Tim Yoder

Construction accounting is a unique form of bookkeeping and financial management with many distinctive features, such as job costing and change orders. This can leave many contractors and construction companies struggling to find the right accounting methods to keep up with their different projects, decentralized work, and irregular costs. To help simplify the construction accounting processes, we present construction accounting tips and best practices. These include using time tracking solutions with geofencing, classifying workers correctly, selecting the right payroll provider, and backing up records digitally. 1. Use Job Costing Because a construction company can work on many projects at the same time, it’s critical to attribute expenses to each job to control costs accurately and measure a project’s profitability. All direct and indirect expenses must be allocated to the proper job to ensure that the company’s financial records are accurate. This must occur during the project―not after―and expenses must be submitted daily. Expenses should be categorized the same way as in the estimate you provided for project managers to determine whether the job is proceeding as planned. The construction company should also have a standard formula for allocating indirect expenses, such as administrative overhead, to each project. You can use job costing features in the software, such as QuickBooks Contractor. 2. Consider Completed Contract Accounting for Taxes The completed contract method (CCM) involves reporting all project revenue, expenses, and profit only once a contract is completed in full, although payments may be received during the duration of a project. While this approach is often the most preferred method in the construction industry, it’s best suited for short-term contracts under two years. Contractors will often use this method if it’s impossible to calculate the percentage of completion for a project or if they want to defer revenue to a future period—but it also has particular restrictions by the IRS. To be eligible, contractors can’t exceed a certain average annual revenue and their contracts must be completed within a set timeframe. It’s also important to note that because revenue isn’t properly matched with costs, completed contract accounting doesn’t comply with generally accepted accounting principles (GAAP). 3. Use Time Tracking Software With Geofencing A construction company’s labor force can include a combination of salaried employees, union and non-union workers, and independent contractors. Tracking the labor hours and costs on multiple projects can become challenging, so to automate the process and reduce human error and oversight, it’s important to take advantage of web-based tools and mobile apps. Not only is it essential to use some form of time tracking software, but it’s also a good idea to invest in an app with geofencing. This reminds your employees to clock in and out and allows you to monitor your employees’ locations as they travel while at work. 4. Manage Change Orders Construction projects can often undergo changes from the original plan for which a quote, estimate, or bid was provided to the customer. These adjustments can cut into or eliminate project profits if the original bid isn’t adjusted for the additional cost. The use of Change Orders to document changes to the original bid can avoid disputes with customers—and the original contract or bid should spell out exactly how to handle change orders. Contractors should also establish a standard change order process with full documentation of the work and cost required for each requested change. 5. Use Construction-Specific Accounting Software Construction accounting software helps automate standard processes like job costing and estimate comparisons and also enables contractors to better track a project’s profitability. is one of our best construction accounting software, specifically because of its enterprise resource planning (ERP) features, which include project management, remote time tracking by employees, and equipment management. It’s a full accounting software package, with a job costing capability that allows you to generate cost reports and check job cost journals, labor journals, and billing summaries. You can review other great options in our guide to the best small business accounting software. 6. Correctly Classify Workers as Employees or Independent Contractors There are rules you must follow in making the classification of an independent contractor vs employee, and the courts have provided a list of factors that must be considered in determining if a worker is classified as a 1099 or W-2. The focus of the factors is to determine the amount of control the company has over the worker—the more control the company has over the worker, the more likely they’re an employee. The IRS groups the factors into three categories: behavioral control, financial control, and the relationship of the parties. Also, there’s a big difference between how independent contractors and employees are treated for tax purposes. Your construction company must pay social security tax, workers’ compensation, federal unemployment tax, and perhaps other local tax on the wages of employees. However, when you pay independent contractors, you don’t have to worry about those expenses. 7. Choose the Right Payroll Provider With the rigorous reporting requirements in the construction industry, companies may find that payroll can be a complex process. This can apply in instances such as prevailing wage requirements, certified payroll reporting, multiple pay rates, multiple states, and multiple localities. Construction companies can also face many payroll reporting requirements, even if they don’t have to file certified payroll. These can include union reports, workers’ compensation, new hire reporting, and equal employment opportunity (EEO) minority compliance. Because there are so many variables that factor into processing payroll for a construction company, it’s important to select the right construction payroll provider. The ability to manage multiple pay rates is key for processing payroll as are multistate, union-specific, and job costing tools. 8. Track Business Expenses Tracking business expenses can be tricky, as it includes tracking materials and labor too. If you’re paying for these expenses with a credit card, it’s imperative that you use one that’s only for business. You’ll need to track payroll, subcontractor fees, equipment, and material purchases, ensuring that the date, description, and payment made are indicated for each transaction. It’s also important to categorize these expenses by service and individual job so that you can track how much money came in as well as how much you spent on expenses easily. You may want to use a digital expense tracker app to automate this process for you. 9. Reconcile Bank & Supplier Statements Each month, your bank and suppliers will send a statement for each of your accounts, which you’ll need to reconcile to ensure that it matches up with your own accounting system, invoices, and payments. After checking for any discrepancies, you may need to contact your bank to discuss any issues that come up. While reconciling your accounts, you may also want to review whether you’ve had any unexpected expenses, which will impact a project’s profit forecast by raising the predicted job costing. You’ll want to ensure that this is accounted for and that you have a plan in place so that you don’t lose profitability and compromise your profit margin. 10. Improve Inventory Tracking Keeping an accurate inventory of materials makes it easier to see where your resources are being used so that you can budget accordingly. It isn’t unusual for a job to require more labor or materials than originally anticipated, and if you’re constantly taking materials from inventory, you can quickly go over budget on a project and find yourself in short supply on others. Automating inventory management is the key to increased efficiency and eliminating time-consuming manual tasks. Since contractors deal with an array of construction materials―from raw materials and consumables to prefabricated products―and are often managing multiple construction sites at any given time, the need to streamline storage locations, work orders, and purchase orders (POs) using an inventory management system is crucial. How Construction Accounting Is Unique Construction accounting differs from regular business accounting in several ways. In addition to the standard accounts receivable (A/R), accounts payable (A/P), and payroll transactions, construction companies deal with job costing, change orders, progress billings, and customer deposits. Here’s a summary of its three most distinct traits: Project-based: Whether related to production, billing, or labor, construction companies operate their business primarily around projects. Therefore, contractors must treat every construction project as a unique, short-term profit center. To control costs and bid successfully, it’s crucial to track accurate costs for each project individually. Decentralized production: Construction projects primarily happen on different job sites as opposed to a fixed location. Both equipment use and labor frequently move from site to site, which can result in mobilization costs. It also means that equipment and labor costs must always be tracked to each job site along with the correct wage rate. Long-term contracts: In construction, production contracts can last years and have multiple, extended payments over that time. Contract terms frequently allow 30, 60, or 90 days or more to pay invoices. As a result, revenue recognition and cash management carry special considerations in construction. Frequently Asked Questions (FAQs) How do you account for construction projects? Revenue from construction projects can be recognized using either the completed contract or percentage completion methods. Completed contract is usually favorable for tax purposes, but there are limitations on when it can be used. What is an Employee vs Independent Contractor? Employees (W-2 workers) are usually paid salaries or hourly rates by companies, which pay payroll taxes on their workers’ earnings. Meanwhile, independent contractors (1099 workers) are paid hourly or flat rates and are responsible for paying their payroll taxes. Our guide to W-2 vs 1099 workers discusses the differences between classifications in detail. Bottom Line Accounting for construction companies comes with its challenges and requires a unique approach and a comprehensive understanding of all the factors that go into the process. By following our suggested construction accounting best practices, you’ll ensure that your company will maintain accurate records and have a better handle on your financial situation.

