The Best Accounting Software for Small Businesses in 2023

Online accounting software can help you make smarter and better-informed plans for an uncertain future by organizing and automating your daily financial tasks. Every year, we test and rate the top web-based accounting services. Some are better for sole proprietors, freelancers, and companies with only one or two employees. Others accommodate slightly larger businesses. Below you’ll find summaries of these applications, with an explanation of what makes them differ, along with what to look for when choosing the right software for your business. We also include links to the in-depth reviews of each software if you want to learn more.

The last three years must have been brutal for you if you own a small business. You survived the worst of the COVID-19 pandemic, only to be slammed with crippling supply chain issues. Rising inflation in 2022 added to your financial woes. You’ve had to focus more than ever on money in and money out.

Deeper Dive: Our Top Tested Picks

FreshBooks

Best for Sole Proprietors and Very Small Businesses

4.5 Outstanding

Why We Picked It

FreshBooks’ good looks and simplicity are deceptive. FreshBooks is actually a full-featured, double-entry accounting system that happens to offer an exceptional user experience. It has won numerous PCMag Editors’ Choice awards for these reasons. FreshBooks is one of the first accounting options a very small business should consider because it’s intuitive enough for novice bookkeepers to learn but it supports all the elements that a larger business would need, including payroll. 

Who It’s For

We recommend FreshBooks especially for sole proprietors and companies with perhaps an employee or two—though it’s capable of handling more. Very small businesses could use it for basic money management, like sending invoices, monitoring financial accounts, accepting payments, and tracking income and expenses. More complex companies can add advanced tools that include projects and proposals, mileage and time tracking, and reports.

PROS

• Delightful user experience
• Context-sensitive settings
• Team collaboration and time tracking tools
• Inventory tracking
• Automatic mileage tracking on mobile apps

CONS

• Some dashboard deficits
• Limited invoice customization
• Minimal onboarding help

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FreshBooks Review

Intuit QuickBooks Online

Best for SMBs

4.5 Outstanding

Why We Picked It

Intuit QuickBooks Online has been the small business accounting service to beat for many years. It puts highly effective accounting functionality into an exceptional user experience. The service stands out because it’s easily customizable, comes in multiple versions with hundreds of add-on apps, and offers better mobile access than most rivals.

Who It’s For

Intuit QuickBooks Online is expensive, so it’s most appropriate for small businesses with a technology budget. It’s easy enough for an inexperienced bookkeeper to learn but feature-rich enough that a more demanding user can make use of its advanced accounting tools. Because it’s so customizable and user-friendly, it would appeal to a wide variety of business types.

PROS

• Excellent user experience
• Dual-screen dashboard
• In-depth contact records and transaction forms
• Numerous customizable reports
• Supports projects, payroll, and many add-ons
• Great mobile apps

CONS

• Expensive
• Confusing toolbar
• Online support could be better

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Intuit QuickBooks Online Review

Wave

Best for the Smallest Businesses

4.5 Outstanding

Why We Picked It

Wave is one of only two online accounting services that you can use for free, unless you need payroll and payments, which you do have to pay for. Wave follows standard accounting rules and is especially skilled at invoicing and transaction management. It’s one of the cleanest, most understandable business services available. It supports multiple currencies and has a smart selection of features for very small businesses. It doesn’t have a dedicated time-tracking tool, comprehensive mobile access, or inventory management, though.

Who It’s For

Wave is for sole proprietors and freelancers who need an online accounting service and may want a little room to grow. Integrated payroll and double-entry accounting support make it a potential option for small businesses with a few employees, though there are better choices for those companies. And because it has a simple user interface, even financial novices could use it.

