Updated: November 12, 2021
Published: November 12, 2021
Selecting the right accounting software is important for any kind of business, whether it’s a small business or an enterprise-level company. Depending on the vendor, each program offers a different set of accounting functionality—from basic expense tracking and invoicing to more advanced features, like inventory management and project accounting.
To assess objectively the quality of products we discuss, we have developed an internal case study to evaluate the major accounting solutions on the market today. Our case study aims not only to evaluate each accounting program on a surface level but also to provide you with a 360-degree view of each software’s core features. For example, by varying the weights assigned to features you require, we can provide a custom recommendation for your Best Small Business Accounting Software.
Our case study evaluates small business accounting software in the following 11 categories:
- General Features
- Accounts Payable
- Accounts Receivable
- Banking and Cash Management
- Fixed Assets
- Project Accounting
- Sales and Income Tax
- Inventory
- Reporting
- Customer Service
- Mobile App
Below we explain how we evaluate the accounting software across each category and which features are the most heavily weighted criteria in our rubric.
How We Evaluated General Features
At the very least, a developed accounting system should have an intuitive user interface to work with. This means you should be able to complete your setup by following an easy navigation pattern, with features arranged neatly and accessible easily from a single dashboard. More importantly, we looked into enhanced bookkeeping features, such as the ability to modify the chart of accounts and enter beginning balances, which are extremely important when you’re switching from an old program to new accounting software.
Other important features we consider include:
- Record fiscal year-end: It’s important that your accounting software records your financial activity accurately within the proper period prior to closing the accounts.
- Close the books prior to 2021: You should be able to close your books at year-end so no further changes can be made.
- Add additional users and restrict user access: This feature comes in handy if you have an employee or accountant that accesses your accounting data. You should be able to control how much access you can give to them.
Here’s the complete list of features considered in our evaluation of general features:
FSB Case StudyGeneral Features Input basic company information Close the books for prior periods Record entity type Add additional users and restrict their access Record fiscal-year end Record a notes payable (N/P) and create an amortization schedule Import and modify chart of accounts Enter an adjusting journal entry (AJE) Input beginning balances Provide access to an external accountant
How We Evaluated Accounts Payable
It’s very easy for a business to lose track of bills, so your new accounting software should help you track how much money you owe to your suppliers and vendors. The best accounting system allows you to record new bills and pay the money online with the click of a button to help you reduce the time spent on processing checks and making bank deposits. Some programs take it a step further by allowing you to set up recurring payments, which is a useful feature for businesses that pay vendors on a regular basis. We also assessed how the software handles purchases, from creating simple purchase orders to processing quotes to purchase and payment.
Our criteria for evaluating A/P focus on the following features:
- Record an expense without paying: Good accounting software should allow you to record an expense when an invoice is received rather than having to wait until it’s paid.
- Record a credit from a vendor: There are some instances where a vendor owes you money, whether it’s a refund or return of items. Your accounting program should allow you to enter a vendor credit to record that refund or return.
- Ability to short-pay an invoice: If you don’t want to pay the entire amount due for any reason, such as items aren’t yet completely delivered by the vendor, you need to be able to make a partial payment of the invoice.
Below is the complete list of features involved in our assessment of A/P:
FSB Case StudyA/P Create a vendor and view list of vendors Create a bill for the purchase of inventory Record an expense without paying, enter expense due date, and create recurring expenses Record and print checks Attach a receipt, send a copy through the app, and check if a transaction is created or just attached Record a vendor credit and apply to an invoice Record purchase order and convert to bill Record electronic payment of a bill View unpaid bills and filter by vendor View transactions by vendor Create service item and set default cost Short-pay an invoice Pay the independent contractor using the service item and assign the payment as a billable to a customer Ease of use
How We Evaluated Accounts Receivable
In addition to tracking what you owe, your accounting software should also track who owes you money, how much they owe you, and when to expect payment. We evaluated the software across this category based on invoicing capability, from creating and customizing invoices to adding billable labor, inventory, and expenses. A robust accounting software program should also be capable of setting up and sending recurring invoices. We also examined the software’s ability to produce A/R reports, such as outstanding balances by customers.
We also scrutinized the following essential features:
- Create a new customer: You should be able to set up a customer in your accounting software so that you can streamline and track your transactions with them. One important feature is a “quick-create” option for creating new customer accounts when billing a customer for the first time.