Tax software is the core of a tax preparer’s business—which is why the best professional tax software must include the ability to prepare both individual and business returns. The needs of tax preparers vary greatly based on their need for bookkeeping integrations, remote access, and budget. The six best tax software programs for professionals are: : Best overall professional tax preparation software : Best for QuickBooks Online ProAdvisors : Best value for preparing unlimited returns : Best value for preparing 30 or fewer individual and business returns : Best for complex returns, such as consolidations : Best cloud-based software to manage the whole firm Best Professional Tax Software Compared ProSeries Professional: Best Overall Professional Tax Preparation Software , reliable tax preparation software from Intuit, is a good fit for accountants looking for desktop software with a forms-based interface that can import account balances from QuickBooks Desktop. It offers four pricing tiers, with a great option for small firms preparing 200 or fewer returns per year or firms that focus almost exclusively on individual returns. Pricing starts at $594 per year plus $98 per return, including charges for both federal and state returns. ProConnect Tax Online: Best Tax Software for QuickBooks Online ProAdvisors If you’re an avid user of QuickBooks Online, you’re probably going to like , which is designed specifically to serve the tax preparation function for firms centered on . The programs integrate very tightly and can be managed from a single dashboard inside QuickBooks Online Accountant. ProConnect Tax is priced on a pay-per-return basis with no annual fee. QuickBooks Online ProAdvisors can try ProConnect for free and not pay until the return is filed. TaxAct Professional: Best Value for Preparing Unlimited Returns , one of the best professional tax software options for small accounting firms, is a robust solution that comes at an affordable price. You can choose between having an on-site application or having it hosted on the provider’s servers for cloud access. There are several add-ons that allow you to customize the software based on your needs, including payment acceptance and practice management features. You can also access digital marketing capabilities and facilitate client returns. TaxAct Professional offers a money-back guarantee to all clients, allowing you to return it for a full refund within 30 days if you aren’t completely satisfied. Drake Tax: Best Value for Preparing 30 or Fewer Individual & Business Returns , which has been in business since 1977, isn’t just a little bit cheaper than its competitors―it’s a fraction of the price. Yet, it provides very capable tax software. All state programs are included, and you can prepare multiple state returns for a single business with no additional charge. While it’s a great software, its desktop program doesn’t have advanced integrations. Its attractive price―$345 for 10 individual returns plus pay-per-return pricing for business returns―makes it a good fit for tax firms that prepare 30 or fewer individual and business tax returns. Lacerte: Best Software for Preparing Complicated Tax Returns is Intuit’s high-end tax preparation software for preparing the most complicated tax returns, such as consolidated returns and returns for oil and gas companies. It can import balances from QuickBooks Desktop and integrate with Intuit Practice Management. You need to speak with a sales representative to get pricing for plans other than the pay-per-return plan. CCH Axcess Tax: Best Cloud-based Software to Manage the Whole Firm is one module of the CCH Axcess cloud-based firm management software. It’s good for small and midsized accounting firms looking for more than just tax preparation software and preferring cloud-based applications. It integrates with CCH IntelliConnect, a leading tax research service, to provide in-program links to relevant tax authorities and analysis. You must speak with a sales representative for pricing information. Frequently Asked Questions (FAQs) What software do tax preparers Use? Paid tax preparers must use professional tax software that allows them to sign the return as a paid preparer and e-file the return as an Electronic Return Originator (ERO). Popular platforms include ProSeries, ProConnect, Drake Tax, Lacerte, TaxAct Professional, and CCH Axcess Tax. What is the best tax software for CPA firms? The tax software for your certified public accountant (CPA) firm depends primarily on the number, type, and complexity of returns you expect to file. For instance, TaxAct Professional is great for filing an unlimited number of individual returns, while Lacerte is commonly considered the best software for extremely complex returns. Bottom Line You should choose software that provides a pricing option that fits the number and types of tax returns you prepare. However, you must also consider your need to prepare complex returns and the time you could save with bookkeeping software and practice management integrations.

Welcome to the Fit Small Business free QuickBooks Online tutorials. Whether you are new to QuickBooks Online or could use a better understanding of the program, these tutorials are designed for you. Each QuickBooks tutorial provides an in-depth lesson complete with text, examples, and a comprehensive video demonstration. While there are many good accounting software options for businesses, we rated QuickBooks Online as the best. These free QuickBooks tutorials will help you harness the power of QuickBooks Online while saving you time and frustration. If you’re ready to purchase the product, Quickbooks Online is offering new customers 50% off for three months or a 30-day free trial. Our free QuickBooks course consists of eight lessons. Setting Up QuickBooks In this lesson, you will learn how to set up key areas of QuickBooks like bank and credit card accounts, invoice templates, products and services, and the chart of accounts. By the time you complete this QuickBooks online tutorial, you will be ready to start using QuickBooks to manage all of your income and expenses. The features and settings that you choose in this lesson will affect every area of QuickBooks. For example, you will set the default payment terms for customer invoices and vendor bills. You will also choose whether to turn on inventory quantity and cost tracking. The Setting Up QuickBooks lesson includes the following tutorials: Managing Sales and Income This lesson covers how to record your sales and track your income in QuickBooks Online. There are two types of sales in QuickBooks: credit sales and cash sales. By the end of this lesson, you will be able to keep track of your credit sales by creating and emailing invoices to your customers as well as recording cash sales where no invoice is needed. You will also learn how to apply payments received to outstanding invoices so that your accounts receivable (A/R) is up to date and income is not counted twice. After this lesson, learn about A/R aging reports, which will help you manage unpaid invoices. The Managing Sales and Income in QuickBooks lesson includes the following tutorials: Managing Bills and Expenses This lesson covers how to manage your bills and record expenses in QuickBooks. As a small business owner or manager, you know that managing expenses is as important as generating sales. By the end of this QuickBooks lesson, you will be able to keep track of expenses in a couple of ways. First, you can write and print checks directly from QuickBooks to pay for expenses that require immediate payment. Second, you will be able to manage what you owe to vendors by entering and tracking bills. You will learn to enter the payment of these bills correctly so that the expense is not recorded twice. The Managing Bills and Expenses in QuickBooks lesson includes the following tutorials: Managing Banking Transactions You will be able to manage all of your downloaded banking transactions by the end of this lesson. You will also understand how to enter basic banking transactions manually. Finally, you can use the reconcile tool to ensure the transactions on your bank statement match what has been entered into QuickBooks, resulting in up-to-date financial statements. If you need a refresher, we walked through how to import your banking transactions into QuickBooks in Lesson 1, Tutorial 9. The Managing Banking Transactions in QuickBooks lesson includes the following tutorials: Managing Business Credit Card Transactions Bookkeeping is much easier when cash transactions are kept to a minimum. One way to limit cash transactions is to use a credit card. This lesson will teach you to download and track your credit card purchases in QuickBooks and reconcile them with your credit card statement to ensure that they match. The Managing Business Credit Card Transactions in QuickBooks lesson includes the following tutorials: Managing Credit Card Sales By the end of this lesson, you will be able to manage credit card sales with either a account integrated with QuickBooks or a third-party credit card processor. You should consider accepting credit card payments as a convenience for your customers and to increase the speed that you collect outstanding invoices. The Managing Credit Card Sales in QuickBooks lesson includes the following tutorials: Set Up and Manage Payroll By using , all your wages, salaries, and payroll taxes will be included automatically in your financial statements. After this lesson, you’ll be able to set up employees in QuickBooks, enter and run payroll, pay employees by direct deposit or check, and reconcile your payroll taxes. The Set Up and Manage Payroll lesson includes the following seven tutorials: Reporting in QuickBooks Online QuickBooks will generate important reports that will provide you, your accountant, and your banker important insights into the financial health of your business. This QuickBooks tutorial will teach you the importance of and how to print the profit and loss report, balance sheet report, statement of cash flows, and A/R and accounts payable (A/P) aging reports. One of the primary purposes of using bookkeeping software like QuickBooks Online is to determine the health of your business at any given point in time. Having the ability to produce solid, accurate financial statements can benefit you in the following ways: You might gain potential investors You might secure a business loan or line of credit You can make better business decisions, such as whether you should sell a new product or service or drop one that is not doing so well The Reporting in QuickBooks lesson includes the following tutorials: Bottom Line Our QuickBooks Online tutorial will teach you the basics you need to know to start keeping the books for your small company or employer. Don’t be intimidated by the size of the tutorial―take one lesson or tutorial at a time. Get started today. First Tutorial

