It’s been nearly two years since small businesses began to feel the impact of COVID-19. Congress has passed legislation that continues to help companies through the long recovery, but you may still be feeling the effects of the virus on your company’s finances. Small business accounting websites certainly aren’t a panacea, but if you use one religiously, you should feel more in control of your finances and be able to make better decisions. As you grapple with the current state of your income and expenses, you can make smarter, more informed plans for your future.
We tested nine of the best web-based accounting applications available for this roundup. All are capable of handling the tasks required for small businesses, though some are better suited to very small businesses, like sole proprietors or freelancers or companies that only have an employee or two. These are FreshBooks, Sunrise, Kashoo Classic, and Wave. Others can accommodate slightly larger businesses, though they might also be appropriate for startups and less complex companies. This group includes Editors’ Choice Intuit QuickBooks Online, Xero, Sage 50cloud Accounting, and Zoho Books. The ninth application, NeatBooks, is new.
Note that, while we don't include it here because it's not strictly speaking a double-entry accounting service, we also reviewed Bill.com, which does, however, offer advanced accounts receivable and payable management, plus the ability to create multiple approval levels. No other service provides its set of features and sophisticated workflow. It's an excellent app, and an Editor's Choice winner.
The Best Small Business Accounting Deals This Week*
*Deals are selected by our commerce team
- Intuit QuickBooks Online (Opens in a new window) — Save 50% off Online Plans
- FreshBooks (Opens in a new window) — $4.50 Per Month for Lite Plan (List Price $15)
- Xero (Opens in a new window) — 30-Day Free Trial
What These Services Can Do
Financial bookkeeping is complicated and time consuming. Business owners find it challenging enough to cover the basics—paying the bills and tracking incoming revenue—let alone answer critical questions such as: Are we profitable? Why or why not? Can we make required tax payments? Should we invest in new equipment? Do we need to explore financing? Will we hit our budget numbers? Where can we cut expenses? Can the appropriate team members access all our accounting data online, if they have to work from home?
A good small business accounting website can provide information in seconds that will help you answer these questions, based on the input you supply. Once you populate a site with information about your financial accounts, your customers and vendors, and the products or services you sell, you can use that data to create transactions that the site can, in turn, use to create insights. Instant search tools and customizable reports help you track down the smallest details and see overviews of how your business is performing. Android and iOS apps for the sites give you access to your finances from your mobile devices.
Setting Up Bookkeeping
Depending on how long your business has been operating, getting started with a small business accounting website can take anywhere from five minutes to several hours. after signing up for an account. These sites charge monthly subscription fees and usually offer free trial periods. The more you need it to do, the longer your setup tasks will take (and the higher the monthly payment, generally). Early setup will involve creating an account, of course. You may also be asked ask questions like 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 your login credentials for that account and the small business accounting site will import recent transactions (usually 90 days' worth) and add them to an online register. This process is not as simple as it used to be. Banks have been tightening up their security (which is a good thing), but you may have to jump through a couple more hoops to get connected.
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 or Stripe (extra charges will apply). It’s also a good idea to browse through the whole Settings menu. The sites I reviewed all come with their own default settings, which you may want to change. For example, do you plan to use specific features such as purchase orders and inventory tracking? You can usually turn some tools on or off, which can help you either simplify the user interface or maximize the functions available to you.
Your People, Your Stuff
After you’ve supplied information about your company structure, one of your next setup tasks should involve supplying information about your customers and vendors. Most websites allow you to include more than basic contact details (customer since, birthday, and other similar fields), which can be helpful as you develop and maintain relationships with them. You’ll do the same thing for the products and services you sell, so you can add them easily to transactions.
One of the great things about using a small business accounting website is that it reduces repetitive data entry. Once you fill in the blanks to create a customer record, for example, you never have to look up that ZIP code again. When you need to reference a customer in a transaction, it will appear in a list. The same goes for vendors, items or services, and employees. No more filling out card files or messy spreadsheets.
Once you complete a customer record and started creating invoices, sending statements, and recording billable expenses, you can usually access those historical activities within the record itself. Some sites, such as Zoho Books, display a map of the individual or company's location and let you create your own fields so you can track additional information that's important to you (customer since, birthday, and other similar fields).
It is possible to do minimal setup and then jump into creating invoices, paying bills, and accepting payments. All of the services included here let you add customers, vendors, and products during the process of completing transactions (you need to do so anyway as you grow and add to your contact and inventory databases). You just have to decide whether you want to spend the time upfront building your records or take time out when you're in the middle of sales or purchase forms.
Most small business accounting sites offer the option to import existing lists in formats such as CSV and XLS. They provide mapping tools to make sure everything comes in correctly. This procedure works better on some sites than others.
Moving Money and Products
Accountants love to use phrases like accounts receivable and accounts payable to describe the primary elements of accounting: recording and tracking income and expenses or tracking sales and purchases. Small business accounting sites are designed to appeal to people who don't use the same kind of language as accounting professionals and avoid such terminology.
The services let you easily create any transaction that a small business is likely to need. The most common of these are invoices and bills, and most of the services we reviewed support them. Sites such as Xero and Zoho Books go further, allowing you to produce more advanced forms, like purchase orders, sales receipts, credit notes, and statements. They provide templates for these online forms that resemble their paper counterparts. All you have to do is fill in the blanks and select from lists of variables like customers and items.
