6 Best Accounting Software for Freelancers 2020

The best freelance accounting software should include expense tracking and documentation, business mileage tracking, and invoicing. Some freelancers might also need their accounting software to track sales tax collections and inventory. We looked at numerous accounting software products and narrowed it down to six from which you can choose.

Top Accounting Software for Freelancers 2020

• QuickBooks Self-Employed: Best overall accounting software for freelancers
• Xero: Best for freelancers required to collect sales tax on the sale of inventory
• QuickBooks Online Simple Start: Best for service providers required to collect sales tax
• FreshBooks: Best for service providers with five or fewer customers
• Wave: Best free accounting software for freelancers
• Zoho Books: Best for freelancers using other Zoho products

Answer a few easy questions and we will provide you with a personalized recommendation for the best accounting software for your freelance business. Afterwards, you can continue to read the article to learn more details.

How to Choose Your Freelance Accounting Software

Most freelancers and self-employed people have to capture and document all their expenses, bill clients, make quarterly payments of estimated tax, and file a Schedule C at the end of the year. Freelancers generally don’t need as comprehensive of an accounting system as other small businesses, but you should look for the following features:

• Bank account connectivity: You should import activity from checking and credit card accounts to save hours of manual data entry.
• Receipt tracker: Receipts are required to substantiate tax deductions, so the software should allow you to attach copies of receipts to each expense transaction.
• Mileage tracker: You can deduct 57.5 cents (in 2020) per business mile driven, but you must keep a log of your miles. Good software will track your business miles using a mobile app.
• Time tracking: If you bill clients by the hour, then you need accounting software that will help you track your time spent by job.
• Invoice: Some freelancers perform services for two or three companies while others have a large customer base. If you have numerous customers, it’s important to issue and track invoices.
• Estimated tax: As a self-employed taxpayer, you must calculate and pay quarterly estimated income and self-employment taxes. It’s helpful if the accounting software will calculate these payments.
• Sales tax: If you sell a service or good that is subject to sales tax, the software should track sales tax collections and record sales tax deposits. Sales tax rates vary from city to city, so it’s important that the software can pull the correct tax rates automatically based on the address you provide.
• Inventory: If you sell or build a product, you must track inventory purchases and determine how to allocate total purchases between cost of goods sold and ending inventory.

QuickBooks Self-Employed: Overall Best Accounting Software for Freelancers

QuickBooks Self-Employed is our best overall pick because it includes special features for freelancers and self-employed people, like the calculation of quarterly estimated tax payments and the transfer of data to TurboTax to file your Schedule C. QuickBooks Self-Employed is available for just $1 per month for the first 12 months.

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QuickBooks Self-Employed Pricing

• QuickBooks Self-Employed: $1 per month for 12 months, then $15 per month
• Self-Employed Tax Bundle: $12 per month for three months, then $25 per month
  • Includes both QuickBooks Self-Employed and TurboTax Self-Employed

QuickBooks Self-Employed Features

• Bank accounts: Connect bank, credit cards, PayPal, Square, and other accounts to transfer transactions to be classified automatically
• Attach receipts: Take a picture of receipts with the mobile app and attach it to the transaction
• Mileage tracker: Track business miles using the mobile app or add trips manually
• Invoices: Create invoices online or within the mobile app
• Quarterly tax payments: Calculates your required estimated income and self-employment tax payment for each quarter

For more information, read our QuickBooks Self-Employed review.

Xero: Best for Freelancers With Sales Tax and Inventory

Xero’s inventory management will not only help you track inventory units and costs but will also provide you an analysis of the profitability of each product line so you can make informed decisions on where to focus your time and capital. All editions of Xero come with inventory management, making it more affordable than inventory management in QuickBooks Online. You can evaluate Xero for free with a 30-day trial.

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Xero Pricing

Inventory management is included with all three plans, but you’ll need the Established plan if you want to capture receipt images with the mobile app.

• Early: $9 per month—limited to five invoices, five bills, and 20 bank transactions
• Growing: $30 per month
• Established: $60 per month—includes receipt capture and project costing

Xero Features

• Connect accounts: Bank and credit card accounts can be connected to minimize data input
• Invoices: Print or email invoices and track payments received
• Sales tax: Sales tax rates are automatically calculated and applied to invoices as appropriate
• Inventory: Track inventory costs and quantities as well as calculate profitability by product
• Receipts: With the Established plan, receipt images are stored and generate an expense transaction automatically by pulling required information from the receipt
• Unpaid bills: Input and track unpaid bills

For more information, read our complete Xero review.

