The best small business financial software can help you keep track of all the money coming in and going out of your business, as well as automate certain processes that, not so long ago, would use up a lot of a business owner’s time and energy.
If you’re thinking about investing in financial software for your business, read on. What follows is a closer look at how these programs work, their pros and cons, and how to pick the best software product for your small business.
Key Points
• Financial software simplifies small business accounting by automating tasks such as tracking expenses, invoicing, and generating reports.
• Popular financial software options for small businesses include QuickBooks, Xero, Zoho Books, FreshBooks, and Wave, each offering unique features and pricing structures.
• Using financial software can reduce errors, save time and money, and make financial management more efficient.
• When comparing financial software plans, you’ll want to consider user access needs and desired features, as add-ons can be pricy.
• Financial software is generally easy to install and set up, but there may be a learning curve, especially for new business owners.
What Is Financial Software?
Small business financial software is a type of accounting software designed to meet the needs of small businesses. These programs can help you manage your accounts, track your revenue and expenses, and store your receipts and important financial documents. They can also keep you in compliance with tax law, help you prepare filings at tax time, and simplify the process of applying for a small business loan.
While features vary depending on the product, small business financial software programs typically use double-entry accounting. Most programs allow you to generate useful financial reports and integrate with other small business software and apps.
You can use small business financial software along with an accountant or in place of hiring an accountant. This type of software can be a worthwhile investment that accommodates the growth of your business over time.
How Does Financial Software Work?
Financial software automates the process of managing and tracking your company’s finances. Typically, the software will sync with your business’ bank accounts and business credit cards, handle accounts payable and receivable, and track transactions (including credit card payments).
Business financial software can also store documents securely, generate quarterly reports, and reconcile data. Some of the fancier versions also offer services like payroll (or integration with a payroll company), multi-user access, inventory management, and financial forecasting.
Accounting software can be used in place of a hiring bookkeeper or accountant. However, if you’re not an expert in small business accounting, it may still be helpful to use a financial professional to help maintain and review your books, and make sure that all financial statements are prepared correctly.
Recommended: What Is the Business Cycle?
Pros and Cons of Using Dedicated Financial Software
Even the best accounting software options come with both pros and cons. Here’s a closer look at the advantages and disadvantages of using small business financial software.
Pros of Using Dedicated Financial Software
Reduces Errors
Accounting software can eliminate, or at least significantly reduce, common small business accounting errors. For example, if your journal entries don’t balance, the accounting software will flag it right away. This keeps minor mistakes from becoming larger ones, and can save you all that time you might have spent trying to figure out why your balance sheet doesn’t balance.
Automation Saves Time
With accounting software, you won’t have to spend time doing repetitive tasks (like manually entering every business transaction), fixing accounting errors, and creating financial reports. Both forecasting and creating a small business budget can often be done with the push of a button, as can many other calculations.
Can Cost Less Than Hiring an Accountant
While you don’t know what you don’t know when you first open a business, financial software can at least do a majority of your bookkeeping for you. Of course, an accountant can likely offer insights and advice you can’t get from a program. But if you’re on a tight budget, accounting software can give you most of the things you need.
At some point, you may still want to hire a Certified Public Accountant (CPA) for financial planning. But if you’re just getting your business off the ground, accounting software can be a good place to start.
Simplifies Tax Filings
Business financial software can be a big help when it comes to tax compliance. That’s because having accurate accounting records and up-to-date financial statements makes the process of collecting all the documents and information you need to file your taxes relatively easy.
Cons of Using Dedicated Financial Software
Can Be Difficult to Use at First
Financial software programs try to be as user- and non-accountant-friendly as possible. However, if you’re new to small business accounting, there will likely be a learning curve involved. Figuring out how to use — and keep up — with the software may take a fair amount of time and effort at the outset.
Lack of Human Support
While automation can save time and money, a software program will likely never be able to fully replace a live bookkeeper or CPA. Most financial software companies offer customer support, either online or over the phone, but the quality and availability can vary widely.
Requires Updates and Maintenance
Maintaining accounting software involves performing periodic upgrades to the accounting software package. It also means keeping all the necessary equipment — PC/laptop, internet connection/modem, backup drive, and operating system — up to date so it can properly run the program.
May Require Additional Purchases
Even if the financial software is free, there’s likely a paywall somewhere. Software companies will often charge for additional services like payroll, payment processing, technical support, and upgrades.
Recommended: Small Business Payroll Loans Defined & Explained
5 Small Business Financial Software Choices
The best accounting software for small businesses helps you track your accounts and expenses and keep detailed, accurate books. Which program will serve your business best will depend on the industry you’re in and how many employees you have.
Here’s a look at five popular financial software options (based on a Google search of “popular small business financial software” in October 2024) that you may want to consider for your small business.
Recommended: How to Choose Vendors
Intuit QuickBooks
Quickbooks often appears on “best accounting software for small businesses” lists. While it can be pricier than its competitors, it offers multiple tiers to choose from, which means you may be able to find an option that fits within your budget.
