Which accounting software for startups is the best option? What are the benefits? What should you look for and what are other important questions to ask?
Below we will help you answer these and more as we explore these digital tools.
What is Accounting Software?
It’s a digital solution for organizing your financial transactions.
These software solutions are more than just glorified notebooks or Excel sheets. They’re not only good for keeping secure digital records and receipts.
They also provide other useful functionalities such as:
- Invoice and bill tracking
- Expense tracking
- Budgeting and forecasting
- Inventory management
- Automatic bank and card reconciliation
- Generating reports from financial data
- Easy view of data through a real-time dashboard
- Integrations with POS (point-of-sale) systems, online payment systems, payroll software, and more
Why Startups Need Specialized Accounting Software
There are several challenges faced by startups in financial management.
- You could be too busy with the front desk to care for the backend.
- You might be spending too much time listing the daily expenses, transactions, and other bookkeeping tasks.
- You might have poor understanding of cash flow management, budgeting, and forecasting.
- Some end up with disorganized or incomplete records come tax season and incur fines or penalties.
Thankfully, accounting software can address these challenges.
Accounting software:
- Automates most of the tedious busywork saving you countless hours.
- Is easy to navigate and find the transactions you’re looking for
- Can generate reports so you can see a snapshot of your business health
- Makes it easier for a bookkeeper or accountant to go through and help you during “that” time of the year
Key Features to Look for in Accounting Software
Automation Features
We already teased the beauty of automation and how it can drastically improve efficiency. With software, the important task of bank reconciliation and reconciling credit card accounts is much simpler. Most software can help analyze the nature of your transactions and automatically categorize them into accounts (though not always accurately).Automation is also important in helping reduce the possibility of manual errors.
Scalability
What do we mean when we talk about scalability in regards to accounting software? How can a tool grow with your business?
It all comes down to the flexibility of the product and its offerings.
Some accounting software will market themselves as best for small businesses. They focus on the important features that businesses of this size need. Others have more niche features that are incredibly useful for specific industries or larger businesses.
Consider their ability to cater to your needs as a startup and their ability to accommodate your needs when you scale.
User Interface and Ease of Use
An accounting software without an intuitive UI can feel like assembling furniture without instructions. You’d probably figure it out eventually but it will likely be a frustratingly time-consuming process.
Accounting software for startups should take user experience into, well, account! They need to be intuitive to navigate for accountants and laymen alike.
A steep learning curve will sooner discourage someone from using that service than push them to figure it out.
Thankfully, some accounting software offer helpful resources like Youtube videos or “Getting Started” tutorials. These help users familiarize themselves with their site and services.
Integration Capabilities
Integrations with other software are one of the greatest things about accounting software. It’s a level of multi-functionality that allows you to do so many things from one place.
Examples of essential accounting software integrations include:
- Banking
- Payroll
- CRM (customer relationship management)
- Billing and payment processors
- Analytics platforms
- Ecommerce platforms and stores
Compliance and Security Features
Accounting software can help you stay compliant with regulatory requirements. For one, they help you keep complete, accurate records. There are also fraud prevention measures such as audit trails that external auditors can track.
When it comes to data security, it’s important to choose your accounting software wisely. You don’t want a shady tool stealing your sensitive financial information or leaving it vulnerable to cyber criminals. You should ensure that they comply with industry data security standards at the least.
Best Options for Accounting Software for Startups
Overview of Top Market Choices
QuickBooks
QuickBooks Online is an accounting software that caters to SMBs. It’s one of, if not the most well-known bookkeeping software out there. With them, you can do income and expense management, integrate with QuickBooks Payroll, access in-depth reports, and more. Their dashboard allows multiple users to view and track everything in one place. It also has various customization options and mobile-friendly viewing.
FreshBooks
Freshbooks is the solution for you if you are a small business selling services. They specialize in bookkeeping for freelancers, solopreneurs, businesses with employees and businesses with contractors. They are well known for their excellent customer support. Instantly access the financial management tools you need plus other tools like project management.
Xero
Xero is another popular accounting software that gives small business owners the core accounting functionality they need. On top of that, they offer other tools for worker management, expense and invoice tracking, payment systems and more. The Xero app store allows you to connect multiple apps and solutions accessible on a single platform. Xero is also dedicated to data security, being ISO/IEC compliant. They are mobile friendly, user friendly, and offer 24/7 support.
Zoho Books
Zoho Books is an accounting software that allows you to improve your financial back end with its features. They cater to all business sizes from startups to large entities. Their smart automation tools allow you to save precious time. Their other features can help you manage your cash flow, set up recurring invoicing, manage customers, and track your inventory among others. Zoho Books is part of the Zoho Suite which allows you to seamlessly integrate with other Zoho products and services.
Wave
Wave is an accounting solution made for startups and small businesses with less than 10 employees. Their features contain all the essentials you need to get your financial management journey started without the fluff. Their software is easily navigable for both you and your accountant. Waves invoicing tools allow you to get paid faster and their customization options allow you to proudly display your branding. Integrate Wave Payroll to easily pay your workers.
