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Choosing the right accounting software for your small business

Not having a good bookkeeping system in place is one of the main reasons businesses fail.

You can choose to set up a bookkeeping system manually (using accounting books), electronically (spreadsheets) or use accounting software. Unless you want to get familiar with bookkeeping practices, accounting software is the most efficient choice.

What is small business accounting software?

Small business accounting software is software used by small businesses to track incoming and outgoing financial transactions as well as financial statements and cash flow. While traditionally small businesses have tracked financial information on tools such as spreadsheets, these manual methods are time-consuming and less accurate. Spreadsheets also do not offer the automation and notification capabilities of a dedicated tool.

With small business accounting software, users can eliminate the need to create a spreadsheet and manually enter each transaction detail. Instead, they gain the flexibility of integrating with third-party tools such as point-of-sale software to automatically input data. These tools can also generate branded invoices, send notifications upon certain financial transactions or milestones, and provide an overview of the business’ budget.

Given all this, it can be tricky for small businesses to identify the right accounting software for their needs. We developed this guide to help buyers understand exactly what these products offer, so they can select the solution that is the best fit.

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How Accounting Tools Work

Accounting probably doesn’t make the list of things you like to do as a business owner; it can be complicated, and it needs to be done correctly. So, the makers of small business accounting tools have worked hard to present this discipline as simply and, well, pleasantly as possible. Some—including Intuit QuickBooks Online and Zoho Books—have been more successful at this than others.

If you have ever used a productivity app online, you shouldn’t have any trouble understanding these tools’ structure. They all divide their content into logical modules by providing toolbars and other navigation guides. Sales tasks are grouped as are purchase, inventory, reporting, and payroll activities. There’s always a Settings link that takes you to screens where you can specify preferences for the entire tool. These include your setup chores and settings you may need to modify at times, such as restricting additional users to specific areas.

A tool’s dashboard homepage provides a real-time overview of the financial information you need to see frequently, including charts comparing income and expenses, account balances, and invoices and bills that need immediate attention. There are often links to areas of the tool where you can take action.

You use standard web conventions to navigate around each tool and enter data. Along the way, you’ll encounter a lot of buttons and arrows, drop-down lists, and menus. Colour is sometimes used to signify related information, while graphics and fonts are well chosen to make the tools as aesthetically pleasing as possible.

Key considerations for choosing the best accounting software

With so many options and feature sets to choose from, selecting the right accounting solution can quickly become an overwhelming task. Here are some of the core features to look for in accounting software:

Accounting Software for Simpler Businesses

If you’re a sole proprietor or freelancer, then you probably don’t need all of the features offered by full-featured small business accounting tools. You might want to track your online bank and credit card accounts and record income and expenses, and maybe send invoices and track time worked (if you’re service-based). Maybe you need to track mileage. You might need help estimating your quarterly income tax obligation, and you certainly want mobile access to your financial data.

Numerous tools can do a combination of these things. They’re easy to use, inexpensive (totally free in the case of Wave), but they can overwhelm you with the functionality you don’t need.

Our Editors’ Choice, this year in this category, goes to FreshBooks. This beautifully designed tool started life as a simple online invoicing app. Since then, it’s added more functionality, including basic time tracking, project tracking, expense management, estimate and proposal creation, and reporting.

FreshBooks lacks some features that other tools offer, though. It doesn’t help with quarterly estimated taxes while GoDaddy Bookkeeping and Intuit QuickBooks Self-Employed do. It doesn’t have its integrated payroll processing app as Wave does, and it’s not a true double-entry accounting like Sunrise is. Wave also lacks Intuit QuickBooks Self-Employed real-time mileage tracker, and it doesn’t automate as many processes as other tools do.

Accounting Software for Your Business Needs

Whether you need one of these entry-level financial management tools or your business is complex enough that you need to start with one of the small business accounting tools, we think you’ll find that this batch of tools offers enough variety that you can find the right fit for your business.

While you’re thinking about your money, you might also like to consider our reviews of online payroll services and tax software.  

