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5 Popular Small Business Financial Software Options

5 Popular Small Business Financial Software Options
Lauren Ward
Lauren WardUpdated October 12, 2022
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Editor’s note: Lantern by SoFi seeks to provide content that is objective, independent and accurate. Writers are separate from our business operation and do not receive direct compensation from advertisers or partners. Read more about our Editorial Guidelines and How We Make Money.
The best small business financial software can help you keep track of all the money coming in and going out of your business, as well as automate certain processes that, not so long ago, would use up a lot of a business owner's time and energy. If you’re thinking about investing in financial software for your business, read on. What follows is a closer look at how these programs work, their pros and cons, and how to pick the best software product for your small business.

What Is Financial Software?

Small business financial software is a type of accounting software designed to meet the needs of small businesses. These programs can help you manage your accounts, track your revenue and expenses, and store your receipts and important financial documents. In addition, they can keep you in compliance with tax law and help you prepare filings at tax time, as well as simplify the process of applying for a small business loan.While features vary depending on the product, small business financial software programs typically use double-entry accounting, generate useful financial reports, integrate with other small business software and apps, and can accommodate the growth of your business over time. You can use small business financial software along with an account or in place of hiring an accountant.Recommended: Tips for Running a Successful Small Business

How Does Financial Software Work?

Financial software automates the process of managing and tracking your company’s finances. Typically, the software will sync with your business’ bank accounts and business credit cards, handle accounts payable and receivable, and track transactions (including credit card payments).Business financial software can also store documents securely, generate quarterly reports, and reconcile data. Some of the fancier versions also offer services like payroll (or integration with a payroll company), multi-user access, inventory management, and financial forecasting.Accounting software can be used in place of a hiring bookkeeper or accountant. However, if you’re not an expert in small business accounting, it may still be helpful to use a financial professional to help maintain and review your books, and make sure that all financial statements are prepared correctly.Recommended: 6 Business Cash Management Tips

Pros and Cons of Using Dedicated Financial Software

Even the best accounting software options come with both pros and cons. Here’s a closer look at the advantages and disadvantages of using small business financial software.

Pros of Using Dedicated Financial Software

Reduces Errors

Accounting software can eliminate, or at least significantly reduce, common small business accounting errors. For example, if your journal entries don’t balance,  the accounting software will flag it right away. This keeps minor mistakes from becoming larger ones, and can save you all that time you might have spent trying to figure out why your balance sheet doesn’t balance.

Automation Saves Time

With accounting software, you won’t have to spend time doing repetitive tasks (like manually entering every business transaction), fixing accounting errors, and creating financial reports. Both forecasting and creating a small business budget can often be done with the push of a button, as can many other calculations.

Can Cost Less Than Hiring an Accountant

While you don’t know what you don’t know when you first open a business, financial software can at least do a majority of your bookkeeping for you. Of course, an accountant can likely offer insights and advice you can’t get from a program. But, If you’re on a tight budget, accounting software can give you most of the things you need. One day, you may still want to hire a CPA for financial planning. But if you’re just starting out, accounting software can be a good place to start. 

Simplifies Tax Filings

Business financial software can be a big help when it comes to tax compliance. That’s because having accurate accounting records and up-to-date financial statements makes the process of collecting all the documents and information you need to file your taxes relatively easy.

Cons of Using Dedicated Financial Software

Can Be Difficult to Use at First 

Financial software programs try to be as user- and non-accountant-friendly  as possible. However, if you're new to small business accounting, there will likely be a learning curve involved. Figuring out how to use – and keep up – with the software may take a fair amount of time and effort at the outset.

Lack of Human Support

While automation can save time and money, a software program will likely never be able to fully replace a live bookkeeper or CPA. Most financial software companies  offer customer support (either online or over the phone), but the quality and availability can vary widely.

Requires Updates and Maintenance

Maintaining accounting software involves performing periodic upgrades to the accounting software package. It also means keeping all the necessary equipment – PC/ laptop, internet connection/modem, backup drive, and operating system – up to date so it can properly run the program.

May Require Additional Purchases

Even if the financial software is free, there’s likely a paywall somewhere. Software companies will often charge for additional services like payroll, payment processing, technical support, and upgrades. Recommended: What Is a Bank Reconciliation Statement?

5 Small Business Financial Software Choices

The best accounting software for small businesses helps you track your accounts and expenses and keep detailed, accurate books. Which program will serve your business best will depend on the industry you’re in, and how many employees you have. Here’s a look at five popular financial software options (based on a Google search of “popular small business financial software”) that you may want to consider for your small business.