- Add unbilled labor and expenses to an invoice: This feature is useful for making sure you bill customers for all labor and expenses that have been paid and assigned to their accounts.
- Accept short payment from customers: There might be times where customers opt not to pay the full amount of an invoice. Your accounting software should have a streamlined procedure for managing short-paid invoices to keep your accounting records accurate.
We explored all the following features in our assessment of A/R:
FSB Case StudyA/R Choose an invoice template and customize the invoice Set up sales tax and service contract items Set the invoice to recur monthly Issue a check for credit balance refund Add unbilled labor and expenses to invoice Create a new customer Email and print the invoice View balance and transactions by customer View outstanding invoices with and without a report Issue a credit memo to a customer and accept short payment Issue a sales receipt for a sale paid immediately Ease of use
How We Evaluated Banking and Cash Management Features
At the very least, your accounting system should provide an option to connect your bank account, allowing you to import real-time data from your bank into the system and make direct payments. Some software will also accept QuickBooks Online files, which enables you to download files without connecting the software to your bank. If you like to pay bills by check, your system needs to be able to print and process checks as well as provide options for voiding and deleting duplicate checks.
Other major features we evaluated include:
- Bank and credit card reconciliation: Reconciliation is one of the pillars of good accounting. A great accounting solution should have an automated feature for reconciling transactions between your books and your bank statements to avoid the problems that come with manual reconciliation.
- View outstanding transactions: You should have the ability to see outstanding checks and uncleared transactions in your bank account.
Our assessment of banking and cash management covers all the following features:
FSB Case StudyBanking and Cash Management Connect to bank account and upload file of transactions Reconcile credit card statements Open bank reconciliation and enter ending balance of checking accounting Receive a check on an outstanding invoice Enter monthly service fee Don't deposit the check received View outstanding transactions and select transactions that have cleared the bank Record a check in the register Save the reconciliation and return later and finalize reconciliation and print report Combine multiple checks received and cash into a single deposit
How We Evaluated Fixed Assets
Usually offered as an inclusive module or a separate add-on, fixed asset management is an important feature for monitoring equipment and vehicles. While most accounting systems don’t have full-fledged fixed asset management features, they should at least be able to record a fixed asset purchase. Additionally, they should offer basic features for managing and tracking fixed assets, depreciation calculation, cost records, audit history, and resource allocation.
Below is the complete list of all features evaluated in this category:
FSB Case StudyFixed Asset Management Record the purchase of a fixed asset and view list of fixed assets Print or view a depreciation schedule Assign an ID number to the asset Record the sale of the fixed asset Set up the fixed asset to depreciate and set up separate depreciation for taxes Offer other fixed asset accounting options
How We Evaluated Project Accounting
Most accounting programs don’t have full features adapted to project contracting businesses, but some programs have basic functionality for estimating and tracking project-related costs, including labor, materials, and equipment. After creating the project, you should also be able to assign costs and actual labor and add new transactions, such as inventory, expenses, and invoices. Project managers should be able to compare actual project costs with their budgets by period.
We assessed project accounting based on the following features:
FSB Case StudyProject Accounting Create an estimate, and add items, such as labor, inventory, and sales tax Record actual inventory used in project Assign estimate and actual labor to a project Generate report comparing actual to estimated labor and inventory Track income or loss by project
How We Evaluated Sales and Income Tax
An accounting system doesn’t have to replace your tax software, but your accounting program should be able to track sales tax collected and submitted by tax jurisdiction. We consider the software’s ability to set up sales tax items with the correct requirements, depending on the tax rules in your region. An all-inclusive accounting program also generates reports for tax liabilities and tracks taxes owed for different time periods. The ability to pay sales tax liability and file tax returns are the strongest features we consider across this category. The most important income-tax-related feature is the ability to track payments that must be included on Form 1099 to subcontractors.
Here’s the complete list of features evaluated in this category:
FSB Case StudySales and Income Tax Create a sales tax item Create an independent contractor and track for 1099 payments View sales tax liability details File sales tax return Pay sales tax liability with a check and electronically Ease of use Print report for Schedule C
How We Evaluated Inventory
Inventory accounting varies from vendor to vendor. While most programs allow you to record inventory in an asset account, the ability to calculate the COGS automatically is rarer but an essential function for retailers and wholesalers. Overall, the best accounting software must include features for tracking inventory on hand, creating inventory items, and making adjustments to increase or decrease the quantity and cost of stocks. It should also be able to easily add inventory to invoices and bills while adjusting stock levels for the sale or purchase automatically.