Accounting Software Automation

If the last few years have been about the trend to mobile, then I believe beyond 2020 is about automation in the form of workflows and Artificial Intelligence.

The best systems offer functionality such as:

  • Automated debtor reminders (Xero, MYOB Essentials, ZohoBooks);
  • Recurring transactions such as invoices, bills and journal entries (QuickBooks Online, Xero, ZohoBooks)
  • Auto-coding of banking transactions – evolving from customer-defined rules to suggestions driven by big data and AI (QuickBooks, MYOB, Xero)
  • Automation of bill/expense entries, from pdf or image, to entered and coded (Xero, MYOB, QuickBooks and ZohoBooks)

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All told, it takes large datasets and significant resources to build automation engines that work effectively.

Automation is the economic moat or barrier to a competition where global players have a massive competitive advantage. We already see the likes of Intuit (QuickBooks), Xero, Sage and Zoho deliver in this area and I can only see them accelerating away from smaller players because of their size, access to data and significant human capital to build such things.

Setting Up Bookkeeping

Depending on how long your business has been operating, getting started with a small business accounting tool can take anywhere from five minutes to several hours after signing up for an account. Small business accounting tools charge monthly subscription fees and usually offer free trial periods. The more you need the tool to do, the longer your setup tasks will take (and the higher the monthly payment).

First, you’ll need to supply your contact details. If you want your logo to appear on sales and purchase forms, then you can upload a file containing it. Some small business accounting tools-ask whether or not you plan to use specific features such as purchase orders and inventory tracking so that they can turn them on or off. You may also be asked when your fiscal year starts, for example, and whether you use account numbers.

Do you want access to the transactions you have stored in online financial accounts (checking, credit cards, and so on)? Enter the username and password you use to log on, and the small business accounting tool will import recent transactions (usually 90 days’ worth) and add them to an online register. Would you like to let customers pay with credit cards and bank withdrawals? You’ll need to sign up with a payment processor such as PayPal (extra charges will apply) or Stripe.

Integrated Payroll

Single-touch Payroll is a requirement for any business with employees. If you have staff, you need a modern payroll software to give you compliance and ease of the process. If you’ve set up as a company, chances are you’ll be paying yourself as an employee and need a payroll system.

QuickBooks has partnered with KeyPay to bundle Payroll as part of their Australian QuickBooks Online solutions. Ironically so too has Sage with Sage Business Cloud Financials. KeyPay as an embedded “best-of-breed” probably wins on this front.

Bank Feed

This feature connects the software to your business bank and credit card accounts to receive a daily update of your transactions. This saves you the time it would take to upload transactions into the system manually. It also gives you a daily, rather than monthly, an overview of your accounts. A real-time bank feed feature can assist with reconciliation, allowing you to make it a small daily task rather than a monthly ordeal.

Integration with operational software

There’s a world of software beyond Accounting & Bookkeeping systems

The bookkeeping software is often not the key operational tool these days. If you’re in retail or hospitality, you need a Point Of Sale System like Square, Vend, Kounta or Hike.

If you are a tradie, whilst you can probably get away with just using the bookkeeping apps on their own (particularly the mobile-friendly QuickBooks, Xero and Freshbooks), you might consider tradie specific apps like ServiceM8, Tradify, NextMinute and Simpro.

If you’re a yoga studio or gym, you need apps like Mindbody to book your appointments and manage your classes. I could go on…

My point is that the accounting/bookkeeping software is less important than the key operational software. This means the key value of the bookkeeping software is its ability to integrate with these operational tools and the number of options that these integrations make available.

Xero wins hands down in Australia in this regard. Followed by QuickBooks. Then MYOB.

Whilst most offer integrations to best-of-breed 3rd party operational tools, Zoho probably deserves a special mention, with ZohoBooks being one small part of a comprehensive suite of products the company bundles under the ZohoOne offering. From accounting to reporting, inventory management to email marketing, CRM to project management and beyond… ZohoOne is marketed as “The Holistic Approach To Business Software”. It is impressive at the price point.