Feature Comparison
QuickBooks
- Pricing options range from $18-$76 dollars making it a scalable option
- Get the first 3 months at half price
- Allows accountant access in the lowest tiers
- Managing bills and payments is only accessible in the Essentials plan (the second-lowest tier).
- While you may quickly outgrow your need for the Simple Start tier with its limited functionality, it does have freelancer-friendly features. Take progress invoicing for example. It allows you to send multiple invoices as you finish parts of the project. It shows clients what they are paying for and the balance that remains.
Freshbooks
- 3 main tiers plus an option to talk to a specialist for a personalized estimate
- Pricing ranges from $19-$60
- 60% off for the first 4 months
- Ability to choose certain add-on services instead of upgrading to the next tier
- Invoicing is unlimited but only up to 5 clients for the lowest tier but jumps to a max of 50 in the next tier
- Can only invite accountant at the second tier
- Robust customer support service
Xero
- 3 pricing tiers from $29-$62 dollars
- Special promotions like 50% up to 6 months if you purchase Xero before a set date
- 24/7 support
- Their commitment to data security is front and center
- Set up bill management for up to 5 bills on the lowest tier
- Has special features for those working in healthcare with their practice management software
- Provides options for add-on services like project tracking and Analytics Plus
- Expense management is not included in any plan and only an add-on for $4/mo per user
Zoho Books
- Offers a free plan and 5 other pricing tiers ranging from $20-$275. No promotions.
- Robust accounting features even in the free option
- Can send up to 1000 invoices/yr with the free plan but invoices are Zoho Books branded which you can remove only by paying for the next tier
- Offers a customer portal
- Can only issue sales orders in the $40 tier
- Can add your accountant as a user in the free tier
- Seamless integrations with the Zoho Suite of apps
Wave
- Has a free version and a Pro Plan at $16/mo
- You can create unlimited invoices, estimates and bills with the free version
- Not very scalable. Their limited suite has all the essentials but you will likely need to change accounting software as you grow.
- Has add-on services like receipt capture, mobile functionality, payroll, and hiring a bookkeeper. Receipt capture is included in the Pro Plan,
Pricing Models
One thing you’ll notice is that these accounting software have pricing tiers or models. These services should know how to structure their bookkeeping pricing and distribute their features into these tiers in a way that makes sense.
When selecting an accounting software for startups, ask yourself these main questions:
- Do they have the features I need at this stage?
- Is it at an accessible price? .
- Will I be paying for features that I will rarely or never use?
- If I choose to expand my business, will they have the features I will eventually need?
Implementing Accounting Software in Your Startup
Preparing for Transition
When preparing your startup for integrating new software there’s a couple things you must do.
You want to make sure you are familiar with the software. This makes it easier to explain to your team why you are switching in the first place.
Announcing it ahead of time gives your team time to prepare, especially your bookkeeping/accounting team. This also helps them collate all receipts and other transaction records for the transfer.
Training and Support
The accounting software you choose should offer excellent support while using their services. Some have 24/7 support through email, while others offer multichannel support like live chat and even SMS.
A lot of them offer additional resources to help train your team in using the software. Some link to videos while others have start guides, blog posts, or forums.
Evaluating the Impact
There are multiple ways to measure the effectiveness of your new system.
You can set-up metrics or key performance indicators to help you gauge its benefits. For example, you can track how many hours you’ve saved by switching or how many more transactions you’re able to process in a day.
You can also measure it by how much your quality of life has improved.
You can ask questions like:
- Do you gain more actionable insights from data that leads to improved profit margins?
- Does the data improve my understanding of my business needs?
Frequently Asked Questions
What are the hidden costs associated with accounting software for startups?
Your bookkeeper or accountant may charge extra during the transition of systems or increasing the scope.
Accounting software often have percentage charges on all online payments or credit card transactions.
How often should a startup update its accounting software?
You can quite quickly see the gaps in your current accounting software as you go through your day-to-day. You can assess your current plan or software monthly together with your monthly bookkeeping and reports.
A semi-annual or annual review might make more sense for those with insufficient data or low sales volume.
Can accounting software help in tax preparation for startups?
Absolutely! It keeps an organized and accessible database of all your financial records. This document management means your accountant has access to tax-ready financials.
It can also automatically calculate taxes-owed (like VAT and GSAT) based on updated rates.
What is the best way to secure accounting data in cloud-based software?
- Choose the right software
- Use multi-factor authentication
- Use secure password vaults like Lastpass
- Limit the number of users
- Encrypt your data
How does accounting software integrate with other startup operations like inventory and customer management?
Some software already includes these features. Otherwise, they have app stores or a suite of apps that connect with the accounting software.
What Is AccountsBalance?
AccountsBalance is a monthly bookkeeping service specialized for agencies & SAAS companies.
We take monthly bookkeeping off your plate and deliver you your financial statements by the 15th or 20th of each month.
You’ll have your Profit and Loss Statement, Balance Sheet, and Cash Flow Statement ready for analysis each month so you and your business partners can make better business decisions.
Interested in learning more? Schedule a call with our CEO, Nathan Hirsch.
And here’s some free resources:
In Summary
Accounting software for startups need to be both robust and easy to use. These solutions save countless hours and allow you to stay compliant, accurate, and financially organized.