Internal controls are important for all businesses, regardless of nature, size, and type. When I was at the university, we created an accounting manual for a local small business in the area. The main challenge that we encountered was creating a sound internal control system for a small business with three administrative employees who handle multiple job posts. With that, let me share my experience and learnings with this internal controls checklist for small business application: 1. Properly Segregate Duties Segregation of duties (SoD) is a direct deterrent to fraud and a mechanism that spots errors along the process. There’s no fixed rule on what job roles should be segregated. In designing internal controls, you just have to remember the acronym ARC (authorization, recording, and custody). These three functions are incompatible duties and shouldn’t rest in one person. 2. Ensure Owner Oversight The major challenge in a small business environment is the lack of a workforce to handle jobs that should be separated. Sometimes, the cost of following proper SoD outweighs the benefits due to the lack of a business need for so many administrative employees. Owner participation and oversight can be a compensating measure if it’s impossible or uneconomical to separate incompatible duties. Participation in daily operations is an added layer of protection in case some employees take advantage of a weak internal control system. 3. Create Documentations Documents serve as evidence of transactions. Business source documents must contain certain attributes to make them reliable and contribute to good internal controls. They must have the signature of the person who processed and approved the document, which must bear special notes or stamps like Paid, Approved, Denied, or Closed to show the status of the document within the workflow. To keep the integrity of source documents, consider prenumbering them so that employees won’t be tempted to falsify documents to their own advantage. Documentation is crucial in the accounting process as it helps your employees keep track of everything. But with small business accounting software, you shift to paperless transactions. 4. Perform Independent Reconciliations Another important internal control feature is independent reconciliations, meaning that the person reconciling the accounts must not have custody or access to these accounts. For example, the person performing bank reconciliations must not have access to the bank account. Instead, the person performing account reconciliations must reconcile accounts based on reports provided to them by the person with custody over the accounts, such as forwarding bank statements to the person who will reconcile bank accounts. Hence, you can assign your bookkeeper to perform bank reconciliations—as long as they don’t have access to your bank account or the authority to sign checks. 5. Define Levels of Authorizations Proper authorization ensures that all transactions within the business are valid and legitimate. As good internal control practice, only the small business owner should have the ability to authorize any type of transaction. Even the most trusted employees must not have the same level of authority as the small business owner since putting too much trust can be an opportunity for fraud as explained in the fraud triangle. However, the business owner may delegate certain authorization roles to managers and carefully consider the tasks to delegate. For example, managers can approve expense reimbursements that are below $500 or have the authority to approve sales contracts below $5,000. 6. Establish Standard Operating Procedures Even in a small business, you need to establish a standard operating procedure (SOP). An SOP is a set of steps for routine transactions, and a transaction is routine if it needs to be performed several times a week. These may be recording customer payments, accepting customer orders, ordering goods from suppliers, and paying employee salaries. SOPs are a form of internal control because it streamlines the routine process to prevent errors and mistakes. In forensic accounting and auditing, accountants start with SOPs to understand how the business operates since forensic accountants and auditors are external parties who aren’t aware of all business policies. 7. Be Strict in Cash Transactions In a small business, extra emphasis must be placed on cash receipts, disbursements, and deposits. Controls must be in place to ensure that receipts are issued to cash-paying customers and that different employees collect the cash, record the cash, and deposit the cash. If this SoD isn’t possible, you as a business owner must get involved. Another business practice is setting a threshold for cash transactions. For instance, cash transactions above $1,000 must go through owner approval, while cash transactions below $50 can be charged to petty cash. To reduce the risk of theft, one of the most important cash management tips is to deposit all cash received daily in the bank as keeping too much cash in the business is risky. In line with this, strive to pay cashless for every expense transaction where possible. Cashless payments are safer since our goal is to reduce the existence of physical cash in the business. As such, encourage customers to also pay cashless through e-wallets, debit payments, and credit card swipes, and don’t discourage them from paying with a credit card by charging them an extra fee. 8. Review Logical Security Logical security is otherwise known as application access controls. They refer to login credentials to information systems used in the business like accounting software, expense tracking software, invoicing software, and many more. The appropriate level of management must have access to specific apps and software. It doesn’t mean that every person regardless of their position or role must have access to every app used in the business. For example, only accounting employees must have access to your business’s QuickBooks Online account. More so, employees in the sales team shouldn’t be included in the QuickBooks Online subscription. If your business happens to create a customized system like what we did here in Fit Small Business, you should give each employee a role with specific limitations on what they can do. 9. Review Physical Security Physical security is an internal control as well. It refers to the methods you use to secure business assets if your business has an office or physical shop. Physical security includes installing closed caption TV (CCTV) cameras, creating fencing around the perimeter, and limiting access to specific areas. You can limit employee access by handing out access badges or key fobs. Padlocks and typical door locks are still viable if there’s no business need for high-tech security mechanisms. In crucial areas like cash vaults or offices where you keep trade secrets, the best physical security is to limit access to one employee only and the business owner. If you have extra budget, hire security guards from agencies to guard business premises outside business hours. 