QuickBooks offers numerous add-on apps, and also integrates with third-party software and apps. Thanks to the ubiquity of QuickBooks, there are many online training resources and forums to get support when needed.
| Pros | Cons |
|---|---|
| Basic accounting tools are easy for an inexperienced bookkeeper to learn | Monthly plans can be expensive |
| Easily integrates with other apps | Limited account users with each plan |
| Can invite an accountant to collaborate with you for free | Payroll features cost extra |
| Widely used by accounting professionals | Lacks industry-specific features |
Recommended: Break-Even Analysis: How to Calculate and Examples
FreshBooks
FreshBooks is a solid, well-rounded accounting software choice. Freelancers and very small businesses will likely find it easy to use for basic money management, like sending invoices, accepting payments, tracking income and expenses, and monitoring financial accounts. FreshBooks can also be a great tool for budgeting projects, producing proposals or estimates, and tracking time or projects.
| Pros | Cons |
|---|---|
| Simple to use for freelancers and very small businesses | Lower tiers limit number of clients |
| Can be cheaper than some alternatives | Lowest plan lacks accountant access |
| Offers project management and time-tracking tools | Payroll is not included (available as an add-on) |
| Clients can create their own accounts | Lacks features quickly growing companies may need |
Zoho Books
Zoho Books is a user-friendly option that can meet all of your basic bookkeeping needs, including sending invoices, tracking expenses, generating reports, and reconciling accounts. It allows you to seamlessly connect to your bank account, payment processor, and e-commerce platform. Zoho Books even offers a free plan that allows you to send up to 1,000 invoices per year.
This software can be a great choice for small businesses that are already using Zoho products and services, as it integrates well with the company’s other Zoho apps. It can also be a good choice for small, service-based businesses.
| Pros | Cons |
|---|---|
| Free plan available | Free plan limits invoices to 1,000 per year |
| Comprehensive, customizable records and forms | Only allows up to 15 users with top tier plan |
| Excellent e-commerce features | Might be too complex for some smaller businesses |
| Integrates well with other Zoho apps | Third-party integrations aren’t as extensive as some competitors |
Xero
Unlike many other financial software options, Xero allows business owners to add an unlimited number of users and to designate a different permission level for each. It also integrates with hundreds of other apps, as well as third-party payroll and payment services. In addition, Xero offers a variety of plans, so you can upgrade as your business grows.
Xero can be a great choice for small businesses that have multiple people who need to access the accounting software, as well as businesses that need a broad array of accounting and reporting tools.
| Pros | Cons |
|---|---|
| All plans allow for reconciling bank transactions | No free version |
| Can send up to 20 quotes and invoices per month on its lowest-priced plan | Must have its highest-tiered plan to deal in multiple currencies |
| Project and time tracking available | Payroll costs an additional monthly fee |
| Integrates with payroll software (Gusto) | Slight learning curve |
Wave
Wave offers a free version that allows you to track income and expenses, send invoices, and access numerous financial reports, making it a good, cost-effective choice for sole proprietors and very small businesses. It also has a simple, understandable user interface that can appeal to financial newbies.
With integrated payroll and double-entry accounting support, Wave also offers small businesses some room for growth. However, it lacks features that larger and quickly growing companies may need.
| Pros | Cons |
|---|---|
| Offers free unlimited income and expense tracking | Must upgrade to paid tier to digitally capture unlimited receipts |
| Allows you to create unlimited estimates, invoices, and bills records | Does not offer inventory management or time tracking |
| Option to accept online payments (for added cost) | Must subscribe to paid service to access live-person chat and email support |
| Easy to use | No third-party integrations |
Choosing a Financial Software Solution for Your Business
To determine the best financial software system for your business, you may first want to consider how many users you will want to have. If it’s just you and one or two of your business partners, any of the companies above will likely do. However, if you need a large number of people to be able to enter and access data, then you may want to consider a company that offers unlimited users.
Also think about what features you need. If you want everything, including payment and payroll processing, it can be a good idea to shop around and compare costs and features. The cheapest option may not be so cheap once you add on all the services you’re looking for. If you’re just looking for bare bones, then Wave’s free software program (which offers basic accounting and invoicing), may be all you need right now.
The Takeaway
Financial software can help you accomplish your daily accounting tasks, including recording payments, tracking expenses, invoicing customers, and reconciling transactions, easily and all in one place. It can also help you monitor and manage your company’s financial health, and generate reports that analyze your business’s performance from different angles.
While using small business accounting software typically comes with a learning curve, it can be well worth the time and occasional headache to get yourself up to speed. By automating many of the tedious tasks associated with bookkeeping, you’ll have more time to focus on what’s really important – managing and growing your business.
If you’re seeking financing for your business, SoFi is here to support you. On SoFi’s marketplace, you can shop and compare financing options for your business in minutes.
FAQ
Which financial software do most small businesses use?
Intuit Quickbooks is one of the most widely used accounting software options on the market. Other popular and highly rated accounting software picks include: Xero, FreshBooks, Wave, Zoho Books, and Sage.
Do you need an accountant if you are using business financial software?
While accounting software can automate many of the services typically provided by an accountant (like basic bookkeeping and financial statements), having a professional accountant can still be beneficial. An accountant can provide expertise on tax planning, cost-cutting, and regulatory compliance that software typically cannot offer. Often the best solution is to use a combination of both.
Is there a financial software for business that is considered easier to use?
Xero and Wave are often cited among the easiest accounting software options to use, especially for freelancers and very small businesses. Wave even offers a free basic plan.
Photo credit: iStock/FG Trade
SoFi's marketplace is owned and operated by SoFi Lending Corp. See SoFi Lending Corp. licensing information below. Advertising Disclosures: SoFi receives compensation in the event you obtain a loan through SoFi’s marketplace. This affects whether a product or service is featured on this site and could affect the order of presentation. SoFi does not include all products and services in the market. All rates, terms, and conditions vary by provider.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
This content is provided for informational and educational purposes only and should not be construed as financial advice.
Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.
Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.
Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.
SOSMB-Q424-048