PROS

• Free for those who don’t need payments or payroll
• Smart selection of features for very small businesses
• Excellent invoice and transaction management
• Great dashboard
• Multicurrency support

CONS

• Sparse record templates
• Invoice customization could be stronger
• Not all US states supported for full-service payroll
• Slim feature set on mobile apps

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Wave Review

Zoho Books

Best for Mobile Access

4.5 Outstanding

Why We Picked It

Zoho Books is the small business accounting element of Zoho’s ecosystem of productivity applications. Your accounting data can be tightly integrated with numerous related apps and functions, like CRM, customer service, and email. Zoho Books’ usability, flexibility, and depth in standard bookkeeping areas (sales and purchases, time and project tracking, and inventory management) equals and sometimes surpasses what’s offered by competitors.

Who It’s For

While it’s at least as capable as some of the best of its competitors, Zoho Books is surprisingly affordable, and it even has a free version, though prices for paid plans  increased this year. Overall, though, Zoho Books is best for businesses that use some of Zoho’s other applications, but its appeal isn’t limited to such cases. We also recommend it to small businesses, growing businesses, and established businesses that want its customizability, depth, and usability. That said, the depth of its features might be overwhelming to very small businesses but welcomed by companies with more advanced needs.

PROS

• Depth and flexibility in every module
• Multiple sales and expense form types
• Excellent, customizable reports
• Exceptional support options
• Integration with SurePayroll
• Great mobile apps

CONS

• May be too complex for some small businesses
• Time tracking must be tied to projects
• No inventory assemblies
• Limited pool of accountant partners

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Zoho Books Review

Sage 50cloud Accounting

Best for Inventory Tracking

4.0 Excellent

Why We Picked It

Sage 50cloud Accounting is a massive small business accounting application that’s designed for desktop use. It’s the most comprehensive, customizable accounting program in this group of applications, though it does more than what many small businesses need, and it costs a bit more as well. The software offers built-in online connections that support some remote work, and it integrates with Microsoft 365 Business. Sage 50cloud Accounting is a powerful piece of software, so why didn’t it receive a higher rating? A dated interface, lack of mobile access, and the requirement to install the software locally keep it from receiving a higher score.

Who It’s For

Sage 50cloud Accounting is especially appropriate for companies who need robust inventory-tracking capabilities. Additionally, it’s best suited to companies that need more advanced accounting capabilities, customizability, and data capacity; who aren’t averse to desktop software; and whose remote employees have their own installations of the software so they can share company data through Sage’s Remote Data Access.

PROS

• Exceptionally sophisticated feature set
• Extensive customizability
• In-depth records and transactions
• Advanced inventory management tools
• Excellent support
• Microsoft 365 integration

CONS

• For Windows only
• Resource-heavy
• Some UI elements look dated
• Lacks comprehensive mobile app

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Xero

Best for Integrated Add-Ons

4.0 Excellent

Why We Picked It

Xero supports every major financial element you expect in a double-entry small business accounting solution: sales, purchases, bills and expenses, inventory, and payroll. Xero offers exceptional reports and advanced analytics and provides tools for tracking projects. It makes good use of artificial intelligence to automate processes and improve connectivity with related financial websites. Its usability, features, integration options, and network of advisors make it one of the best small business accounting applications available today. 

Who It’s For

Xero is industrial-strength accounting. It’s best used by small businesses that would make use of the lion’s share of its well-integrated features, and that need more powerful reporting options than many of its competitors offer. It also allows you to track fixed assets, which is an unusual tool in the category of small business accounting software. While the user experience is not exactly on the cutting edge, it’s still fairly easy to learn.

We don’t recommend Xero for sole proprietors or freelancers, even though it has a starter pricing level that would suit those budgets.

PROS

• Exceptional support with context-sensitive help
• Uses AI effectively
• Provides critical business views
• Improved customer records
• Advanced analytics
• Processes billable employee expense claims

CONS

• User interface could be better organized
• No inventory assemblies
• Time entries must be tied to projects

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Patriot Software Accounting

Best for Accounting Novices

3.5 Good

Why We Picked It

Patriot Software has a payroll application, which we’ve reviewed for years, and we wanted to see what the company’s integrated accounting counterpart was like. It’s affordable and simple, with robust support. Uncomplicated navigation, an attractive, intuitive UI, and exceptional mobile access add to its appeal. It’s missing some features that competitors offer, and it includes some language and concepts that rivals keep in the background, but it’s a solid, inexpensive solution.