10. Assess Business Continuity Some small businesses use sophisticated technology and equipment that help them provide unique products and services to customers. Good internal control dictates that there must be at least a business continuity or recovery plan in case of unforeseen events and disasters. This plan must outline the necessary steps the business must do to continue performing its critical tasks. In contrast, business continuity may also cover sudden resignations, replacements, termination, or death of key business personnel. With a key position left vacant, the business must establish a series of steps to continue operating even with the absence of key personnel. There must be appropriate documentation as well so that the person who will take over the position can continue all ongoing operations within the department. Components of Good Internal Control In establishing good small business internal controls, many businesses follow the framework of the Committee of Sponsoring Organizations (COSO). In the COSO framework, a good internal control system has five components, and you remember them easily using the acronym CRIME: Control activities: These are manual and automated tools that help prevent or detect the risk of misstatements due to fraud or error. The list of controls above are examples of control activities. However, unique control activities may exist in every department, like accounting controls for the accounting department or production controls for the production department. Risk assessment: This involves analysis of risks posed by internal and external factors affecting the business. These risks may pertain to operations like the risk of employee fraud, product returns due to defective production or economic and political risks, such as increasing interest rates, new legislation, and higher tax rates, that the business can’t control. Information and communication: The business must also have an effective information and communication system. It involves communicating information to employees to help them in their responsibilities. The business should communicate to the employees the importance of following controls to ensure smooth operation. Monitoring: This refers to ongoing evaluations of existing controls and the application of controls. Monitoring controls help your business find ways to improve it if there are sudden changes. Moreover, it enables you to detect employees who aren’t following control procedures. Control environment: It’s the set of standards internal controls are based on. The control environment is the attitude of the business owner and management toward adherence to internal controls or the tone at the top. Your business’s control environment is a result of your philosophy and operating style. In other words, it’s a reflection of your ethical values. Hence, business owners who intentionally misstate tax returns can encourage employees to do fraudulent acts but for their own advantage. Bottom Line Good internal controls can help your business operate efficiently and effectively. It also reduces the risk of fraud or error within the system. By following our checklist of essential small business internal controls, you can lay the foundation for your small business’ internal control system.

Bench Accounting is a virtual accounting service provider that offers bookkeeping and tax support for businesses and individuals. When you sign up, you’ll be matched with a dedicated bookkeeper who is backed by a team of in-house accountants. Your bookkeeper will categorize transactions, reconcile accounts, and prepare reports on your behalf. You’ll also be granted access to an online application that allows you to view the status of your financial data and communicate with your bookkeeper. Use Cases If you’re unsure whether Bench Accounting is the right assisted bookkeeping service for you, check out our list of the best online bookkeeping services for more choices. Bench Accounting Deciding Factors Bench Accounting Alternatives Bench Accounting offers two plans, Essential and Premium, which cost $299 per month and $499 per month, respectively. Both include monthly bookkeeping and year-end reporting, but Premium gives you more features, like unlimited tax advisory services and federal and state income tax filings. If you require specialized accounting, such as segment tracking, invoicing (A/R), and bill payment (A/P), you’ll need to purchase the Specialized Accounting add-on, which starts at $100 per month. Additional Costs Historical bookkeeping: Starts at $299 per month Specialized bookkeeping: Starts at $100 per month S-corps, C-corps, and partnerships filing add-on: $69 per month for one partner or shareholder when billed monthly or $59 per month when billed annually Upon enrollment, you’ll be paired with your own dedicated bookkeeper. They’ll get to know your business, explain how Bench works, and gather everything they need from you to get started, which includes your information for bank accounts, credit cards, loans, and merchant processors. If you need to contact your bookkeeper, you can book a call or message them directly through the app. One of the most appealing features of Bench is that you have access to unlimited support, no matter which plan you choose. Bench Accounting’s mobile app is available for iOS users and provides financial reporting functionality and real-time cash flow updates. It also gives you the ability to check accounts, vendors, spending categories, dates, credit, and more to ensure that your business is on track. As of this writing, there’s no mobile app available for Android users. Bench Accounting is best for freelancers and small businesses with basic bookkeeping needs, such as providing cash-basis financial statements for tax return preparation. It’s an ideal solution if you have limited time or want to outsource your books to a certified bookkeeper so that you can focus on the other aspects of your business. You’ll also have access to a tax professional to help you make tax preparation and filing easier. However, if you need financial planning services like investment and business expansion, you won’t get those with Bench. Also, because it operates on proprietary software, it doesn’t sync with commonly used accounting software like QuickBooks Online or Xero. Here’s a summary of Bench’s useful features: Dashboard The Bench dashboard contains two menus: Accounting and Messages. The Accounting tab gives you an overview of your financial standing and allows you to instantly view reports, if needed. You can also upload documents, run reports, and connect your bank accounts from the tab. The Message tab enables you to send and receive messages from your assigned bookkeeper. Historical Bookkeeping For an additional fee, Bench’s bookkeepers can provide overdue bookkeeping services depending on how late you’re on your books. If you’re less than two years behind on your bookkeeping, you’ll need the catch-up bookkeeping add-on. Your bookkeeper will update your books accordingly on your behalf. If you’re behind on your books for more than two years, Bench offers a special program called BenchRetro. Specialized Bookkeeping If your business needs invoicing, bill payment, property tracking, or third-party revenue collection, you’ll need to sign up for specialized bookkeeping, which starts at $100 per month. Gusto for Payroll Bench Accounting integrates with to help you manage your payroll transactions. Gusto files local, federal, and state payroll taxes automatically and generates W-2s. It helps you manage employees’ information, benefits, and deductions. Learn more about the solution by reading our Gusto review. Financial Reports The Accounting tab on your dashboard provides you with real-time updates of your financials, showing exactly how much money you have and how you’re spending it. You can access your income statement, balance sheet, and other reports that are fully customizable. You can tag transactions with labels like products, clients, locations, or sales channels to see exactly how your business is performing. Click here to see the reports that the Bench Accounting app generates. Bench’s Essential plan includes the preparation of a year-end financial package needed to file your taxes. To make taxes more hassle-free, you can upgrade to the Premium plan, which includes unlimited bookkeeping and tax support. Premium also has filing for sole proprietors, contractors, and businesses (S-corps, C-corps, and partnerships). When your books are completed, your dedicated tax coordinator will help you track down forms to help you simplify the filing process. Bench partners with for filing your return at the end of the year. Frequently Asked Questions (FAQs) What will my Bench bookkeeper do on a monthly basis? Each month, your bookkeeper will import all of your business transactions and categorize them, then reconcile your bank accounts and prepare financial statements. If your bookkeeper has any questions about a particular transaction, they’ll send you an in-app message. When your bookkeeping has been completed for the month, you’ll receive a message inviting you to view your financial statements and account information online. How can I get in touch with my Bench bookkeeper? You can book a call with your bookkeeper or send them an in-app message directly through the Bench app. There’s no extra fee or hourly charges for support, and you’re welcome to reach out to them whenever you have a question. How can I ensure the accuracy of my Bench bookkeeper’s work? Once your bookkeeper wraps up your books every month, the information is reviewed by an in-house support team that ensures accuracy. Also, they never make assumptions about your business, preferring instead to reach out with any questions. How much does Bench Accounting cost? Bench Accounting offers two monthly subscription plans, Essential for $299 and Premium for $499. While both offer basic bookkeeping and year-end reporting, Premium has unlimited tax advisory services and federal and state tax filing. How does Bench Accounting work? Once you sign up for Bench Accounting, you’ll be assigned a dedicated bookkeeper who will learn more about your business and help you connect your bank and credit card accounts. They’ll also categorize your transactions and send you monthly reports and a year-end financial package. Premium subscribers will also receive tax assistance. Bottom Line is a great option if you lack in-house accountants or don’t want to purchase or learn how to use accounting software. Bench bookkeepers are trained professionals, so you can be sure that your books are well taken care of, at a fraction of the cost of hiring a local certified public accountant (CPA). If you only need basic bookkeeping and your business makes enough money to sustain the $299 price tag for unlimited monthly bookkeeping support, then Bench is a cost-effective solution. You can try Bench Accounting for free to see if it’s a good fit.

