Entrepreneurs and small business owners are plagued with a million questions. Where to start your business? How to incorporate it? How to pay employees? Which office to lease? And so much more…. At some point you will ask yourself – which accounting software should I use? Below, I will outline the main players in the space and some questions to help guide you to the best decision.
The market consists of three main software: Quickbooks, Xero, and Sage
It is basic accounting software designed by Intuit. It manages sales, expenses, inventory, and even payroll for small businesses. This product exists on both desktops and in the cloud. This is the most popular software used by hundreds of thousands of companies from Enterprise to mom and pop shops. Out of the box, QuickBooks has great features like bank feeds, custom reports, and recurring transactions.
Xero is basic, cloud-only accounting software. It similarly manages sales, expenses, inventory, fixed assets, and payroll for small businesses. This product exists solely in the cloud and is well known for its seamless integrations and API that allows customers to integrate their software with the product. Out of the box, Xero has memorized transactions, automated bank feeds, and great app integrations (which means you can easily bring in those payroll journal entries).
Sage is an accounting software by the Sage Group. Like the other three software mentioned above it handles sales, expenses, inventory, fixed assets, and payroll for small businesses. This is the least used software of the three. With the basic setup Sage has bank feeds, a great home screen, and a robust tagging system.
Now that you know the lay of the land, let’s try to decipher which is the best fit for you. Accounting software is 100% necessary for your business, and just like a car purchase, it could be overwhelming to decide which one to buy. They will all get you from A to B. Some do 0 to 60 in 4.5 seconds while other blow smoke of the exhaust pipe.
Let’s ask ourselves a few simple questions to narrow down the options:
Which Software Does Your CPA Prefer?
Most importantly, if you are reading this question and don’t have a tax preparer picked out – find one now. This individual or group is an integral part of your team. Without quality advice and open communication, you will more than likely make costly decisions. Picking their brain about what day to day accounting software they prefer will save you time, headaches, and money down the road.
What Does Your IT Department Say?
Some of the software listed above are locally based software. This means they do not sit in the cloud but rather on the server in your office, or soon to be office, or maybe on that old laptop in the garage. Sometimes, the challenge in hosting and supporting a specific software that your CPA needs to log into every quarter is just not worth the challenge. Your IT department should be able to help you with this, or you should know that you don’t have a server nor plan on buying one in the future and you are happy with paying a bit more monthly for the cloud.
What Dos Your Accountant or CFO (Or CFO Consultant, Like Me) Think?
If your startup is starting to scale up and you have a full-time bookkeeper/accountant on the team, obviously their opinion is very important as they will be using the software every day. If your bookkeeper only knows QuickBooks, it poses a bit of a problem if you prefer Xero and he has no experience with it. The net result is likely your books will be in poor form. Also, if you have elicited the help of an accounting or financial consultant, they should have worked with other businesses in your sector and their advice should be heeded.
What Accounting Software Have You Used Before?
If the answer is none, then you are free to start at square one with any of the products. For those with slight experience with other products, I would recommend going with what you know. This is a simple concept that could save you the hours and days of getting your feet wet. Yes, of course, today’s software is different than previous versions. For example, QuickBooks Online has a much different look and feel from Desktop but overall the same functions exist once you find them.
What Do You Want to Spend?
Did you know an advanced ERP (enterprise resource planning) software – aka QuickBooks on steroids – can cost $40,000+ just to implement? The scope and extent of this software can be overwhelming and the price will put it out of the price range for most small businesses or beginning startups. Other software varies from monthly to yearly fees, some will charge for hosting and so forth. If you are price-sensitive, definitely take a dive in and let that make the decision for you as often, there will be sign-up offers for all the basic software aligned above. For those that aren’t as price-sensitive, make sure you get all the features you want at the best price.
Where Do You Want the Data to Live?
Some businesses and business owners are adamant they want their files and backups located locally on their servers, so they can access them, tuck them in at night, or whatever else they may like to do with them. Other businesses store everything in a cloud storage site, such as Dropbox, and could care less about the backup timetable. To each their own, but QuickBooks Online, Sage Cloud, and Xero all live in the cloud. Avoid the online versions if you want your info locally.
What Do Other People in Your Industry Say?
From experience, I know that calling other individuals in my industry and “picking their brain” have saved me both time and money. Figure out what other people in your space use for accounting software and the systems they have. You can always improve on both, but they have done the legwork, allowing you to take it and run with it.
What Are You Special Qualifiers for the Accounting Software?
Overall, the features and depth of most basic accounting software in the business will do what you want. That is correct – most of the low-level software has the same scope of tools and will accomplish the same jobs. It really comes down to preference and ease of use. If you’re happy with your CPA and they recommend a software, go with that. If you are comfortable with certain software, go with that.
There is no best decision, unfortunately, all of the software available has its own pros and cons. My best advice is to choose the best product for you and move forward. More times than not, entrepreneurs get caught up with the decisions and don’t move the business forward. Stick with your intuition and get the job done.