Reliable accounting software is necessary to aid your business with tracking your financial transactions. It’s important to consider your business’s unique needs before deciding which type of free accounting software to choose. Use these expert insights on how to choose the right accounting software for your business to help guide you.
Here are the top 16 expert tips for selecting accounting software for you small business:
1. Choose Software that Offers Greater Flexibility
Jennifer Warawa, EVP of Partners – Accountants & Alliances, Sage
A premium solution that offers greater flexibility and can handle and integrate more complex tasks like inventory tracking, payroll and billing for time might be the best fit, giving you one source of truth and holistic view into your business. Consider upgrading when spreadsheets aren’t cutting it, and you spend too much time cross-referencing a patchwork of systems and records. For instance, as the number of distinct departments in your business grows, you may find that you’re spending too much time manually entering disparate datasets. Premium tools offer the ability to receive and organize information of greater complexity. The switch from free to paid accounting software is a big one, but business owners should consider the return on investment (ROI), especially if your sights are set on competitive growth.
2. Find One that Automatically Generate Financial Reports
Jaren Nichols, Chief Operating Officer, ZipBooks
Find an accounting product that will automatically produce financial reports for you ― no math involved. You just categorize transactions and let your software do the heavy lifting. Regularly running reports will empower you to intelligently analyze expenses and plan for pinch periods. Remember, the time will come when you need to seek out funding. Banks and investors will be much more generous if you can demonstrate a current and detailed knowledge of your financial standing.
3. Ensure it has the Core Functionality That You Need
Mark Lisburn, CEO, EasyBooks
The most important thing to look for in free accounting software is that is has the core functionality that you need. So you better assess your business’s requirements first before looking for an accounting software. Also, there’s no point in getting something for free, just because it’s free, if it doesn’t do what you need it to.
4. Choose a Software That Integrates Easily With Other Programs
Paola Garcia, Vice President, Excelsior Growth Fund
There are different types of accounting software and the right software depends on how much financial tracking the business needs. Choose an accounting software that is popular and integrates easily with other software. This way, not only you but someone in your team, including your CPA, would be able to easily provide support when doing your books or filing your tax returns. Whatever software you choose, make sure it integrates with your other existing business software, for example, your bank account, PayPal, Square and Shopify, among others.
5. Read the Fine Print to Ensure It’s Truly Free
Logan Allec, CPA & Owner, Money Done Right
Many free accounting software programs are essentially lite versions of a more robust, paid platform. This is why it’s important that you make sure that the free version you are looking into does in fact cover your needs as a small business owner. For example, you may have to pay extra if you have multiple users logging into your accounting system or if you have more than a certain number of customers or vendors. So always check the fine print and make sure that the free accounting software that you are considering will in fact be free to you or if you will have to pay extra to access certain features ― in which case the software would no longer be “free” at all.
6. Set Up Your Expense Management System First
Healy Jones, VP of FP&A, Kruze Consulting
Companies should first set up their expense management system ― you can use Expensify for this as it has a free version. Make sure to have a clear distinction between your personal account and your business account from day one in order to save a lot of time, money, and complexity. Your accounting software should be able to handle pretty much everything a small business requires.
7. Choose a Scalable & Easy-to-Use Software
Jason Patel, Former Career Ambassador – George Washington University & Founder, Transizion
Make sure the accounting software you choose is scalable, low maintenance, and saves you time. That’s why you need to chart out your goals and revenue streams first. Ultimately, we use software because it saves us time, which, in turn, saves us money. It’s important to not fall under the influence of services that promote convoluted bells and whistles. Features are great, but you’re looking for something that frees up time.
8. Assess Your Unique Situation First
Mike Savage, CPA & CEO, 1-800Accountant
In choosing accounting software, your specific requirements should come first. Do you merely need a yearly tax return or do you require more attention, such as financial assessments, payroll, inventory? Your specific situation should dictate what you really need. Read carefully what the accounting software offers to see if it’s the best fit for your business.