QuickBooks Desktop Premier, a desktop version of QuickBooks bookkeeping software, enables you to perform a wide range of accounting tasks, such as sending and tracking invoices, running payroll, and managing inventory. It’s ideal for businesses that need to keep separate books for multiple companies and have an experienced bookkeeper who rarely needs assistance from an offsite accountant. Pricing starts at $799 per year for one user. Are you looking for something else? Read our guide to the best small business accounting software. QuickBooks Desktop Premier Deciding Factors QuickBooks Desktop Premier New Features for 2023 Tag intercompany transactions: With this new feature, you’ll no longer have to adjust manually for intercompany transactions when creating consolidated reports, helping you manage multiple business entities better. Cash Flow Hub: This helps you track your cash position and your bank and credit card accounts and loans. With Premier 2023, you can now review account balances, see cash balance trends, manage overdue bills and payments, and track cash performance over a specified period. Upgraded mileage tracking: QuickBooks Premier 2023 now allows you to track business mileage from your desktop or mobile device automatically and get it approved by your manager or supervisor. You just need to input the start and end trip locations, and the app will calculate the mileage automatically. The previous version tracks business mileage, but you have to record your odometer readings manually. This new feature is only available in the iOS mobile app. Inventory categorization: You can now organize item lists by categories or groups so that you can shorten the list and easily find what you need. Improved bank feeds: Premier 2023 now connects to many banks that were previously not possible. Also, you can set up the frequency of automatic downloads of banking data. QuickBooks Desktop Premier Alternatives QuickBooks Desktop Premier pricing runs from $799 per year for one user to $1,999 per year for five users, which is expensive compared to most small business software. For example, you can get with similar features for $85 per month ($1,020 per year) with five users included. However, if you only need one user, QuickBooks Premier can be of great value. If you’re dissatisfied with QuickBooks Desktop Premier, then you can ask for your money back within 60 days of purchase. Enhanced Payroll QuickBooks Desktop Enhanced Payroll calculates your payroll taxes, lets you run your payroll in minutes, and allows automatic import of your time data. It costs $50 a month plus $5 per employee per month and includes free direct deposit. Fit Small Business Case Study We conducted a case study to determine how Premier performs against our internal rubrics. Our QuickBooks Premier review was based on an expert evaluation using different categories. For each, we assign respective weights based on how essential they are to our evaluation. The table below summarizes the result of our QuickBooks Desktop Premier case study. QuickBooks Desktop Premier vs Competitors QuickBooks Premier is very strong in most areas of our case study. Its mobile app is pretty weak compared to QuickBooks Online and Xero, which isn’t surprising given that QuickBooks Premier isn’t cloud-based software. While QuickBooks Premier received only 1 point for pricing, that is a little misleading since our case study evaluated pricing based on a subscription for five users. QuickBooks Online charges $85 per month for one to five users, but QuickBooks Premier charges by the user with a single user being only $799 per year. If you only need a single user, then Premier can be of very good value. QuickBooks Desktop Premier Features QuickBooks Desktop Premier offers a wide range of tailor-made features specially designed for your industry. Whether you’re a general contractor, nonprofit organization, or professional service provider, you’ll find many useful functionalities in the QuickBooks Desktop Premier software. Below is a list of some of its key features. QuickBooks Desktop Premier would have hit all the right notes if not for its inability to track activity by location, which is a popular feature of its cloud-based counterpart, QuickBooks Online. However, as with QuickBooks Online, setting up QuickBooks Desktop Premier is easy and detailed. You can input company information and set entity type. After setting up basic information, you can also modify or import a chart of accounts, close prior period accounts, and input beginning balances. When it’s time to share your books for tax with an offsite accountant, like a certified public accountant (CPA), you create an electronic file called the Accountant’s Copy. When creating it, you must choose a dividing date. For instance, if you’re sending a CPA the information for your 2022 tax return, you’ll choose a dividing date of Dec. 31, 2022. Your accountant will be able to work on transactions on or before Dec. 31, 2022, to prepare your return. You’ll be able to continue working on 2023 information but won’t be able to change any information prior to 2023. This allows both you and the CPA to work on the company file simultaneously without interfering with each other. When the accountant is done, they’ll send you an Accountant Changes file that you’ll import to record the changes made and release the divide date. The only downside of this feature is that you have to send the Accountant’s Copy every time you need a CPA to check your books. This is inconvenient compared to cloud software, which allows your accountant direct access to your books with a simple invite. Users who left QuickBooks Premier reviews praised it for strong inventory accounting reports and the ability to generate advanced reports. However, some dislike that the mobile app is very limited and that it is a bit expensive—especially if it comes with payroll. Overall, the user ratings are a little lower than the ratings for QuickBooks Online and Xero, which is consistent with our evaluation that QuickBooks Premier is a little more difficult to use for nonaccountants. Here are QuickBooks Desktop Premier’s ratings on several review websites: G2: 4.3 out of 5 based on over 1,600 reviews TrustRadius: 8.4 out of 10 based on about 800 reviews Software Advice: 4.34 out of 5 based on around 1,500 reviews Google Play (for Mobile App): 3.1 out of 5 based on over 100 reviews App Store (for Mobile App): 1.9 out of 5 based on more than 50 reviews Frequently Asked Questions (FAQs) When is QuickBooks Desktop Premier right for me? QuickBooks Desktop Premier is right for you if you’re working with an in-house bookkeeper, have complex inventory accounting needs, or are in a specialized industry, including retail, general contractor, manufacturing and wholesale, retail, nonprofit, and professional services. Is QuickBooks Desktop Premier better than QuickBooks Online? QuickBooks Desktop and Online are designed to serve different business purposes. For instance, Desktop Premier is great for multicompany accounting and inventory, while QuickBooks Online is better for companies whose accounting tasks are done remotely. Are there great alternatives to QuickBooks Desktop Premier? Yes, there are, and the right one depends on your needs. For example, if you need access to more than five users, you need to upgrade to QuickBooks Enterprise, whereas if you want a free alternative, consider Lendio Accounting. Bottom Line is powerful accounting software with many advanced features and reporting capabilities that take time and patience to learn. Full-time bookkeepers will love it for its quick data input and fast navigation compared to cloud-based software. However, inexperienced bookkeepers might be served better by cloud-based software, such as QuickBooks Online, if they need frequent help from an offsite bookkeeper.

