1 QuickBooks and QuickBooks Online
What Is a Computerized Accounting System?
A computerized accounting system consists of software designed to track all ofyour company’s accounting transactions, with the goal of producing financialoutput for monthly reports, annual financial statements, tax returninformation and other report configurations used to analyze your company’soperations, efficiency and profitability.While free or low-cost online software systems don’t offer muchcustomizability to your specific business, larger companies often use acomputerized accounting system software package that has been installed on thecompany’s mainframe computer servers and made available to several users.This type of large-scale computerized accounting software often comes with alarge degree of customizability. Companies can have the software designed toaccommodate multiple currencies, business entities located in different partsof the world and branches of the company that sells different sets ofproducts. Also, it can be customized to produce an array of financial reportsthat calculate key performance metrics specifically geared to the company’sindustry and operational benchmarks.
Who Uses Computerized Accounting Systems?
It seems that just about anyone in business can use a computerized accountingsystem these days because of the variety of solutions available to fit theneeds of virtually any size and type of company. For example, a very popularaccounting software, Quickbooks, has been used for many years by a range ofcompanies from small to mid-size. The company offers both online and desktopversions of its software, and the software accommodates a decent amount ofcustomization at a fairly economical price.
Cash Versus Accrual Accounting in the System
You can record your accounting transactions on either a cash or accrual basisin most accounting software. Put simply, the main difference between the cashand accrual accounting systems lies in the presence of accounts receivable andaccounts payable. Cash and accrual accounting differ based on how you recordthe timing of your cash receipts from sales and money spent to pay yourexpenses.When you pay for things or get paid in cash, sales and expenses get recordedin real time. When you use accrual accounting, you record sales when you earnthem and expenditures when you incur them, even if you haven’t received thesales revenue or paid the expense yet. For example, in an accrual accountingsystem, you would make an entry each month to accrue money for an insurancepolicy that you need to pay at the end of the year. You would record thisentry in an asset account called prepaid insurance. You would record thetransaction as if the money had already been spent by reducing the balance ofyour company’s cash account and correspondingly increasing the balance of yourprepaid insurance account each month.
Accounting Software Pros
Using accounting software offers your company several benefits. First andforemost, the structure and discipline of a computerized accounting systemensure that your company can produce accurate financial statements. This isespecially important if your company needs to provide these for external usessuch as bank financing, or if you need to present your financial statements inaccordance with generally accepted accounting principles (GAAP).Accounting software can save time, especially if you want to create a budgetor forecast. You just need to generate a report of your historical data andproject it forward with a few tweaks to produce your next year’s budget orforecast.You can also streamline and add efficiency to your overall accounting process,especially if you can cross-train administrative employees to help out withsome of the more routine bookkeeping tasks, such as entering bills to yourpayment system, for example.When you generate company invoices, your accounting software automaticallyadds the amounts to your company’s accounts receivable balance. All of thisfunctionality working together within the same accounting software reduceserrors and helps you make sure that you don’t let any transactions slipthrough the cracks.
Benefits of Using Accounting Software
Maybe you’re old school and work well with printed spreadsheets and physicalfile folders. Why bother making the switch to accounting software? Once youunderstand how to use all of the accounting features, you’ll be able toorganize data, look up information, reconcile accounts, make calculations andgenerate financial reports in less time. Plus, with some bookkeeping software,you can even make estimates or invoices, manage your payroll and collectpayments online.In short, accounting software allows you to streamline or even automate yourday-to-day financial work. It’s almost like having another professionalbookkeeper on your payroll. Come tax time, you (or your accountant) will beespecially grateful that you decided to switch from paper to online accountingsoftware because all of your financial data will be organized and searchable.Because you can access your online account from any device, your data is safeeven if your computer malfunctions.
Best Small-Business Accounting Software for 2020
There’s no one-size-fits-all option when it comes to small-business accountingsoftware. The best accounting software for you depends entirely on yourbudget, your primary goals in using the software, how many users need access,other tools that need to integrate with the software and your comfort withusing technology.Four accounting tools stand out for small-business owners thanks to theirfunctionality, affordability and ease of use. From there, you can narrow downyour top contenders based on the features that matter most to you. Freeaccounting software options also exist if you’re on an especially tightbudget.
1. QuickBooks and QuickBooks Online
First released in 2002 by Intuit, the name QuickBooks has long been synonymouswith small-business accounting software. Today, QuickBooks Desktop refers tothe hard-disk software that you purchase once and install directly onto yourcomputer’s hard drive (and therefore always access it from that computer),whereas QuickBooks Online is the cloud-based version paid for on a monthlybasis and accessible from any device connected to the internet. Of all thesmall-business accounting and bookkeeping software options available,QuickBooks is easily the most robust, with an extensive catalog of features.As the name implies, QuickBooks has a special focus on bookkeeping, and youcan easily add up to 25 team members (with the highest monthly plan onQuickBooks Online) to track and reconcile all accounts. Like other small-business accounting software, QuickBooks allows you to create invoices andestimates, but this brand goes above and beyond by offering numerous invoicetemplates and the ability to send invoices in several different languages.QuickBooks also stands out thanks to its focus on taxes, automations andreports. Over 600 other third-party, cloud-based tools — such as PayPal,Shopify and TSheets — integrate with QuickBooks to improve your experienceeven further.QuickBooks also offers a few other services for which you’ll need to payextra, including payroll services and a lending integration called QuickBooksCapital. Of course, the brand’s extensive features and reputation arereflected in the price of the core product, but thanks to varying subscriptionpackages for QuickBooks Online, you’ll likely find an affordable plan with thekey features you need. Apart from the price, the other major downside ofQuickBooks is a lack of email customer support. If you need assistance, youhave to get on the phone, and wait times are sometimes long.