Who It’s For

Patriot Software Accounting Premium is  best for uncomplicated small businesses who probably won’t outgrow it. The integration with Patriot’s payroll application is a definite plus, but the accounting side lacks depth in areas like contact records, inventory, time tracking, and merchant account choice. Its price, voluminous support, and usability make it a great choice for a novice or a small startup.

PROS

• Competitive price
• Useful Overview page
• Uncomplicated navigation
• Attractive, intuitive UI
• Exceptional mobile access

CONS

• References some back-end accounting concepts
• No time tracking
• Can’t track inventory
• Minimal fields in contact records
• Can’t customize reports

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Patriot Software Accounting Review

TrulySmall Accounting

Best for Microbusinesses With No Employees

3.5 Good

Why We Picked It

Truly Small Accounting comes from Kashoo, the company that produced Kashoo Classic, which we’ve reviewed for many years. Truly Small Accounting supports only transaction and contact management, invoices, and bills at this early stage, and it’s likely to stay small and uncomplicated. We liked it for its simplicity, its affordability, its usability, and its unusual approach to accounting when so many competitors are going the opposite direction and offering more features and services. 

Who It’s For

It was refreshing to see a software developer take a step back and develop a very simple accounting application for the many millions of microbusinesses that process fewer than 500 transactions per year. The user experience was clearly designed for novice bookkeepers who are just starting out, or for established but still small companies that just don’t need many accounting features.

PROS

• Excellent user experience
• Zero accounting knowledge required
• Supports multiple businesses
• Simple, understandable transaction management
• Good invoice creation tools

CONS

• Pricey
• Can’t distinguish between customers and vendors
• No product or service records
• No invoice customization
• No payroll option

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TrulySmall Accounting Review

Buying Guide: The Best Accounting Software for Small Businesses in 2023

What Do Small Business Accounting Services 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 answering critical questions: Are we profitable, and 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 service provides information in seconds that will help you answer these questions, based on the input you supply. Once you populate the service 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 software 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 give you access to your finances from your mobile devices.

How Do You Set Up Accounting Software?

Depending on how long your business has been operating, getting started with a small business accounting service can take anywhere from five minutes to several hours after signing up for an account. Most of them offer free trials or a demo account and charge monthly subscription fees once you’re ready to commit. Generally speaking, the more you need an accounting service, the longer it takes to set one up and the higher the monthly payment.

Early setup involves creating an account and answering questions like when your fiscal year starts and what type of business you have.

Next, you have to ask yourself whether 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 software imports recent transactions, usually 90 days’ worth, and adds 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? Then you 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 the accounting software’s settings. All the accounting services reviewed here come with default settings that you may need to change. For example, do you plan to use specific features such as purchase orders and inventory tracking? You can usually turn tools on or off, which can help you either simplify the user interface or maximize the functions available to you.

It is possible to do minimal setup and then jump into creating invoices, paying bills, and accepting payments. All the accounting 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 services also offer the option to import existing lists in formats such as CSV and XLS.

What Is the Best Free Accounting Software for Small Businesses?

For the very smallest businesses, Wave if the best free accounting software. It’s free as long as you don’t need to run payroll and make payments.

The other small business accounting software with a totally free version is Zoho Books. It’s a better choice for anyone who already uses other Zoho software, as well as businesses that plan to grow.

What Is the Easiest Accounting Software for Small Businesses?

Accounting can be complicated, and it needs to be done correctly. The companies that make small business accounting software have worked hard to present this discipline as simply and pleasantly as possible. Notably, Intuit QuickBooks Online and FreshBooks are among the easiest accounting programs to use.