The best accounting software for your small business vary greatly by industry and your personal preferences, which we’ll cover in this guide. We selected our top accounting software for small businesses based on pricing, ease of use, and how they perform against various accounting tasks, such as invoicing, project management, and inventory accounting. Here are the eight best accounting software for small businesses: : Best overall industry-customizable small business accounting software with project, class, and location tracking (8.8 out of 10) : Best for use on a mobile app (8.7 out of 10) : Best for managing the books of multiple companies (8.5 out of 10) : Best for unlimited users (8 out of 10) : Best for small service-based businesses (6.3 out of 10) : Best free solution for tracking income and expenses (5.7 out of 10) : Best online bookkeeping service as an alternative to do-it-yourself (DIY) accounting software (no score) : Best accounts payable (A/P) software for advanced bill pay features and approval workflows (no score) Comparison of Best Small Business Accounting Software See fullscreen table × QuickBooks Online: Best Overall Small Business Accounting Software is our best small business accounting software because of its strong feature set, including the ability to create classes and locations for tracking income and expenses. It’s a versatile program that you can customize to specific industries, such as churches, restaurants, and nonprofits. QuickBooks Online is also easy to use and allows you to share data and files effortlessly with employees, certified public accountants (CPAs), and tax professionals. With tiered subscription levels, it can scale as your business grows or your needs change—making it the top accounting choice for 5.5 million small business subscribers. Who QuickBooks Online Is Best For Construction: QuickBooks Online, when integrated with , provides excellent project accounting and construction management tools like employee time and location tracking, customer relationship management (CRM), and a customer portal. Ecommerce retailers: can be added to QuickBooks Online to provide direct integrations with most ecommerce platforms, reducing the need for expensive third-party connectors. Real estate businesses: The ability to separate activity by class and location makes QuickBooks Online a viable option for property management companies that need to track income and expenses for various segments and locations. Invoicing: QuickBooks Online is our best invoicing software as it calculates sales tax rates automatically based on the customer address or transaction location. Trucking companies: provides a great integration that adds fleet management, IFTA tracking, and dispatching to your QuickBooks Online software. Mac users: QuickBooks Online’s intuitive design and navigation are optimized for Mac users. Bank reconciliation: QuickBooks Online has the most comprehensive bank reconciliation of all the leading accounting software programs on the market. You can reconcile transactions by connecting your bank accounts or uploading your files of statements manually. Standout Features Location and class tracking: Set up tags to track your income and expenses across different departments, properties, or locations of your business. You can use this feature to determine which department brings the most money to your business. Inventory: Track the cost of inventory on hand and allocate that cost between ending inventory and the COGS. Project accounting: Set up projects to include income, expenses, and wages, and create project estimates. A huge drawback we found in QuickBooks Online’s project accounting, however, is that you cannot compare estimated to actual project costs. Invoicing: The best thing about QuickBooks Online’s invoicing feature is that it calculates the sales tax rate automatically to apply to your invoice based on the customer address. Bill Pay: Pay your bill electronically directly from your QuickBooks account. We compare the features of each plan in our QuickBooks Online comparison guide. Expert Opinion It’s hard to go wrong with if you can afford the price. It’s very flexible and powerful software that can be customized for nearly any business. The ability to track profit and loss (P&L) by class and location allows you to see how profitable your business is across different offices, locations, and properties. Another benefit of QuickBooks Online is that you can find a local QuickBooks ProAdvisor in your area easily if you need one. To get the most out of the platform, check out our free QuickBooks Online tutorials. Zoho Books: Best Accounting Software for Use on a Mobile App stands out from the other accounting software with its powerful mobile app. We recognized it as the leading mobile accounting app because it can perform almost any accounting task, including sending invoices, accepting online payments, entering bills, and viewing reports. The app also allows the creation of recurring invoices and tracking of time worked, making it our pick for the overall best accounting software for freelancers. The software is one of the many Zoho apps—which includes Zoho CRM, Zoho Inventory, and Zoho Projects—that can be integrated to give you a comprehensive solution to all your business needs. Zoho Books can be purchased separately as part of the Zoho Finance bundle or as part of Zoho One, which includes all of Zoho’s apps. *Elite and Ultimate were launched in 2022. Elite is designed for those needing improved inventory management features like serial number tracking, while Ultimate is great for those wanting advanced analytics such as collaborative reporting. Standout Features Mobile app: Mobile accounting is one of Zoho Books’ biggest strengths. The mobile app can perform plenty of accounting tasks—including invoicing, accepting online payments, recording bills and bill payments, categorizing expenses from the bank feed, and viewing financial reports. Inventory: Zoho Books has complete features for tracking inventory. You can track inventory on hand and the COGS, adjust the cost of inventory, and categorize expenses based on vendor details, product details, and stock-keeping units (SKU). Project accounting: Track time worked and assign it to a project or customer, create expenses from a project, and generate an invoice straight from the project. Expert Opinion We believe that conducting business with clients on the go is easier when you have a powerful mobile app like . However, that’s not the only thing it can offer, as it’s also remarkable in other aspects, like inventory and project accounting. Whether you’re a large enterprise needing inventory software or a very small business wanting a free package, it can be a great option. QuickBooks Desktop: Best Multicompany Accounting Software If you manage multiple businesses, then is for you. All its editions, which we cover later, can be used to keep the books of an unlimited number of companies for a single price—a big advantage over QuickBooks Online. Because of this, QuickBooks Desktop is our top-recommended multicompany accounting software. Another reason to use the program is it works even when you have no internet connection because it’s locally installed. QuickBooks Pro and Premier are the most popular desktop versions of QuickBooks for Windows. Meanwhile, QuickBooks for Mac, one of our best accounting software for Mac, has features similar to Pro. Standout Features Multicompany accounting: Manage the books for an unlimited number of companies with a single subscription. Advanced inventory management: QuickBooks Desktop offers more advanced inventory tracking than QuickBooks Online. For instance, you can create assembly items to build and track finished goods, which can be useful for manufacturing teams. Class tracking: Classes can be customized to represent cost centers or enterprises, making QuickBooks Desktop our leading farm accounting software. Expert Opinion If you prefer locally installed software over a cloud-based program and mobile accounting app, then go with . Its Pro and Premier editions are very powerful accounting software, perhaps even more powerful than QuickBooks Online. However, they’re more difficult to master and don’t provide the advantages of mobile accounting. Read our in-depth comparison of QuickBooks Online and Desktop to choose the best software for your business. Also, read our QuickBooks Desktop Pro review, QuickBooks Desktop Premier review, and QuickBooks Desktop Enterprise review to learn more about each version of QuickBooks Desktop. Xero: Best Accounting Software for Unlimited Users is a cloud-based accounting software with features similar to QuickBooks and Zoho Books. However, unlike those two, all Xero plans include unlimited users. If you need multiple