Our assessment of inventory accounting includes the following features:
FSB Case StudyInventory Create an inventory item and view inventory available Determine if the program recorded COGS automatically View inventory on purchase order and total cost of inventory on hand Is COGS sold using average cost or last in, first out (LIFO)? Create bill for purchase of inventory Decrease inventory for units returned to vendor Add inventory to an invoice Record inventory returned back into inventory
How We Evaluated Reporting
At the very least, the best accounting software generates fundamental reports, including profit and loss (P&L) statements, cash flow statements, and balance sheets. Besides the number of features available, we also looked into the software’s flexibility in terms of creating report categories. Some programs offer basic reports while more advanced solutions can run reports by category, such as class and location.
We attempted to generate the following types of reports:
FSB Case StudyReporting Balance sheet Income/loss by month P&L statement Income/loss by customer Statement of cash flows Income/loss by class A/R & A/P aging reports Income/loss by location General Ledger & trial balance Unbilled charges and time Expenses by vendor Transaction list by customer
How We Evaluated Customer Service
Most accounting software claims to have responsive support, but we wouldn’t know how efficient they are without actually testing them. We tested each software’s support options and placed our highest scores on phone and live chat support. The most reliable customer support allows you to initiate the call and is quick to pick up the phone. If phone support isn’t available, then you should be able to seek assistance at least through email or a chatbot. Accounting programs, including free software, should also provide self-help resources that users can browse at their own pace.
We tested if the software provider offers the following types of customer service:
FSB Case StudyCustomer Service Phone support (you call or they call) Self-help information available Email support Chatbot and live chat person
How We Evaluated Mobile Apps
Each mobile app provides different levels of functionality depending on the vendor. We evaluated each app based on its ability to perform important accounting functions, such as sending invoices and recording bills on the go. A powerful mobile app doesn’t need to have all the features of the desktop interface, but you should essentially be able to enter and receive payments, capture expense receipts, and view financial reports.
The best mobile app should be able to perform the following features:
FSB Case StudyMobile App Enter bills and bill payments Capture receipt Send invoices and receive payments Record time worked and assign to customer or project Assign expenses to customer/projects View reports
Bottom Line
At the very least, a developed accounting system should have an intuitive user interface to work with. This means you should be able to complete your setup by following an easy navigation pattern, with features arranged neatly and accessible easily from a single dashboard. More importantly, we looked into enhanced bookkeeping features, such as the ability to modify the chart of accounts and enter beginning balances, which are extremely important when you’re switching from an old program to new accounting software.
Other important features we consider include:
- Record fiscal year-end: It’s important that your accounting software records your financial activity accurately within the proper period prior to closing the accounts.
- Close the books prior to 2021: You should be able to close your books at year-end so no further changes can be made.
- Add additional users and restrict user access: This feature comes in handy if you have an employee or accountant that accesses your accounting data. You should be able to control how much access you can give to them.
Here’s the complete list of features considered in our evaluation of general features:
FSB Case Study General Features | |
|---|---|
Input basic company information | Close the books for prior periods |
Record entity type | Add additional users and restrict their access |
Record fiscal-year end | Record a notes payable (N/P) and create an amortization schedule |
Import and modify chart of accounts | Enter an adjusting journal entry (AJE) |
Input beginning balances | Provide access to an external accountant |
It’s very easy for a business to lose track of bills, so your new accounting software should help you track how much money you owe to your suppliers and vendors. The best accounting system allows you to record new bills and pay the money online with the click of a button to help you reduce the time spent on processing checks and making bank deposits. Some programs take it a step further by allowing you to set up recurring payments, which is a useful feature for businesses that pay vendors on a regular basis. We also assessed how the software handles purchases, from creating simple purchase orders to processing quotes to purchase and payment.
Our criteria for evaluating A/P focus on the following features:
- Record an expense without paying: Good accounting software should allow you to record an expense when an invoice is received rather than having to wait until it’s paid.