9. Understand the Cost & Functionality of Your Business’s Needs
Matthew Gillman, CEO, SMB Compass
For the most part, free accounting software provides basic functionality to start and maintain bookkeeping for your business. As your business matures and you add new credit cards, bank accounts, and want more functionality and reporting, you’re going to have to upgrade. Most accounting systems offer three versions in addition to a free version. Rather than look at what’s free today, you want to make sure you understand the cost and functionality of what you’ll need in the future. This will help you avoid spending time to switch and learn a new accounting system. Our time as business owners is limited and planning ahead helps us maximize our time.
10. Be Skeptical of Free Accounting Software
Riley Adams, CPA, Owner, Young & the Invested
You should know exactly what your accounting needs are and how the program handles them. If you have a small business with only a handful of clients, a free version of QuickBooks might be right for your needs. It tracks basic payroll, invoicing, and a limited number of customer accounts. Starting here might be the best option for a small business with the understanding it may need to scale up to a paid version as the business grows. Be mindful of your choice for your needs now and the future because this free accounting software holds your financial data. If you cross a threshold without knowing it and the software demands an upgrade before allowing you access to use the system for your business again, this would be problematic.
11. Discuss Options With Your CPA
Travis B. Bailey, Regional Executive ― Senior Vice President, First Bank
Accounting software is becoming more and more important when operating a company. There are several factors for this. First, most small companies depend on borrowing money to maintain operations; therefore, having internal financial information is crucial as most bankers will want to see and review mid-year data. Secondly, having internal financial information will assist in year-end prep work with your CPA which is a possible reduction is year-end accounting cost. When selecting financial software for your company be sure to discuss options with your CPA as well as your banker. In addition review the various versions to determine if one is better for your specific industry.
12. Do Your Research First
Gemma Roberts, Accountant & Business Blogger, The Work Life Blend
Don’t choose free software if it will end up being a false economy. Do your research as you would with any business tool. Remember that any accounting software, free or otherwise, does not replace the services of an accountant, but it should help to reduce their day-to-day involvement and therefore the cost. Ask your accountant for their input ― do other clients use it, will it work for them? Does the software cater for your particular business industry? Check that it can handle your reporting requirements. It should be able to easily process and report on any taxes, manage sales and purchase ledgers, manage inventory, perform bank reconciliations and produce a set of accounts. If possible, ask for a demo of the software to test out its features and usability beforehand. You want a software that is intuitive and not overly complex.
13. Know the Weaknesses of Free Accounting Software
Crystalynn Shelton, Accounting Specialist, Fit Small Business
In general, most free accounting software fall short in two areas: 1. They don’t track inventory, and 2. You can’t track accounts payable. If a business does not sell products and pays most of its bills online or with a credit card, then most free accounting software products like Wave will work for them. Don’t use an accounting software product just because it is free. The most important thing is that it can do everything you need it to when it comes to managing income and expenses for your business.
According to Inc., one of the most common mistakes many business owners make is thinking that they don’t need to know anything about accounting because the software will just take care of it. On the contrary, business owners still need to understand basic accounting. Read books, take classes, do your research ― make sure you know what data you’re putting into your software and understand what your reports mean.
Spendesk suggests that you use the right accounting software as it will bring you to a higher level of accounting management that is optimized, accurate, and reliable. It’s important to make sure that it provides legal compliance and centralization and traceability of financial records. It should also be able to help mitigate risk of errors, and streamline processes.
As most business owners do not have an accounting background, ProfitBooks recommends choosing a software which has a simple user interface, easy to use, and is not bloated with unnecessary features. Clean interface makes it easy to focus on the important tasks and it’s also possible for you and your employees to learn the software quickly.
Generally, a free accounting software is a good option for startups and small businesses with few transactions and simple requirements. However, as your business grows, your needs will also increase and the free software version may not be sufficient to support those needs. Be careful in choosing a free accounting software and use the above tips to help guide you with your selection process.