seats to access and work on your accounting software, then this provider is an ideal choice. Its features are comparable to QuickBooks, and it’s considerably less expensive, making it one of our best alternatives to QuickBooks. Standout Features Unlimited user access: Xero offers a good value for your money, as all its plans support an unlimited number of users without any extra cost. Fixed asset management: What makes Xero unique from other accounting software is its fixed asset manager. You can record and track fixed assets (like machinery, vehicles, and equipment), set up depreciation entries, and account for gain or loss from a disposal of a fixed asset. Inventory management: Create and track inventory, monitor inventory levels, add inventory items to invoices, and track COGS. Expert Opinion unlimited user access makes it a great option for collaborative teams. Its fixed asset manager, which is unique among accounting programs, is useful for manufacturing teams that use different kinds of machinery and equipment in their production. A major drawback to Xero compared to QuickBooks Online is the lack of bookkeeping professionals who support it. While Xero has 2.3 million users, most of them are located outside of the United States. Check out our free Xero courses to learn how to make the program more useful for your business. FreshBooks: Best for Small Service-based Businesses has many project management features beneficial for service-based businesses, such as the ability to create estimates and convert those estimates to invoices once approved, track time spent by team members on a project, and communicate with members through its built-in collaboration tool. Another useful feature is the ability to compare estimated and actual project costs, which isn’t possible with QuickBooks Online. Standout Features Project accounting: FreshBooks allows you to create estimates with items like inventory and sales taxes, convert estimates to projects, track time and instantly convert time entries to invoices, and more. Excellent customer service: FreshBooks offers plenty of customer support options, including phone and email support and self-help guides and resources. However, its biggest advantage over other software providers is that it allows FreshBooks users to directly call its customer support over the phone. With other providers like QuickBooks Online, you have to send a request and wait for them to call you. Mobile app: The FreshBooks mobile app lets you create and send invoices, enter and pay bills, accept payments online, and record billable time from your smartphone. Expert Opinion doesn’t have inventory accounting features, so we highly recommend it for small service-based businesses needing a strong project management solution. If you have team members working on multiple projects and you want to make sure that no billable time is missed, then its time tracking tool is a great help. Billable hours and expenses entered by employees and contractors will be saved until added to a customer invoice. You might enjoy our free FreshBooks tutorials for an in-depth view of how to use the platform. Lendio Accounting: Best Free Solution for Tracking Income & Expenses (formerly Sunrise) offers free accounting software for small businesses needing basic tracking of income and expenses and a solid invoicing function. Its main drawback is the inability to reconcile your bank accounts to your bank statements, which isn’t a major problem unless you issue a lot of paper checks. If you’re a small business or a freelancer wanting to know where money is going, you should do well with Lendio Accounting, our best free accounting software. Standout Features Receipt capture: Lendio Accounting lets you capture and store receipts from your browser or with the Sunrise mobile app, helping you organize your expense claims easily. Automatic expense categorization: Upgrade to Plus to get automatic expense categorization in your bank feed. Invoicing: You can create customized invoices, send them on a recurring basis, track sales taxes by jurisdiction, and accept short payments from customers. Expert Opinion is a great choice if you’re a solo business owner or freelancer looking for a free invoicing solution without the need for professional bookkeeping assistance. It has a decent mobile accounting app and good customer service. If you’re looking for a zero-cost platform that allows more than one user, we recommend ; and if you need the option to track inventory and project profitability, you’ll need a paid program like QuickBooks Online. Explore our free Lendio tutorials to learn how to use the platform. Bench: Best Online Bookkeeping Alternative to DIY Accounting Software Your time is valuable, and you should definitely consider outsourcing some of your bookkeeping tasks. , our best online bookkeeping service, will complete your bookkeeping for you in its proprietary software, starting at only $299 per month. This is far less than you would pay a local independent bookkeeper, and you can even add on tax filing and advisory services for an additional charge. Bench is a flexible bookkeeping service that can be customized to different industries, including real estate. *Bench isn’t a complete bookkeeping system and was, therefore, not evaluated in our case study. However, it’s an excellent alternative to traditional accounting software for small businesses with specific needs. Standout Features FreshBooks partnership: Bench is FreshBooks’ largest accounting partner. It can import your invoicing activity from FreshBooks to include in your accounting records. Human bookkeepers: You’ll be assigned a dedicated team of bookkeepers that will produce monthly financial reports based on managing and reconciling your bank accounts. Tax pros: In the Premium plan, you’ll be assigned a tax pro who is available for unlimited tax consultations and who will oversee the preparation of your annual income tax returns. Expert Opinion will take care of the most crucial tasks in your bookkeeping process, which are overseeing the import and classification of your bank transactions and reconciling your bank accounts. We firmly believe that services like Bench should replace the DIY accounting software that many small business owners wrestle with every month. However, the service doesn’t completely eliminate your bookkeeping tasks. You’ll still need to issue invoices to your customers, collect payments, and pay your bills. These tasks are closely tied to businesses, and we believe most business owners like maintaining control over these activities. We recommend as a great free invoicing program to use if Bench is doing the rest of your bookkeeping. Bill: Best A/P Software for Advanced Bill Pay Features & Approval Workflows (formerly known as Bill.com) makes it easy for businesses to track and pay large numbers of bills quickly and easily by importing bills from email automatically and allowing for a customized approval process—which is why it’s our top-recommended A/P software. What’s more, it integrates easily with both QuickBooks Online and Xero. *As with Bench, Bill isn’t a complete bookkeeping system; thus, it wasn’t evaluated in our case study. However, we consider it a great alternative for processing A/P. Standout Features Invoice capture: Bills received via email are transferred to your bill list automatically, where you can modify them and then send them on for payment approval. Automatic bill approvers: Bill approvers can be assigned by bill, or you can allow Bill to choose approvers based on the settings in your Bill Approval Policies. Dedicated approvers page: Approvers have their own login, where they’ll see only bills that have been submitted for their approval. Bill payments: Once bills have been approved, you can schedule payment through e-payments, internal wire transfers, or check payments. Issue invoices: With the Get Paid plan, you can issue invoices and track the payment of your invoices for customers who use Bill. Expert Opinion We recommend as it’s a great bill payment solution for managing your A/P. Most accounting software come with some features to manage your bills, but Bill goes far beyond these built-in features. Its import process and accuracy are better, and the customized approval process is a necessity for larger organizations. If you choose to use it for payments, you might opt to add the Get Paid plan for accounts receivable (A/R), but we don’t view that A/R function to be any better than the invoicing features built into most accounting software. The only exception is if your customers also use Bill, in which case, the payment can be collected within the platform and the tracking is done automatically. How We Evaluated Small Business Accounting Software We evaluated accounting software based on