Choosing the right accounting software for your business
By Ean Murphy, founder of Moxie Bookkeeping
All too often, I talk with clients who say “I do my books once a year, in a panic, when I have to do my taxes.” And every time I hear this, my heart breaks a little. Not only is this a stressful way to live and do business, but it also means these people are missing out on this really juicy data about the financial health of their business — data that they could be using, every day, to inform their strategy and make decisions.
As an accountant, a business owner (I’m the founder and owner of Moxie Bookkeeping) and a former freelancer, I have a pretty good understanding of the different accounting challenges that entrepreneurs face as their businesses grow and evolve. Because of this, my firm does a lot of consulting and coaching as well as full-service bookkeeping for our clients. That means we’ll work with brand-new entrepreneurs to help them get set up, and we’ll be there to help them upgrade their systems as they grow.
As a new business owner, you’ll have to make many choices. One of them is deciding on an accounting system, and that’s the choice I’d like to help you with today.
Why I recommend cloud accounting software
Although you can use a spreadsheet or desktop software, cloud-based accounting software is much easier to use and more efficient. It’s real-time, and you can easily import information from your bank account or the other financial tools that you use to run your business. Here’s a video of me explaining exactly why it’s so much better than the alternatives.
Primary options for cloud accounting software
When someone asks me “What accounting software do you recommend?”, my answer will depend on who that person is. The advice I give to a freelancer is very different than the advice I to a small business owner that’s been in business for a while and keeping everything in Excel.
The options for accounting software fall into two main categories: tools for freelancers and solopreneurs, and tools for small businesses that have more complex needs or are planning to scale.
Options for freelancers and solopreneurs
If you’re a freelancer or a solopreneur, you probably don’t need complex accounting software or help from a professional bookkeeper. In that case, there are three primary options to keep in mind: Wave, FreshBooks, and QuickBooks Self-Employed. None of these services offer true double-entry accounting, so you may outgrow them as your business grows — but they are typically affordable and easy to use.
Options for larger or scaling businesses
If your business finances are a little more complex, you should look for a service that offers double-entry accounting. If you’re not familiar with the term, let me quickly define it for you. Double-entry accounting means that the money has to come from somewhere (like your business bank account) and go to somewhere (like salaries) and it all has to balance out in the end.
Both QuickBooks or Xero offer double-entry accounting software that will scale along with your business. These are both paid services, and the primary difference between them is that QuickBooks emphasizes built-in functionality, while Xero allows you to easily connect other tools. For example, if you need a tool for inventory management, QuickBooks will offer a built-in option, while Xero will allow you to connect the tool of your choice.
What I recommend and why
If you’re looking for something simple to get started with, I recommend Wave. It’s free, and that’s huge. Controlling costs is so, so crucial for entrepreneurs — cash flow is the number-one factor that causes small businesses to fail.
The cost of another service, like FreshBooks or QuickBooks Self-Employed, might not seem like much but it adds up. If you’re paying a few dollars here in bank fees, and a few more there for payment processing, you can easily find yourself paying over a hundred dollars per month to organize and access the money that you’re bringing in.
Originally published at www.azlo.com.
