How to Choose Accounting Software
Choosing accounting software isn’t easy. There are a lot of options, and (despite what the advertisers may say), there is not a single program which is best for all businesses. Far from it.
So how do you figure out which small business accounting software program is the best for you? If you’re serious about finding a good fit for your business, I’d recommend setting aside 2-3 hours to investigate your options and make your choice. That may seem like a lot, but a good accounting program should save most businesses at least a few hours of work each month; sometimes more. For that kind of benefit, it’s probably worth it to really take the time to examine your options.
What follows is a step-by-step guide to finding the best accounting software for your company. Here goes:
Table of Contents
Locally installed or web-based?
There are pros and cons to each. Quick-and-dirty summary: Locally installed = more robust, more capabilities and features, needed for most large businesses. Cloud-based = portable, access from multiple devices, ease of use, best for small and medium businesses. The rest of the article will focus on cloud-based software, but the same principles apply to choosing locally installed software.
Is it actually accounting software?
Unfortunately, some popular cloud-based “accounting” programs aren’t accounting at all; they’re simply expense tracking. It can be hard to tell the difference between them if you’re not familiar with the field; the key thing you need to look for is the term “double-entry bookkeeping.” If software has it, then it’s accounting software. If it doesn’t, then it’s not true accounting. End of story. If you aren’t sure whether a program uses double-entry, ask. Or check its review on this site.
How big is your company?
Some programs are designed for companies of a specific size. Make sure the software you’re looking at can support the number of users you need.
What features do you need?
Many people don’t go to look for accounting software with a clear idea of exactly what they need. If you want software that’s accurate, reliable, and pretty easy to use … well, there are loads of options that fit those criteria. To narrow the field a little, I find it’s best to begin by asking yourself exactly what you need your accounting software to do. For some, job costing capabilities will be indispensable. For others, the availability of mobile apps is key. Think not only about what you need now, but also about what you might want in the future. It’s often easiest to choose software that can scale with your business, so that as you expand, you can continue to use the same system.
Make a list: the features you absolutely must have, followed by the features you would like. Remember to include in this list the possibility of integration with the other platforms your business uses, like CRM or shopping cart software. Good integrations can save you a lot of data entry, and therefore, a lot of time.
To help you get started, here’s a list of capabilities you can expect to find in some of the cloud-based accounting software available. It’s by no means exhaustive, but if this is your first time choosing accounting software, it may help you to get an idea what’s out there.
What are your options?
So now you have your feature list. Time to start seeing how the various options line up.
If you have some programs in mind already, start with them. If not, I’d recommend starting with any accounting software rated 3.5+ on this site. Go to the accounting software reviews page and do a quick search (Ctrl-F) for the features you want (e.g. “inventory”). I can’t guarantee I’ll have worded every feature with the search term you use, but this method means you’ll be able to come up with a few potential options in minutes – and rule out others. If you desperately want accounting software that will do your laundry (I know I do) and the word “laundry” isn’t to be found in the review … well, there’s a good chance the software doesn’t handle that sort of thing.
Jot down the names of the most promising options. It’s possible multiple programs will have everything you want. It’s possible none will, and you’ll have to decide what to give up. By now, though, you should probably have the field narrowed to at most 4-5 possibilities.
Cash-based or accrual?
How do you do your accounting? When you send an invoice on June 10 and get paid on July 10, do you reckon it as income for June, or for July? If June, you’re using accrual accounting. If July, you’re using cash-based accounting. In either case, you will want an accounting program which supports the accounting method you use.
You can work around this limitation by doing some of your reckoning manually. Consider whether that is really something you want to do. Personally, the only cases where I think it’s worth it are FreeAgent and Wave, since they are so good for micro-businesses in nearly every other respect.
How much does it cost?
Cloud-based accounting subscription packages range from free to over a hundred dollars a month. Once you’ve got the list of software that gives you everything you absolutely must have, you get to decide how much you want to pay for the other features. Take a look at the pricing, and consider the monthly and yearly cost. Remember, cheaper is not always better. If you can buy $20/month accounting software or $40/month accounting software, but you spent an extra half-hour each week on the $20 software … well, you should ask yourself: is your time worth more to you than $10/hour? If yes, you want the $40 program. If no, stick with the $20 one.
Most likely, you’re down to 2-3 possibilities at this point, and you may even have a clear forerunner. Now that the numbers are more manageable, read a review of accounting software or two on your top picks.
Try it out
Okay. You’ve probably got a favored candidate by now, or maybe you’re still waffling between two programs. Time for the test drive. Pick the program you like the best so far, and sign up. Nearly all cloud-based accounting programs have a free trial option. Play around. Check out the functions you use the most often. While there’s a learning curve with any new software, do you find that the layout makes sense to you on the whole? Or do you find yourself constantly frustrated and confused? How long does it take to do the tasks you do the most often? Do you like the overall feel of the software?
If you enjoy your test drive, you’ve found yourself a match. If you don’t, then try out #2 on your list.
Good luck! And, as always, if you have questions about how to choose accounting software for your business, don’t hesitate to contact us!