- Record a credit from a vendor: There are some instances where a vendor owes you money, whether it’s a refund or return of items. Your accounting program should allow you to enter a vendor credit to record that refund or return.
- Ability to short-pay an invoice: If you don’t want to pay the entire amount due for any reason, such as items aren’t yet completely delivered by the vendor, you need to be able to make a partial payment of the invoice.
Below is the complete list of features involved in our assessment of A/P:
FSB Case Study A/P | |
|---|---|
Create a vendor and view list of vendors | Create a bill for the purchase of inventory |
Record an expense without paying, enter expense due date, and create recurring expenses | Record and print checks |
Attach a receipt, send a copy through the app, and check if a transaction is created or just attached | Record a vendor credit and apply to an invoice |
Record purchase order and convert to bill | Record electronic payment of a bill |
View unpaid bills and filter by vendor | View transactions by vendor |
Create service item and set default cost | Short-pay an invoice |
Pay the independent contractor using the service item and assign the payment as a billable to a customer | Ease of use |
In addition to tracking what you owe, your accounting software should also track who owes you money, how much they owe you, and when to expect payment. We evaluated the software across this category based on invoicing capability, from creating and customizing invoices to adding billable labor, inventory, and expenses. A robust accounting software program should also be capable of setting up and sending recurring invoices. We also examined the software’s ability to produce A/R reports, such as outstanding balances by customers.
We also scrutinized the following essential features:
- Create a new customer: You should be able to set up a customer in your accounting software so that you can streamline and track your transactions with them. One important feature is a “quick-create” option for creating new customer accounts when billing a customer for the first time.
- Add unbilled labor and expenses to an invoice: This feature is useful for making sure you bill customers for all labor and expenses that have been paid and assigned to their accounts.
- Accept short payment from customers: There might be times where customers opt not to pay the full amount of an invoice. Your accounting software should have a streamlined procedure for managing short-paid invoices to keep your accounting records accurate.
We explored all the following features in our assessment of A/R:
FSB Case Study A/R | |
|---|---|
Choose an invoice template and customize the invoice | Set up sales tax and service contract items |
Set the invoice to recur monthly | Issue a check for credit balance refund |
Add unbilled labor and expenses to invoice | Create a new customer |
Email and print the invoice | View balance and transactions by customer |
View outstanding invoices with and without a report | Issue a credit memo to a customer and accept short payment |
Issue a sales receipt for a sale paid immediately | Ease of use |
At the very least, your accounting system should provide an option to connect your bank account, allowing you to import real-time data from your bank into the system and make direct payments. Some software will also accept QuickBooks Online files, which enables you to download files without connecting the software to your bank. If you like to pay bills by check, your system needs to be able to print and process checks as well as provide options for voiding and deleting duplicate checks.
Other major features we evaluated include:
- Bank and credit card reconciliation: Reconciliation is one of the pillars of good accounting. A great accounting solution should have an automated feature for reconciling transactions between your books and your bank statements to avoid the problems that come with manual reconciliation.
- View outstanding transactions: You should have the ability to see outstanding checks and uncleared transactions in your bank account.
Our assessment of banking and cash management covers all the following features:
FSB Case Study Banking and Cash Management | |
|---|---|
Connect to bank account and upload file of transactions | Reconcile credit card statements |
Open bank reconciliation and enter ending balance of checking accounting | Receive a check on an outstanding invoice |
Enter monthly service fee | Don't deposit the check received |
View outstanding transactions and select transactions that have cleared the bank | Record a check in the register |
Save the reconciliation and return later and finalize reconciliation and print report | Combine multiple checks received and cash into a single deposit |
Usually offered as an inclusive module or a separate add-on, fixed asset management is an important feature for monitoring equipment and vehicles. While most accounting systems don’t have full-fledged fixed asset management features, they should at least be able to record a fixed asset purchase. Additionally, they should offer basic features for managing and tracking fixed assets, depreciation calculation, cost records, audit history, and resource allocation.
Below is the complete list of all features evaluated in this category:
FSB Case Study Fixed Asset Management | |
|---|---|
Record the purchase of a fixed asset and view list of fixed assets | Print or view a depreciation schedule |
Assign an ID number to the asset | Record the sale of the fixed asset |
Set up the fixed asset to depreciate and set up separate depreciation for taxes | Offer other fixed asset accounting options |
Most accounting programs don’t have full features adapted to project contracting businesses, but some programs have basic functionality for estimating and tracking project-related costs, including labor, materials, and equipment. After creating the project, you should also be able to assign costs and actual labor and add new transactions, such as inventory, expenses, and invoices. Project managers should be able to compare actual project costs with their budgets by period.