pricing, ease of use, and how well it performed against the ideal features we’re looking for, including project accounting, inventory management, and mobile accounting. Our evaluation was based on a rubric scoring methodology in six categories, each with designated appropriate percentages. Our criteria for choosing the best small business accounting software are as follows: Accounting Software for Niche Industries Some industries have accounting needs that require specialized software. Here are our top picks for niche industries: Why You Need Small Business Accounting Software Approximately 64% of business owners do their own bookkeeping and 64.4% of small businesses use accounting software to streamline their operations. To achieve financial stability, small businesses can use bookkeeping software that help them make informed decisions. In addition to helping you understand and manage your business’s finances, good accounting software can save you time. You can read our top bookkeeping and accounting tips to help simplify your bookkeeping and use it effectively. How Small Business Accounting Works All businesses should have accounting software that can bill customers, help manage their bills, track their payments, and provide reports to see how a business is performing. Beyond that, the features needed in accounting software will vary by industry and personal preference. Invoicing & Tracking Customer Payments Your accounting software should be able to issue invoices and track them until they’re paid by your customer. It’s also helpful if your software will print an A/R aging report, which shows all of your outstanding invoices grouped by how long they’re past their due date. Finally, the best accounting software will track inventory, time, and expenses and allow you to add them to your invoices easily without much manual data entry. Managing Bills & Tracking Expenses Ideally, your accounting software should allow you to input bills when you receive them, including their due date. You can receive reminders of upcoming due dates and print an A/P aging report, grouping bills by how long they’re overdue. Reporting At the very least, your accounting software should print a profit and loss (P&L) statement and a balance sheet that can be used to prepare your tax returns. It’s helpful if software prints comparative financial statements that show both current and prior year numbers side by side. The best accounting software will print many more reports than just basic financial statements. For instance, if your business deals with inventory, a report summarizing the quantity and cost of the current inventory on hand is essential. If your company works on large projects (e.g., a construction company), you’ll want reports that track the profitability of individual projects and compare the actual results to the estimated costs. Fulfilling Industry-specific Needs Many industries have specific requirements for their accounting software that might not apply to other industries. For example, restaurants and brick-and-mortar retail stores need a strong point-of-sale (POS) system. For these businesses, it’s important to choose an accounting system that will integrate with a POS system to transfer the data automatically without manual entries, which can cost time and create mistakes. Other industry-specific needs include time and location tracking of employees, ecommerce platforms, CRM, and subcontractor management. Frequently Asked Questions (FAQs) What is the best small business accounting software? QuickBooks is by far the most popular small business accounting software in the US. However, there are some less expensive alternatives to QuickBooks you should consider. What is the difference between cloud-based and on-premise accounting software? A cloud-based software like QuickBooks Online allows you to access your books from the internet. On-premise programs like QuickBooks Desktop can be accessed only from the computer where it’s installed. Read our comparison of QuickBooks Online vs QuickBooks Desktop to learn more. Is free accounting software good for my business? If you only need basic accounting features like income and expense tracking, then you may benefit from free accounting software. Some free accounting programs, such as Lendio Accounting, also offer great invoicing functions. Do I need to be an accountant or bookkeeper to use accounting software? No, you don’t. There are some easy-to-use accounting software that doesn’t require prior bookkeeping experience. Examples are QuickBooks Online, Lendio Accounting, and FreshBooks. However, to get the most out of accounting software, we recommend that you work closely with your accountant. Bottom Line There are many terrific small business accounting software applications available, but none of them are as versatile and comprehensive as . However, it isn’t always the best solution, especially if you only have very basic needs and wish to save money. If your priority is mobile accounting, is more suitable. If your business operates in a very specialized industry, you may find a great choice.

Federal tax credits and deductions both reduce the amount of tax you owe on your tax return, but the way the tax savings is calculated is very different. Tax deductions reduce the amount of your taxable income, whereas tax credits are directly applied against the tax you owe. Credits can reduce the amount of tax you owe or increase your tax refund, and some credits may give you a refund even if you don’t owe any tax. Determining Your Marginal Tax Rate The marginal tax rate is the rate that a taxpayer pays on the next dollar earned and is commonly referred to as “your tax bracket.” The federal marginal tax rate for businesses and individuals increases as income increases, which is known as progressive taxation. Low-income earners are taxed at a lower rate than higher-income earners. Small business owners who are either self-employed, partners, or S corporation (S-corp) shareholders pay tax on their business income on their individual tax returns. Therefore, the marginal tax rate on their business income is determined by the total taxable income shown on their individual tax return. The current marginal tax rates went into effect on January 1, 2018, with the passage of the Tax Cuts and Jobs Act but are adjusted annually for inflation. The rates are shown in the table below. 2022 Marginal Tax Rates How To Calculate the Equivalent Tax Credit or Deduction To calculate the equivalent tax credit or tax deduction, you must first know your marginal tax rate. However, a tax credit provides the same tax relief regardless of the taxpayer’s marginal tax credit. The tax benefit of a tax deduction depends upon the tax rate of the taxpayer. Calculating the Tax Credit Equivalent Tax credit equivalent = Tax deduction X Marginal tax rate (MTR) Example: Kim has an MTR of 25% and is eligible for a $1,000 tax deduction. What is the minimum tax credit that Kim would be willing to accept instead of the tax deduction? You can calculate this by multiplying the $1,000 tax deduction by the 25% marginal tax rate, as shown below: $1,000 X 25% = $250 Calculating the Tax Deduction Equivalent Tax deduction equivalent = Tax credit / MTR Example: Kim has an MTR of 25% and is eligible for a $250 tax credit. What is the minimum tax deduction that Kim would be willing to accept instead of the tax deduction? You can calculate this by dividing the tax credit by the marginal tax rate, as shown below: $250/25% = $1,000 Examples of Business Tax Credits vs Deductions You can learn about all of the available business tax credits on the IRS website. Frequently Asked Questions (FAQs) Is a tax credit better than a tax deduction? Yes, if the amounts are the same, a tax credit is better than a tax deduction. For example, a $100 tax credit reduces your tax liability by $100, whereas a $100 tax deduction only reduces your tax liability by $100 times your marginal tax rate. What are refundable vs nonrefundable tax credits? There are two forms of tax credits: refundable and nonrefundable. Refundable tax credits provide a benefit even if you don’t have a tax liability. In other words, if your total tax liability is $300, and you receive a $400 refundable tax credit, the IRS will pay you $100. Nonrefundable tax credits cannot exceed the amount of your total tax liability. While they can reduce your total tax liability down to $0, they never create a negative tax liability. Bottom Line While the result of tax deductions and credits may be the same, such as you pay less in taxes, and the amount of the tax savings is different. Knowing the differences between tax credits and tax deductions can help you understand the tax savings for various tax incentives you may wish to explore for your small business.