(Credit: Intuit QuickBooks)

Accounting professionals love to use terms like “accounts receivable” and “accounts payable” to describe the primary elements of accounting: recording and tracking income and expenses or tracking sales and purchases. QuickBooks Online and FreshBooks are still understandable if you don’t use that terminology. Their dashboards provide 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.

In general, accounting services are easy to use, with standard navigation tools, icons, and colors (like red for urgent) to help you figure out what you need to know. If you’re in need of the easiest ones, however, QuickBooks Online and FreshBooks are the two we recommend.

After you’ve supplied information about your company structure, one of your next setup tasks will be to add information about your customers and vendors. Some online accounting software lets you include more than basic contact details (“customer since” date, birthday, and other similar fields), which can be helpful as you develop and maintain relationships with them. You 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 small business accounting software 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, they will appear in a list. The same goes for vendors, items, services, and employees. No more filling out card files or messy spreadsheets.

Once you complete a customer record and start creating invoices, sending statements, and recording billable expenses, you can usually access those historical activities within the record itself. Some accounting programs, 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.

These record templates vary in complexity, so you need to understand the differences before you go with one accounting service or another. Some, such as Patriot Software Accounting Premium, simply let you maintain descriptive product records. Others, such as Intuit QuickBooks Online, do more. 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 reorder. Then they actively track inventory levels, which provides insights on selling patterns and keeps you from running low.

Which Transactions Do Accounting Services Support?

Accounting 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.

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 them, too. All you have to do is fill in the blanks and select from lists of variables like customers and items.

(Credit: Zoho Corp.)

How Are Completed Transactions Handled?

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.

Can You Manage Expenses and Bills With Accounting Software?

Accounting services pay special attention to your company’s expenses—not bills that you enter and pay (though some support this), but rather 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 software separates them into expense types. Then the software compares them to your income using totals and colorful charts.

If you’re traveling and have numerous related expenses on the road, for example, then you can often take pictures of receipts with your smartphone. Some accounting services attach these receipts to a manually entered expense form. Others, such as Intuit QuickBooks Online and Xero, read the receipts and transfer some of their data (such as date, vendor, and amount) to an expense form using optical character recognition technology. 

Why You Should Import Transactions and Bank Balances

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 service, then this is easy to accomplish. For one thing, their balances often appear on the dashboard. 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 accounting service guesses at how at least some transactions might be categorized. You can change them 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 accounting services 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.

Creating Reports to Improve the Business

Reports are your reward for keeping up with your daily work and completing it correctly. Every small business accounting service 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 software pour your own company data into it. It only takes a few seconds to generate a report after you have defined it.

(Credit: Patriot Software)

There are two kinds of reports. The bulk are the type that any small business owner 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. They’re considered standard financial reports—such as balance sheet, statement of cash flows, trial balance, profit and loss—and they’re the kind of documents you need if you ever want to get a loan from a bank or attract investors. Small business accounting software 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.

What If I Need Help?

All online accounting services simplify the accounting process, but there will undoubtedly be times when you have questions. You can often get help via chat, email, or phone. Some apps also provide context-sensitive help along the way and a searchable database of support articles. 

Intuit has an option called QuickBooks Live that adds bookkeeping support to Intuit QuickBooks Online Plus. You communicate with a dedicated bookkeeper through one-way video chat (they can’t see you) or email. This individual and their 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. Wave offers fee-based bookkeeping services, but they lack Intuit QuickBooks Live’s interactive quality.

What Is the Best Accounting Software for Small Businesses?

Choosing a small business accounting application is challenging. The best one for you depends on your business needs. 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 accounting services 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.

We recommend reading our in-depth review of any service first to make sure it fits your needs—and your budget.

While you’re thinking about your money, you might also like to consider our reviews of online payroll services and personal finance managers.