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When you log in to your account, you’ll be greeted by a dashboard that shows you an overview of your account activity and key metrics such as cash flow, profit and loss, account balances, expenses, accounts payable and receivable, and sales. Some allow you to customize what you see first by rearranging the information.

Bank Reconciliation

Smart reconciliation tools identify potential matches between your bank transactions and the bills and invoices that you’ve entered into the accounting software, saving you the hours it would otherwise take to sift through your bank account for this information. You can then approve or deny the suggested matches. The best applications suggest potential matches as you reconcile your accounts and a few include a reconciliation tool on their mobile apps.

Inventory Management 

If you have a retail or distribution business, you need an application that helps track your inventory and helps with purchase orders. You may need to subscribe to a top-tier plan to get this feature. If you need more advanced inventory features, look for software that integrates with a dedicated inventory management system.

Project-Based Billing 

Firms, freelancers, and consultants who work with clients on projects or jobs should look for accounting software that helps them track their projects’ tasks and budgets. The software should allow you to invoice customers for tracked time and bill them for project expenses.


On customer feedback alone, Rounded probably scores the highest on support satisfaction. It’s only fair to point out that customer support in software for small and micro businesses is very difficult to scale well. I would suggest Rounded leads the way as they remain small and haven’t yet experienced the scaling problem, and their key directors are still very hands-on in supporting their clients.

QuickBooks scores well for support in Australia, probably ahead of the other BIG players by offering phone, email and live chat support. MYOB offers phone and other forms of support to a high level (though my experience is not as timely as QuickBooks). Xero cops a bit flack for not offering phone support (see this thread for example), but not everyone wants phone support in 2020 and general Xero to do OK, given their size and their responsiveness to online queries.


Accounting software should help business owners significantly streamline billing and accounting. However, it doesn’t have to cost a lot of money. Depending on the software and features you’re looking for, most programs offer several plans to accommodate your needs and budget. With multiple options, you can choose what you want and how much you pay. 

There are typically two types of pricing models for accounting software: perpetual licensing or a recurring subscription. With a perpetual licensing model, you make a one-time payment for unlimited access for the software. Subscription pricing models require users to pay a monthly or annual fee for access to the software.

For subscription pricing, expect to pay anywhere from $10 per month for a basic starter plan to as much as $60 per month for a more advanced service plan. Other factors like the number of users you have and features you want access to will affect the monthly cost as well.

Regardless of the pricing model you select, watch out for hidden fees, which can include added charges for customization options, installation or setup services, integrations, and maintenance or support services.

If your business is on a tight budget, there are free software programs. Wave, for instance, is free but still offers many of the accounting and invoicing features you would find in paid programs such as unlimited income, sales tax and expense tracking, and unlimited partners and accountants.

Many programs offer free trials and demos, which you should take advantage of. When you’re choosing accounting and billing software for your business, we strongly encourage you to take advantage of the free trials to test out the solutions and see which one offers the features and tools you need. 

Spending time with software beforehand helps you feel more confident in your decision, and it reduces the likelihood that you will be stuck with a program that’s confusing to use or lacks the features you need.

How We Chose Accounting Software for Small Business

We looked at nineteen accounting software companies with specialized products for small businesses before choosing our top five software options. We considered cost, scalability, ease of use, reputation, and accounting features. Reputation was a key consideration because the longer a company has been around, the more likely that any technological glitches have been resolved, which ensures that a company’s important financial information will be reported accurately. Scalability was the next most important consideration because as a company grows, its accounting needs grow as well, and transferring financial information to new software can be tedious. Finally, ease of use and collaboration for business owners, employees, and accountants was considered because all users need to be able to access and review the financials at the same time.


When it comes to choosing the best accounting software for your small business, there are many options available. It takes an investment of time and money to find an accounting software solution that fits your business’s needs. Identify the best accounting software overall for small businesses because of its affordability, versatility, and scalability.


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