1. QuickBooks

Quickbooks is a popular option among small business owners. While it can be pricier than its competitors, it offers multiple tiers to choose from, which means you may be able to find an option that fits within your budget. The developer, Intuit, has a whole set of other programs business owners use (such as Payment Processing and Payroll). As a result, Quickbooks will work seamlessly with these programs, as well as hundreds of other third-party apps. Thanks to the ubiquity of Quickbooks, there are also many online training resources and forums to get support when needed.
Offers various pricing optionsMonthly plans can be expensive
Easily integrates with other appsLimited account users without upgrade
Live full-service support available (for an additional fee)Learning curve to getting started
Easy sharing with outside accountants or bookkeepersLacks e-commerce features

2. FreshBooks

FreshBooks is a solid, well-rounded accounting software choice, and is often cited as being one of the easiest accounting software to use. It’s also known for having good customer service, highly customizable invoices, and a strong mobile app. While FreshBooks can be a great choice for freelancers and independent contractors, it may not be ideal for fast-growing businesses due to user and client limits on some of its plans.
Simple to use for freelancers and very small businessesDoesn’t offer document management
Advanced invoicing featuresTraining not offered
Feature-rich mobile appPayroll is not included (available as an add-on)
Can be cheaper than some alternativesLimits on number of users and clients

3. Zoho Books

Zoho Books is a cloud-based accounting software product that offers simplified financial management at an affordable price. It automates business workflows, offers robust invoicing features, includes free inventory software, and automatically imports bank feeds. It also offers a free plan for businesses with annual revenue under $50k.Zoho can be a great choice for very small businesses, especially ones that are already using Zoho products and services because it integrates well with other Zoho apps.
Easy to create automatic workflowsOnly allows up to 15 users with top tier plan
Integrates well with other Zoho appsLimits amount of contacts with lower tiers
User-friendly interfacePayroll services cost extra
Manages 1099 contractorsFree plan limits invoices to 1,000 per year

4. Xero

Unlike many other financial software options, Xero allows business owners to add an unlimited number of users and to designate a different permission level for each. It also integrates with hundreds of other apps, as well as third-party payroll and payment services. In addition, Xero offers a variety of plans, so you can upgrade as your business grows
Seamlessly integrates with other appsNo live phone support
Cheaper than many of its peersLimits on bills and invoices with entry-level plan
Each plan supports unlimited usersMust have its highest-tiered plan to deal in multiple currencies
Simple inventory managementPayroll costs an additional monthly fee

5. Wave

Wave is 100% free for invoicing, accounting, and banking. As a result, it can be a good, cost-effective choice for freelancers and service-based businesses that send basic invoices and don’t need to run payroll. At the end of the year, an accountant can pull needed information and reports from the software to prepare the business’s tax return.
FreeNo live customer support
Offers unlimited income and expense trackingMust pay for payroll and payment processing
Can add unlimited number of users with various permissionsDoes not offer inventory management or time tracking
Easy to customize templatesNot ideal for businesses with more than 10 employees
Recommended: Guide to Income Statements in Business

Choosing a Financial Software Solution for Your Business

To determine the best financial software system for your business, you may first want to consider how many users you will want to have. If it’s just you and one or two of your business partners, any of the companies above will likely do. However, if you need a large number of people to be able to enter and access data, then you may want to consider a company that offers unlimited users.Also think about what features you need. If you want everything, including payment and payroll processing, it can be a good idea to shop around and compare costs and features. The cheapest option may not be so cheap once you add all the services you’re looking for. If you’re just looking for bare bones, then Wave’s free software program (which offers accounting, invoicing, and receipt scanning), may be all you need right now.

The Takeaway

Financial software can help you accomplish your daily accounting tasks, including recording payments, tracking expenses, invoicing customers, and reconciling transactions, easily and all in one place. It can also help you monitor and manage your company’s financial health, and generate reports that analyze your business’s performance from different angles.While using small business accounting software typically comes with a learning curve, it can be well worth the time and occasional headache to get yourself up to speed. By automating many of the tedious tasks associated with bookkeeping, you’ll have more time to focus on what’s really important – managing and growing your business.

3 Small Business Loan Tips 

  1. Online lenders generally offer fast application reviews and quick access to cash. Conveniently, you can compare small business loans by filling out one application on Lantern by SoFi.
  2. If you are launching a new business or your business is young, lenders will consider your personal credit score. Eventually, though, you’ll want to establish your business credit.
  3. If you need to borrow money to cover seasonal cash flow fluctuations, a business line of credit, rather than a term loan, provides the flexibility you likely need.

Frequently Asked Questions

Which financial software do most small businesses use?
Do you need an accountant if you are using business financial software?
Is there a financial software for business that is considered easier to use?
Photo credit: iStock/Hiraman

About the Author

Lauren Ward

Lauren Ward

Lauren Ward is a personal finance expert with nearly a decade of experience writing online content. Her work has appeared on websites such as MSN, Time, and Bankrate. Lauren writes on a variety of personal finance topics for SoFi, including credit and banking.
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