3. FreshBooks Cloud Accounting Software
QuickBooks Online and Xero stand out for their range of features, but youalmost need to be an accounting professional in order to understand how to putall of those features to use. For the typical small-business owner who justwants something user friendly without a lot of extraneous features that neverget used, FreshBooks is an excellent solution. This cloud-based software alsorises above the competition in terms of its customer support because you canget phone help or chat-based help without a long wait time.Because FreshBooks allows a limited number of users per account and haslimited features, it’s an especially good choice for freelancers, independentcontractors or self-employed business owners. It offers streamlined timetracking, expense tracking, numerous invoice templates, multiple reports andthe ability to automate your billing cycle. You can also perform some basicproject management via FreshBooks, minimizing the number of tools with whichyou need to work. If you do use other tools, FreshBooks integrates with manyapps, include G Suite, Dropbox, Gusto, Stripe, Basecamp, Trello and many more.Small-business owners may balk at FreshBooks’s monthly price and user fees,which are similar to Xero and QuickBooks Online. You’ll need to not onlyconsider which features you want but also how many clients you typically billbefore you choose a monthly package. It also costs extra to add team membersor advanced payment options. However, if you really love the more intuitivedesign of FreshBooks and the better customer support, it could be worth payingfor it.
Free Accounting Software Options
When you’re launching a brand-new business, money can be tight, and paidaccounting software can seem like a luxury. Thankfully, free accountingsoftware exists to get you through those first months until your revenue hasstabilized a bit. Of course, the functionality of free accounting systems willbe far more limited than their paid counterparts.The accounting app Wave, for example, allows you to send invoices, scanreceipts, add bank accounts and credit cards, track your income and expensesand add unlimited collaborators for free. The only catch is that the Wave appcharges for payment processing. That means any fees you collect through thispayment gateway will have 30 cents plus 2.9% diverted to Wave.Other free accounting software options worth examining include GnuCash,ZipBooks and NCH Express Accounts. If all you truly need to do at this pointis send invoices and collect online payments, consider signing up for a freePayPal business account or using Zoho Invoice.
Best Free Accounting Software: Wave
Wave is a software platform with a stacked deck of financial products forsmall businesses. Its all-in-1 business management system provides freeaccounting, invoicing and more. If you’d like to manage your paymentprocessing and payroll using Wave, you can opt to pay-per-payment andsubscribe to monthly payroll services.Other free Wave features include multi-business accounting capability, receiptscanning and more. You can also use Wave advisors when you need some expertguidance. Pay a monthly fee for expert bookkeeping and tax services or a1-time fee for professional accounting coaching. The bookkeeping serviceoutsources your accounting while the accounting coaching teaches you how to doit yourself. You can create your free account or sign in with Google here.Pricing: $0 for free accounting services; $129+ per month for professionalbookkeeping and tax assistance or a $199 fee for accounting coaching.Mobile app? Some Wave features have mobile apps but not all
Benefits of Accounting Software
1. Cut accounting expenses. The cost of outsourcing your bookkeeping or hiring more hands for manual accounting can really add up. With a software subscription or licensing, you’ll be able to control how much you spend without sacrificing quality. 2. Reduce the risk of errors. Automated data entry and calculation means the chance for error is much less. Even the most meticulous accountant can make a mistake, so why wait for the inevitable? 3. Maintain and prove compliance. Accounting software will help you maintain legal compliance with your financials. And, if you ever have to prove it, you’ll have the professionally compiled data to back it up. 4. Integrate your accounting with other aspects of your business. Accounting software often comes as part of a larger business management system or integrates with your CRM. A holistic view of how each sector of your business works with each other is invaluable. 5. Make smart financial business decisions. Most accounting software and CRMs provide financial reports and analytics, allowing you to make not only informed financial decisions but decisions for your company as a whole.
Cost of Accounting Software
Most accounting software is reasonably priced with scalable subscriptionmodels. There are, of course, super pricey CRM and accounting systemsavailable for those who require them. Large-scale or businesses with hyper-specific accounting needs may find their accounting expenses rising. Thefollowing cost ranges are based on offerings from our partners, but may varysignificantly with other platforms. Also, custom-built general accounting, ERPsystems and other highly specialized or high-powered accounting software maybe significantly more expensive.For small businesses: Accounting packages from our partners that are suitablefor small businesses generally range from $0 to $25 per month.For mid-size businesses: Accounting packages from our partners that aresuitable for mid-sized businesses generally range from $0 to $139 per month.For large businesses: Accounting packages from our partners that are suitablefor large businesses generally range from $150 to $199 per month.