Once you have completed an invoice, for example, you have several options. You can save it as a draft or a final version and either print it or email it. If you do the latter and have established a relationship with a payment processor, then your invoice can contain a stub explaining how the customer can return payment via credit card or bank withdrawal. You can create a PDF version of the invoice, copy it, record a payment on it, and set it up to recur on a regular schedule. All forms in these sites work similarly.
These services also pay special attention to your company's expenses—not bills that you enter and pay (though many support this), other purchases you make. This is an area of your finances that can easily get out of control if it's not monitored. So, small business accounting sites tell you about them, dividing them into expense types and comparing them with your income using totals and colorful charts.
If you're traveling and have numerous related expenses on the road, for example, then you can take pictures of receipts with your smartphone. Some sites just attach these receipts to a manually entered expense form. Others, such as Intuit QuickBooks Online and Neatbooks, read the receipts and transfer some of their data (such as date, vendor, and amount) to an expense form using OCR technology.
As I mentioned earlier, one of your setup tasks involves creating records that contain information about the products and services you sell so you can use them in transactions. These vary in complexity, so you need to understand the differences before you go with one site or another. Some, such as Kashoo Classic, simply let you maintain descriptive records. Others, such as Intuit QuickBooks Online, go further. They ask how many of each product you have in inventory when you create a record and at what point you should be alerted to re-order. Then they actually track inventory levels, which provides insights on selling patterns and keeps you from running low.
Transactions and Banking
While much of your daily accounting work probably involves paying bills, sending invoices, and recording payments, you also need to keep a close eye on your bank and credit card activity. If you have connected your financial accounts to your accounting site, then this is easy to accomplish. For one thing, their balances often appear on the dashboard (homepage). You can also view each account's online register, which contains transactions that have cleared your bank and been imported into your accounting solution (along with those you have entered manually).
You can do a lot with these transactions once they appear in a register. For one thing, they should be categorized (office expenses, utilities, travel, and meal costs are some examples) so you know where your money is coming from and where it's going. Every site guesses at how at least some transactions might be categorized. You can change these if they're incorrect and add your own. Conscientious categorization will result in more accurate reports and income tax returns.
You can also match related transactions, such as an invoice that was entered into the system and a corresponding payment that came through. Again, some sites make educated guesses here. You can split transactions that should be assigned to multiple categories, make notes, and reconcile your accounts with your bank and credit card statements.
Read It in a Report
Reports are your reward for keeping up with your daily work and completing it correctly. Every small business accounting site comes with templates for numerous types of insightful output. You select one, customize it by using the filter and display options provided, and let the site pour your own company data into it. It only takes a few seconds to generate a report after you have defined it.
There are two kinds of reports. The bulk are the type that any small businessperson could customize, generate, and understand. They tell you who owes you money, which of your products and services are selling well, whether you're making money, which expenses and services haven't yet been billed, which customers are buying the most, and how much you owe in sales tax, for example.
There are other reports, though, that aren't so easy to understand. These are considered standard financial reports and they're the kind of documents you'll need if you ever want to get a loan from a bank or attract investors. They have names such as Balance Sheet, Statement of Cash Flows, Trial Balance, and Profit & Loss. Small business accounting sites can generate them, but you may need an accounting professional to analyze them to tell you in concrete terms what they mean for your company.
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 sites 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 application online, you shouldn't have any trouble understanding these sites’ structure. They all divide their content into logical modules by providing toolbars and other navigation guides. Sales tasks are grouped together 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 site. These include your setup chores and settings you may need to modify at times, such as restricting additional users to specific areas.
A site’s dashboard (homepage) usually 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 site where you can take action.
You use standard web conventions to navigate around each site and enter data. Along the way, you encounter a lot of buttons and arrows, drop-down lists, and menus. Color is sometimes used to signify important information, while graphics and fonts are well chosen to make the tools as aesthetically pleasing as possible.
Help Resources
These services simplify the accounting process, but there will undoubtedly be times when you have questions. Support comes in many forms. Some apps provide context-sensitive help along the way and searchable databases of articles. All offer a combination of chat, email, and phone assistance.
Intuit takes it a step further. Its QuickBooks Live service adds bookkeeping support to QuickBooks Online Plus. You communicate with your dedicated bookkeeper through one-way video chat (they can’t see you) or email. This individual and his or her team work with you on customizing your setup and monitoring your transactions so they’re accurately entered and categorized for tax purposes. They reconcile your accounts and close your books at month’s end to prevent errors, plus they’re available for questions during regular business hours. Finally, they generate the reports you need so you’re ready to prepare your taxes or hand them off to your accountant. Sunrise and Wave offer fee-based bookkeeping services, but they lack QuickBooks Live's interactive features.
Choose the Right Financial Tools for Your Business
Choosing a small business accounting application is challenging. You want the product to allow room for your business to grow, but you don’t want to spend a lot of extra money on features you may never need. Most of the websites we reviewed are available in multiple versions, so you can start at the low end and upgrade to a more powerful edition that looks and works similarly.
Intuit QuickBooks Online, our current Editors’ Choice, is one of these. Its scalability is one of the reasons it takes top honors. We recommend you look at it first to see if it fits your needs—and your budget. It offers the best combination of flexibility, accounting functionality, and usability of all the services we reviewed.
While you're thinking about your money, you might also like to consider our reviews of online payroll services and tax software.
