Choosing the Best Accounting Software for Online Entrepreneurs
Do you conduct your business via Internet? Then chances are you will need some accounting help. You are an online entrepreneur if you see yourself inside of one or more of these situations:blogger, drop shipper or Etsy.com shop business owner. Perhaps you have a podcast or YouTube channel with tons of sponsors and ad revenue. Maybe you provide services in the form of freelancing or hourly, contracted work. No matter your online business model, it’s still a business and you need to treat it as such. That means you need to know your numbers to make good business decisions and be prepared for annual and/or quarterly tax filings.
If you are confused about how to keep track- don’t be. I’ve used at least 4 different accounting applications to track our business and personal finances, so I can give you a preview into each option to help you decide how to handle your accounting needs. Honestly, I can say that I really liked using all the applications I will reveiw, what you will need, however, just depends on your specific business situation.
I’ve always been a numbers, spreadsheet, techie geek. As a managing partner of a Cafe many moons ago, I implemented an early version of Quickbooks. So, it just made sense to me to start with an Intuit product for our personal financial accounting as a newly married couple. For a while, We used it for nothing more than a glorified checkbook register, but when i became aware of the Home & Business version , it actually became a critical part of my accounting picture as a new business owner. We would carefully track expenses during the year, and come tax time, send the profit and loss reports directly to our accountant. This made it so that she could easily file both our personal and business taxes. This is a good solution if you like to access your financial details locally (i.e. runs faster on your local machine, but can push data to your smartphone app.)
I also appreciate the way Intuit Quicken Home & Business helps you sort out transfers between personal and business accounts. Tracking that can be tricky, but this all-in-one solution helps. Lastly, it’s a popular tool for online entrepreneurs because it can take all your data to work with TurboTax for seamless tax filings (some accountants charge $600-$700 for annual tax filings, so using TurboTax could save you a significant amount of money each year if you do your own taxes.) It’s not a totally perfect accounting solution, but I would say it was mostly helpful. If I hadn’t gone “MAC”, I might still be using it today.
Here are more things to think about should you decide to use Intuit Quicken Home & Business:
- Tracks business and personal spending and any transfers between these accounts
- Works with most bank systems to download and reconcile transactions
- Integrates with TurboTax automatically
- Has an accompanying smart phone app to track finances on the go (in my experience, it’s a little buggy)
- Only works on PC (well, I hear there is a MAC version, but it has more than a few low reviews on Amazon.com)
- There is no true “cloud access” other than being able to access on your smartphone; it’s truly a desktop-centric solution
- There are a lot of complaints about Intuit treating the Quicken line like a neglected stepchild. Supposedly, the development cycle is unresponsive to client needs and the customer service is supposed to be pretty horrendous.
- Not ideal if you need more robust business needs like invoicing, payment or payroll processing
- The Quicken division was recently sold to a private buyer who could potentially fix some of the issues mentioned. So if you are patient, you could hang in there until some of these problems are fixed.
FreshBooks actually caused me to somewhat fall in love with accounting (if that were possible.) FreshBooks became really important to me as I hired contractors who would bill work to specific client accounts. Without this feature, my accounting was a nightmare. It’s another reason I decided to graduate from Intuit Quicken Home & Business. FreshBooks is clever in that once your contractors need to log time in the app, they too, can create their own account on the platform and deal with other clients in their own separate instance of FreshBooks. The contractors I dealt with did end up using it to bill not only me, but also other clients they worked with. I am sure this has been a key part in the growth of the platform. I also like the invoicing feature that allows your clients to pay with a special B2B rate for PayPal (50 cents flat!) My only gripes were lack of more features that would make this a full accounting solution like tracking all expenditures (not just contractors.) There are ways to track expenses against income with FreshBooks , but it’s a little more manual which is why I say it’s not a full solution to me. To make up for this, FreshBooks does offer a bunch of integrations that might make up for this gap in features. FreshBooks is totally honest about their target market being smaller businesses who need to be able to get paid efficiently. They expect your accountant to figure out the rest.
- Friendly, easy-to-use interface
- Cloud based with smart phone access (the app is AWESOME!)
- Good invoicing and payment options
- Easily collaborate with a team for expense tracking and billing
- Integration with a lot of other apps to provide more features
- Free for up to 3 clients
- No general ledger accounting
- Need a 3rd Party application to make this a full accounting solution
- No payroll services
One of the pioneer accounting packages, QuickBooks has pretty much been go to since forever. As I said, I used it in it’s clunky, though effective, desktop form back in the day. Recently, I did switch from FreshBooks to QuickBooks because of how my business grew in 2015. The main reason was that I needed to be able to process payroll for myself and provide my accountant with a format that she was used to working in: QuickBooks. The online version is really nice. The latest updates make it pretty easy to use plus you can get real-time updates of financial reporting without having to manually put in a bunch of information. It will take your payroll and bank connection information to populate your p&l, cashflow and balance sheets at a moment’s notice. There’s even a way to create 1099s from your contractor payments already in Quickbooks! There are two main complaints here: price and no native features to deal with contractors who bill to client projects. I solved the latter by using minute7, a time clock software that wrote contractor hours to QuickBooks directly under the correct client. The bottom line is that this is actually a good solution but may be overkill for most smaller businesses. I really didn’t start using it until I made over $5k/month and consistently worked with contractors.
Here’s my breakdown on key pluses and minuses of using QuickBooks online.
- Full service solution for most basic accounting needs
- The online version, to me, is much more user friendly than the desktop version of old (no need to be scared if that’s the version you remember!)
- Payroll processing (includes those painful quarterly filings for both Federal and Local taxes)
- 1099 Creation (through a separate paid service, but it’s a seamless hop from QB to the Intuit 1099 site once you initiate the process)
- Payment processing included on invoices
- It’s the format your accounnt will most likely prefer; they can make general ledger entries easier and make sure your chart of accounts looks ok
- Pushes information to TurboTax for tax filing
- The price for the base product plus payroll can run anywhere from $40-$50 per month or more depending on your plan
- No easy way to connect contractor billable hours to clients (but there’s an app for that)
- Might be too much for a small business that doesn’t need all these features
Wave Apps Accounting
Last but not least is Wave App. This is the newcomer on the block that offers a free accounting solution, only charging more for upgraded services like payroll processing and others. Like FreshBooks and QuickBooks, the service even allows you to accept credit card payments on directly invoices you send out. I tried wave a few years ago and it didn’t quite work because there seemed to be no clear way for me to reconcile transactions I had entered in versus what the automatic bank import placed in the transactions list. (There might have been a way to do this, i just didn’t have the time or patience to figure it out.)
In an attempt to stay on top of my business check book register balance, I was trying to enter transactions in preemptively. Back then, it made perfect sense to me. Probably because I wrote more checks. Now, I don’t even own a business check! I usually send off any check payments online (which is really rare) and do the rest with my handy-dandy debit card. Due to the need of having to scale back expenses this year, I am back at Wave and so far so good. I simply take a look at my transactions that have been imported from my bank account and categorize any that need to be categorized. Wave apps will create nice neat reports for me in a jiffy. At the moment, I am not paying myself and don’t need payroll processing yet, but should that happen, it looks like I can add that service on for $19/month. With Quickbooks, it was about $50/month.
- Mostly full service solution for most basic accounting needs
- Payroll processing (not sure of all the features, however)
- Payment processing included on invoices
- Double entry accounting
- Made for businesses with a few employees: limited features
- Still a little buggy, but not a game-stopper (example, sometimes I have to re-authorize my bank accounts)
So there you you have it. I hope this run down of all your accounting software options was helpful. What do you use to count beans for your business?