We assessed project accounting based on the following features:
FSB Case Study Project Accounting | |
|---|---|
Create an estimate, and add items, such as labor, inventory, and sales tax | Record actual inventory used in project |
Assign estimate and actual labor to a project | Generate report comparing actual to estimated labor and inventory |
Track income or loss by project | |
An accounting system doesn’t have to replace your tax software, but your accounting program should be able to track sales tax collected and submitted by tax jurisdiction. We consider the software’s ability to set up sales tax items with the correct requirements, depending on the tax rules in your region. An all-inclusive accounting program also generates reports for tax liabilities and tracks taxes owed for different time periods. The ability to pay sales tax liability and file tax returns are the strongest features we consider across this category. The most important income-tax-related feature is the ability to track payments that must be included on Form 1099 to subcontractors.
Here’s the complete list of features evaluated in this category:
FSB Case Study Sales and Income Tax | |
|---|---|
Create a sales tax item | Create an independent contractor and track for 1099 payments |
View sales tax liability details | File sales tax return |
Pay sales tax liability with a check and electronically | Ease of use |
Print report for Schedule C | |
Inventory accounting varies from vendor to vendor. While most programs allow you to record inventory in an asset account, the ability to calculate the COGS automatically is rarer but an essential function for retailers and wholesalers. Overall, the best accounting software must include features for tracking inventory on hand, creating inventory items, and making adjustments to increase or decrease the quantity and cost of stocks. It should also be able to easily add inventory to invoices and bills while adjusting stock levels for the sale or purchase automatically.
Our assessment of inventory accounting includes the following features:
FSB Case Study Inventory | |
|---|---|
Create an inventory item and view inventory available | Determine if the program recorded COGS automatically |
View inventory on purchase order and total cost of inventory on hand | Is COGS sold using average cost or last in, first out (LIFO)? |
Create bill for purchase of inventory | Decrease inventory for units returned to vendor |
Add inventory to an invoice | Record inventory returned back into inventory |
At the very least, the best accounting software generates fundamental reports, including profit and loss (P&L) statements, cash flow statements, and balance sheets. Besides the number of features available, we also looked into the software’s flexibility in terms of creating report categories. Some programs offer basic reports while more advanced solutions can run reports by category, such as class and location.
We attempted to generate the following types of reports:
FSB Case Study Reporting | |
|---|---|
Balance sheet | Income/loss by month |
P&L statement | Income/loss by customer |
Statement of cash flows | Income/loss by class |
A/R & A/P aging reports | Income/loss by location |
General Ledger & trial balance | Unbilled charges and time |
Expenses by vendor | Transaction list by customer |
Most accounting software claims to have responsive support, but we wouldn’t know how efficient they are without actually testing them. We tested each software’s support options and placed our highest scores on phone and live chat support. The most reliable customer support allows you to initiate the call and is quick to pick up the phone. If phone support isn’t available, then you should be able to seek assistance at least through email or a chatbot. Accounting programs, including free software, should also provide self-help resources that users can browse at their own pace.
We tested if the software provider offers the following types of customer service:
FSB Case Study Customer Service | |
|---|---|
Phone support (you call or they call) | Self-help information available |
Email support | Chatbot and live chat person |
Each mobile app provides different levels of functionality depending on the vendor. We evaluated each app based on its ability to perform important accounting functions, such as sending invoices and recording bills on the go. A powerful mobile app doesn’t need to have all the features of the desktop interface, but you should essentially be able to enter and receive payments, capture expense receipts, and view financial reports.
The best mobile app should be able to perform the following features:
FSB Case Study Mobile App | |
|---|---|
Enter bills and bill payments | Capture receipt |
Send invoices and receive payments | Record time worked and assign to customer or project |
Assign expenses to customer/projects | View reports |
Our case study was developed to provide you with first-hand information and useful insights that will help you choose the right accounting software for your business. It shines a light on the holistic performance of each software we review and provides a multifaceted understanding of the specific features to help you gauge how suitable they are for your specific accounting needs.