precisely what you get with Wave.
This accounting software comes with multiple plans. Three of its plans are 100% free and let you enjoy unlimited book management, invoicing, and banking.
For more advanced accounting services, you’ll need to upgrade to any of Wave’s two payment plans. The most affordable of the premium packages costs either $20/month or $40/month depending on whether your business is in a self-service state or tax-service state. Each option comes with multiple add-on features, including unhindered access to tax forms and documents, employee portal access, and analytics.
6. Sage 50cloud
Pricing: Plans start from $346.80/year
The one standout feature of Sage 50cloud is its ease of integration with Microsoft 365 enterprise software. Using this accounting tool gives you convenient access to all the productivity apps that come with Microsoft 365, including Word, Excel, PowerPoint, Teams, One Drive, and Outlook.
Sage 50cloud also boasts an intuitive dashboard. The tool analyzes all your company’s accounting activities and reports them on a clean, user-friendly dashboard.
Perhaps the one major drawback to Sage 50cloud is that its pricing is available on annual plans only. But this shouldn’t be a deal-breaker considering the slew of features you stand to enjoy with the software.
7. OneUp
Pricing: Plans start from $9/month
Only a handful of accounting software promise efficient integration with Customer Relationship Management (CRM).
OneUp is one such tool. CRM integration is particularly useful for small businesses that need to engage with their customers from time to time. And the best part about OneUp is that it offers this service free of charge.
OneUp has a freemium plan that comes with limited accounting features and doesn’t include customer support. For more features, you’ll need to upgrade to the premium versions, which start from $9/month and come with a 30-day free trial period.
8. AccountingSuite
Pricing: Plans start from $9.50/month
Though relatively unknown compared to other popular accounting software, AccountingSuite is a tool any serious self-employed entrepreneur should check out.
AccountingSuite avails most of the basic accounting services you’ll find in many common cloud-based accounting tools. The service will fulfill your accounting needs, whether you’re selling goods or services.
The one major feature that makes AccountingSuite worth considering is its budgeting capability. Using this software, you can forecast your spending patterns over a considerable duration and create a robust budget for your business. Time-tracking, inventory management, e-commerce integration, and custom invoicing are other things to love about AccountingSuite.
9. ClearBooks
Pricing: Plans start from £6.00/month
ClearBooks is another top recommendation for small business owners looking for reliable accounting software. Like most tools on this list, ClearBooks helps you send customized invoices. This lets you receive timely payments while seamlessly marketing your brand.
ClearBooks lives up to its name in terms of reporting and analytics. The software maintains a clean user interface where you can view your financial transactions in real-time and make better investment decisions.
A cash management feature lets you reconcile your bank statements with cash receipts for efficient money management. ClearBooks’ plans start from £6.00/month and each package includes a free 30-day trial.
10. Hurdlr
Pricing: Paid plans start from $8.34/monthly; a free plan also available
Hurdlr aptly lives up to its name. This software promises to get all the common accounting hurdles out of your way so you can accurately track your financial activities.
You can set Hurdlr to calculate valuable tax deductions and make financial records automatically. With this feature, you could save thousands of dollars in annual tax bills.
Hurdlr also supports mobile receipt uploads and mileage tracking. That makes it a top choice for on-the-go small business owners. You also enjoy receipt and reimbursement management features as well as multi-app integrations, including integrations with third-party accounting systems, application programming interfaces (APIs), and software development kits (SDKs).
Wrap Up
There goes our definitive guide to the top ten accounting software for self-employed entrepreneurs.
Remember, no two accounting tools are identical. Therefore, be sure to choose a service that meets your specific business’ needs.