QuickBooks Online Simple Start: Best for Collecting Sales Tax on Services

QuickBooks Online (QBO) is our choice for best overall small business accounting software. The Simple Start edition of QBO is a great low-cost option for collecting and paying sales tax, but you must purchase the higher-priced Plus edition to manage inventory. QBO makes it easy to import and classify transactions from your bank, invoice customers, track miles, and run reports. QuickBooks Online subscribers have the choice of 70% off for three months or a 30-day free trial.

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QuickBooks Online Pricing

All editions of QuickBooks Online include the sales tax feature. Most freelancers will do great with the lowest-priced Simple Start edition, but you’ll need to upgrade to Plus to track the cost of inventory.

• Simple Start: $25 per month
• Essentials: $40 per month—includes time tracking and managing unpaid bills
• Plus: $70 per month—includes inventory management
• 70% off all editions for the first three months

QuickBooks Online Simple Start Features

• Bank accounts: Bank and credit card accounts sync to your QBO account so that you can classify transactions easily
• Receipt capture: Take pictures of receipts with the mobile app and attach them to existing transactions or create new transactions
• Sales tax rate: Sales tax rates are determined automatically based on the location of the sale and added to your invoice
• Sales tax return: Prepare and file your sales tax return
• Business miles: Track your business miles using your smartphone’s GPS and import into QBO automatically

For more information, read our complete QuickBooks Online review.

Freshbooks: Best for Service Providers With 5 or Fewer Clients

Freshbooks has a time tracker integrated into the accounting software and offers the Lite edition for freelancers with only five clients. You can import bank transactions, issue invoices, and print reports, but you must purchase an add-on to track inventory. You can evaluate the software with a 30-day free trial.

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FreshBooks Pricing

Most freelancers will find the Lite version has all the necessary features, but you’ll have to upgrade to the Plus version if you have more than five billable clients.

• Lite: $15 per month (maximum of five clients)
• Plus: $25 per month (maximum of 50 clients)
• Premium: $50 per month (maximum of 500 clients)

FreshBooks Features

• Bank connections: Bank and credit card accounts can be connected to import and transactions automatically
• Receipts: Mobile app scans receipts to be logged and stored
• Time-tracker: Track time by client and task by inputting hours or using the time clock
• Sales tax: Tax can be added to invoices, but the rate must be determined manually

For more information, read our complete FreshBooks review.

Wave: Best Free Accounting Software for Freelancers

Wave might be your ideal software if your primary goal is to invoice customers and track expenses. Wave not only does a great job of connecting to your bank account to import transactions, but it includes apps for both sending invoices and capturing receipts. Best of all, Wave is free forever.

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Wave Pricing

• Free

Wave Features

• Banking activity: Connect your bank and credit cards accounts and activity will automatically be transferred for classification
• Receipt capture: Receipts can be submitted using the free app, or emailed to Wave
• Invoice: Create custom invoices with company logo to print or email
• Sales tax: Create unlimited sales tax items and manually input tax rates. Collections and payments are tracked by item.

For more information, read our complete Wave review.

Zoho Books: Best for Freelancers Using Other Zoho Products

If you like any of Zoho’s other software, such as Zoho CRM, Zoho Mail, or Zoho Projects, you will probably like Zoho Books as well. By combining Zoho Books with your other Zoho programs, you can customize your own complete management suite. Zoho Books is good bookkeeping software that you can purchase alone or as part of the Zoho Finance Plus software package for even more features.

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Zoho Books Pricing

• Zoho Books Basic: $9 per month (up to 50 contacts, two users)
• Zoho Books Standard: $19 per month (up to 500 contacts, three users)
• Zoho Books Professional: $29 per month (unlimited contacts, 10 users)
  • Includes inventory management
• Zoho Finance Plus: $149 per month (10 users)
  • Includes Zoho Invoice, Books, Inventory, Subscriptions, Expense, and Checkout

Zoho Books Features

• Bank transactions: Connect bank and credit card accounts to load and classify transactions automatically
• Time tracking: Track time by project using the built-in timer or by inputting hours
• Invoices: Create and email invoices, even in foreign currencies
• Sales tax: Include sales tax on invoices and track total sales tax liability by tax authority
• Receipts: Scan and attach receipts to transactions
• Mileage: Track business miles using the mobile app

For more information, read our complete Zoho Books review.

Bottom Line

As with any small business, freelancers can benefit greatly from simple accounting software that helps them issue invoices, track expenses, and collect sales tax when applicable. In addition, freelancers generally need to track business miles driven, make quarterly income tax payments, and file a Schedule C.

QuickBooks Self-Employed is our best overall pick for freelancers because it is the only program reviewed that calculates the quarterly tax payments and transfers information to Schedule C on the owner’s tax return. QuickBooks Self-Employed is only $1 per month for the first 12 months and then $15 per month.

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