If you run a small business, keeping a close eye on your finances is critical. The right accounting software makes managing invoices, expenses, payroll and more a breeze. But with so many options to choose from, finding the one that best fits your needs can feel overwhelming.
That‘s why I‘ve taken a deep dive into the top solutions – FreshBooks, QuickBooks, Xero, Sage and Wave – to compare the key features, capabilities and ideal users of each. My goal is to arm you with everything you need to make the right choice for your small business. Stick with me for a detailed overview!
A Quick Intro to Accounting Software
Before we dive into the options, let‘s briefly cover what small business accounting software actually is and does. At a high-level, these tools help automate key financial processes like:
- Invoicing clients – Easily create, customize and send professional invoices.
- Tracking income and expenses – Connect bank accounts to automatically track transaction data.
- Running payroll – Calculate payroll taxes and withholdings for employees.
- Generating financial statements – Produce reports like profit/loss, balance sheets and cash flow.
- Performing reconciliations – Matching account data with bank/credit card records.
The right software centralizes all of this into a single, cloud-based system accessible from anywhere. Plus, integrations with other business tools like POS systems, payment processors and tax software are common too.
Now that you know the basics, let‘s explore how five popular options stack up across some of the most important categories.
Comparing Key Features
Accounting platforms share many core features, but also have key differences in functionality that sets them apart. Let‘s break down how FreshBooks, QuickBooks, Xero, Sage and Wave compare across some of the most essential capabilities.
Invoicing
Invocing clients promptly and accurately is critical for small business cash flow. Here‘s an overview of the top software options when it comes to creating, sending and tracking invoices:
- FreshBooks – Offers an incredibly robust set of invoicing tools. You can customize designs, set up recurring invoices, configure multiple payment options, and even do things like automatically charge late fees.
- QuickBooks – Easy invoice templating and bulk sending capabilities. Seamless integrations with payment processors like Paypal and Stripe.
- Xero – Allows you to instantly send invoices directly from your smartphone. Has a "Pay Now" button to simplify online payments.
- Sage – Integrates with tools like Stripe to add online payment to invoices. Provides tracking to see invoice status and payment history at a glance.
- Wave – Free invoicing includes unlimited sending and many customizations. Added payments is just 1% per transaction, a bargain compared to others.
Based on versatility for growing businesses, FreshBooks takes the cake when it comes to managing invoices. The level of personalization and automation makes the invoicing process seamless.
Expense Tracking
Being able to accurately capture business expenses across bank accounts, credit cards and other sources is essential for proper accounting and tax deductions. Here‘s how the tools stack up for tracking spending:
- FreshBooks – Has Snap and Grab mobile apps that use OCR to automatically capture receipt data. Syncs expense data across over 14,000 financial institutions.
- QuickBooks – Connects with hundreds of banks and cards for automated data downloads. Neat categorization features help allocate expenses appropriately.
- Xero – Allows connections to feed transaction data from a large network of financial institutions. Can track expenses from a variety of businesses entities and sources.
- Sage – Smart bank connectivity and transaction automation. Uses intelligent reconciliation to match incomes and expenses across accounts.
- Wave – Free expense tracking tightly integrated with Wave Money small business bank accounts.
Thanks to automated receipt capture and unmatched bank connectivity, I give FreshBooks the nod for the best expense tracking capabilities. It makes capturing and categorizing expenses a total breeze.
Reporting and Analytics
Easy access to financial statements and reports is how business owners stay on top of their numbers. Here‘s an overview of reporting functionality:
- FreshBooks – Can generate all key financial statements on demand, including profit/loss, accounts receivable aging reports and more. Custom reports are flexible with groupings and filters.
- QuickBooks – Robust reporting features plus an interactive dashboard give owners an always up-to-date pulse on cashflow, profits and metrics. Excel integration empowers deeper customization.
- Xero – Granular reports include detailedfiltering and many visualizations. Financial ratios provide insights into the health of your business. Mobile view access keeps data at your fingertips.
- Sage – Real-time reports can be customized to focus on the profit drivers most important to your business. Group comparisons illustrate how actuals stack up to plans.
- Wave – Free income and expense reporting, though somewhat basic. Additional tax filing capabilities available for a fee.
For its unparalled interactive dashboards and customizations powered by Excel integration, QuickBooks takes the cake when it comes to financial data analytics and reporting.
Payroll Management
Running payroll smoothly is imperative for small businesses with employees. Here‘s how the top solutions stack up for handling paycheck calculation, taxes, filings and more:
- FreshBooks – Recently launched integrated payroll processing starting at $4 per employee. Handles federal and state taxes and filings. Integrates employee payment data directly.
- QuickBooks – Robust payroll features including paycheck calculations, direct deposit, tax payments and filings. QB Premium includes additional HR tools like managing PTO.
- Xero – Partners with Gusto Payroll, making integration seamless. Includes ability to group employees and customize pay schedules.
- Sage – Works closely with partners like Gusto but also offers core payroll features like headcount reporting natively.
- Wave – Free direct deposit and tax calculations. Unlimited users and free bank transactions. Additional tax filing services require paid subscription.
