Taking the Book out of Small Business Bookkeeping

In an ideal world, we could focus all of our energy on growing and improving our small businesses through strategic initiatives and creative thinking. But in reality, there are logistics and administrative tasks that can get in the way of focusing on what you do best. One such task is bookkeeping. With web-based apps and software packages, bookkeeping is no longer a paper-based, manual process. But with that comes a new challenge: investing in the right technology to support the changing needs of your business. Successfully tackling the burdensome but necessary process of bookkeeping means developing a solid plan and maintaining an approach that’s right for you.

To Outsource or Not to Outsource

The first accounting decision small business owners need to make is whether they want to do their bookkeeping in-house or if they want to outsource this function. There is no right or wrong answer, although some experts advise not outsourcing at the beginning; this gives you an opportunity to gain some foundational knowledge of bookkeeping practices.¹

Assuming you decide to manage your bookkeeping in-house, the next decision you’ll need to make is what accounting software or online application you’ll use. Choosing the most frugal option is most likely a priority. But a common mistake is equating “frugal” with price alone.

Devil in the Details

While some accounting software might be free, it can cause disastrous revenue decline and hinder profitability if it’s not the right program for your particular needs. Mike Budiac, who runs FindAccountingSoftware.com (a website designed to help small businesses choose the right accounting packages), knows how important it is to choose the right one. An expert in this area, he has seen how “it can make the difference between businesses that are profitable versus not profitable.”

This is why it’s important to avoid making decisions based on price alone. The most frugal option might be one that’s a higher investment upfront but provides a stronger ROI over time. Keeping that in mind, there are a few overarching categories to choose from: 1) free programs 2) paid accounting packages and 3) web-based applications.

Free Bookkeeping Programs

If your business needs are simple and you don’t need much help as far as tutorials go, there are some credible programs out there that will cost you absolutely nothing to use. Some of the free programs available include:

1. Zoho Invoice – very simple, basic invoice software meant for small businesses and freelancers
2. Outright – accounting and bookkeeping application designed for small businesses with no need for payroll or inventory
3. Wave Accounting – online software for help with invoicing, accounting and payroll

Top 3 Paid Small Business Accounting Packages

1. Sage 50 (formerly Peachtree): this desktop application includes basic bookkeeping functionality and the expertise and reassurance that Sage offers as a world-leading supplier of accounting and business management software

Price: $369 (1 user)

2. AccountEdge: available as both a desktop application and a mobile app, AccountEdge lets users manage their small business finances from pretty much anywhere. It is available in both a basic edition and a pro edition, depending on how many features are needed

Price: $99.00 (Basic Edition) / $299 (Pro Edition)

3. Quickbooks Premier Edition: easily the most recognizable brand name in this category, Quickbooks offers advanced reporting and accounting tools tailored to your business

Price: $399.95

Top 3 Web-Based Applications

Last but not least, here’s how the top web-based applications rank (according to cio.com):

1. Freshbooks ($19.95/month): a simple, cloud-based application that lets small businesses access their data from virtually anywhere and guides them through various accounting tasks with step-by-step wizards
2. Quickbooks Online Simple Start ($12.95/month): performs basic accounting functions such as creating invoices, tracking sales/expenses, downloading banking transactions, etc and allows some flexibility through add-ons such as the Quickbooks “Payroll Bundle”
3. Kashoo ($16/month): another simple accounting application that lets users access their data from multiple places (phone, iPad, web browser). There is also a free version of this available but it limits a user’s transactions to 20 per month

Work Smarter, Not Harder

Just like bookkeeping itself, selecting the right program requires attention to detail and a firm grasp on the unique needs of your business. Few people will tell you bookkeeping is fun but choosing the right accounting method will at least make it easier to work smarter and not harder.

Angie Picardo is a staff writer for NerdWallet. Her mission is to help consumers stay financially savvy, and save some money with the best bank cd rates.