Thanks to deep native payroll features and scalable HR management tools, QuickBooks Payroll is the top choice for managing small business employee payroll.
Ease of Use and Learning
The best accounting software does you little good if it is overly complex and hard to use efficiently. Let‘s compare how intuitive and easy to learn each platform is:
- FreshBooks – Very simple, visually focused interface. Intuitive workflows for key tasks like invoicing. Light learning curve even for total beginners.
- QuickBooks – Timeline view provides a very natural expense mapping display. Menus and navigation focus on simplicty. Plus vast training resources from blogs, courses and tutorials.
- Xero – Beautiful modern and mobile-inspired designed. Getting started only takes about 2 hours by company estimates. Menu layouts keep things organized.
- Sage – Streamlined navigation using search, icons and menus designed for simplicity. Some more complex reports may have a steeper learning curve. Onboarding resources help shorten the ramp-up time.
- Wave – As a free tool, extremely simple and intuitive by design. The basic features most small businesses rely on are very easy to pickup.
With it‘s clean interface, logical project-based workflows and abundance of external learning content available, QuickBooks gets my recommendation for the easiest accounting platform to get started with.
Comparing Pricing and Plans
Pricing can vary greatly depending on the features, number of users supported and extent of support included. Here is an overview of what pricing looks like for key options:
FreshBooks
- Lite Plan – Free, 1 user, 5 clients, basic features
- Plus Plan – $15/mo, 5 users, unlimited clients, all major features
- Select Plan – $25/mo, 5 users, advanced invoice tracking
QuickBooks
- Simple Start – $25/mo, 1 user, basic accounting
- Essentials – $40/mo, 3 users, core features
- Plus – $70/mo, 5 users, unlimited transactions
- Advanced – $150/mo, 25 users, premium support
Xero
- Early Plan – $9/mo, 5 invoices/mo, 1 user
- Growing Plan – $30/mo, unlimited reconciliations, 5 users
- Established Plan – $60/mo, multi-currency, 10 users
Sage
- Sage 50 Pro – $99/mo, 1 user, all features
- Sage 50 Premium – $169/mo, 3 users, premium support
- Sage Intacct Core – $599/mo, true cloud ERP
Wave
- Free Plan – $0, unlimited income/expenses, 10 active bank transactions monthly
- Select Plan – $20/mo, tax tools, unlimited transactions and users
With tiers aligning to business needs and stages rather intuitively, Xero gets my recommendation for smart accounting software pricing. Their plans scale up smoothly as your needs grow.
Best Software By Use Case
Every small business has unique needs, so accounting software must align accordingly. Here is a breakdown of top options for certain personas and situations:
Best For Freelancers & Contractors
For solopreneurs juggling multiple income streams, FreshBooks‘ focus on nailing invoices, expenses and project workflow makes it an easy #1 pick. Key highlights that make it ideal for freelancer finances include:
- Time tracking perfectly pairs with invoicing by project
- Multi-payment options cater nicely to client preferences
- Project dashboards provide a freelance-centric work view
- Discounts for annual subscriptions provide savings
Best For Retail & Hospitality
For shops, restaurants and hospitality businesses, having accurate inventory management, and seamless POS integrations are key. Based on community reviews and retail-focused capabilities, Quickbooks is the best fit accounting platform for these merchants thanks to:
- Deep inventory tracking optimized for small retail
- Integrates with the major POS systems like Clover, Shopify POS, Square
- Allows tracking customer purchase history and details
- Offline sales mode flexibility for restaurants
Best For Service Businesses
From creative agencies, to IT consultants to cleaning companies, service businesses have unique financial needs. Togglable time tracking and flexible project reporting make FreshBooks the ideal pick for service business accounting.
- Robust time tracking features are perfect for billable hours
- Project-based reporting provides client-centric visibility
- Budget tracking helps gauge profitability of services
- 30+ app integrations align to tech-forward service tools
Best Free Option
Free plans for small business accounting software provide surprisingly robust capabilities, making them great for early stage ventures. Wave nails the fundamentals with their free tier that includes:
- Unlimited income/expense tracking
- Invoicing capabilities
- Multiple business reports like profit and loss statements
- Compatibility with contractor tax documents
The free features are plenty for basic accounting needs of most freelancers and small service businesses just getting started.
Final Recommendations
While the best accounting software depends heavily on your specific situations, a few options shine brightly as the best platforms overall:
QuickBooks is my top overall recommendation thanks to being feature rich while also easy to use with amazing training resources. It can accommodate a huge variety of business types.
FreshBooks takes gold for the best invoice management and best for freelancers and agencies. The flexibility and automation packed into invoicing and payment receipt alone makes it a finace game-changer.
Finally, take advantage of Wave‘s extremely capable and 100% free software if you are just getting started and want to save costs. It delivers on the accounting essentials.
The Bottom Line
I hope this detailed overview has helped you better understand the accounting software landscape and identify the best choices to take your small business finances to the next level. Reach out via the comments below if you have any other questions! I‘m always happy to offer guidance to help you find the right long term solution.
