4 Best Accounting Software Programs for Small Businesses in 2020

How do you manage your business finances? If you've just been winging it so far, it's time to get organized. Accounting software can transform your ability to keep accurate financial information and make sure you get paid on time.

Just a few of the features typically available from the leading accounting software companies include bank reconciliation, double-entry accounting, automatic payment reminders, inventory tracking, management for accounts receivable and accounts payable, a real-time balance sheet, time tracking and the ability to generate a report with a single click.

Best of all, you can often access these accounting services via mobile apps or on any device that has an internet connection, whether a Mac, PC, smartphone or tablet. It has simply never been easier to keep your business finances in order, whether to track cash flow or to prepare for taxes.

Maybe you're old school and work well with printed spreadsheets and physical file folders. Why bother making the switch to accounting software? Once you understand how to use all of the accounting features, you'll be able to organize data, look up information, reconcile accounts, make calculations and generate financial reports in less time. Plus, with some bookkeeping software, you can even make estimates or invoices, manage your payroll and collect payments online.

In short, accounting software allows you to streamline or even automate your day-to-day financial work. It's almost like having another professional bookkeeper on your payroll. Come tax time, you (or your accountant) will be especially grateful that you decided to switch from paper to online accounting software because all of your financial data will be organized and searchable. Because you can access your online account from any device, your data is safe even if your computer malfunctions.

There's no one-size-fits-all option when it comes to small-business accounting software. The best accounting software for you depends entirely on your budget, your primary goals in using the software, how many users need access, other tools that need to integrate with the software and your comfort with using technology.

Four accounting tools stand out for small-business owners thanks to their functionality, affordability and ease of use. From there, you can narrow down your top contenders based on the features that matter most to you. Free accounting software options also exist if you're on an especially tight budget.

First released in 2002 by Intuit, the name QuickBooks has long been synonymous with small-business accounting software. Today, QuickBooks Desktop refers to the hard-disk software that you purchase once and install directly onto your computer's hard drive (and therefore always access it from that computer), whereas QuickBooks Online is the cloud-based version paid for on a monthly basis and accessible from any device connected to the internet. Of all the small-business accounting and bookkeeping software options available, QuickBooks is easily the most robust, with an extensive catalog of features.

As the name implies, QuickBooks has a special focus on bookkeeping, and you can easily add up to 25 team members (with the highest monthly plan on QuickBooks Online) to track and reconcile all accounts. Like other small-business accounting software, QuickBooks allows you to create invoices and estimates, but this brand goes above and beyond by offering numerous invoice templates and the ability to send invoices in several different languages. QuickBooks also stands out thanks to its focus on taxes, automations and reports. Over 600 other third-party, cloud-based tools — such as PayPal, Shopify and TSheets — integrate with QuickBooks to improve your experience even further.

QuickBooks also offers a few other services for which you'll need to pay extra, including payroll services and a lending integration called QuickBooks Capital. Of course, the brand's extensive features and reputation are reflected in the price of the core product, but thanks to varying subscription packages for QuickBooks Online, you'll likely find an affordable plan with the key features you need. Apart from the price, the other major downside of QuickBooks is a lack of email customer support. If you need assistance, you have to get on the phone, and wait times are sometimes long.

Xero is a close competitor of QuickBooks Online and represents a more cost-effective option for larger businesses due to the ability to add unlimited users to the account. From there, users can track time on Xero and easily transfer that time to invoices. However, like QuickBooks Online, no built-in payroll option exists on Xero. Instead, you'll need to pay for an integration with the payroll service Gusto.

If you're a fan of double-entry accounting, you'll love that Xero offers this feature, and thanks to real-time updates, you can instantly see your current cash flow. If you're worried about preventing malicious activity, you'll be pleased to know that Xero offers two-step login verification and standard encryption to protect your data.

In terms of functionality and integrations, Xero matches QuickBooks Online in many ways, so it's worth exploring both to see which one seems easier to use. Users report that Xero has a steep learning curve and that no phone support is available. Xero's cheapest monthly option, the "entry" plan, is more like a trial run to see if you like the software because you're very limited on how many invoices you can send and accounts you can reconcile. The most expensive monthly option unlocks all of the key features like project management, time tracking and multicurrency support.

QuickBooks Online and Xero stand out for their range of features, but you almost need to be an accounting professional in order to understand how to put all of those features to use. For the typical small-business owner who just wants something user friendly without a lot of extraneous features that never get used, FreshBooks is an excellent solution. This cloud-based software also rises above the competition in terms of its customer support because you can get phone help or chat-based help without a long wait time.

Because FreshBooks allows a limited number of users per account and has limited features, it's an especially good choice for freelancers, independent contractors or self-employed business owners. It offers streamlined time tracking, expense tracking, numerous invoice templates, multiple reports and the ability to automate your billing cycle. You can also perform some basic project management via FreshBooks, minimizing the number of tools with which you need to work. If you do use other tools, FreshBooks integrates with many apps, include G Suite, Dropbox, Gusto, Stripe, Basecamp, Trello and many more.

Small-business owners may balk at FreshBooks's monthly price and user fees, which are similar to Xero and QuickBooks Online. You'll need to not only consider which features you want but also how many clients you typically bill before you choose a monthly package. It also costs extra to add team members or advanced payment options. However, if you really love the more intuitive design of FreshBooks and the better customer support, it could be worth paying for it.

The company behind Zoho Books has also developed numerous apps and tools for small businesses, covering everything from customer relations management and project management to human resources and technical support. Therefore, one of the perks of using their financial management software, Zoho Books, is the ability to seamlessly integrate accounts across its entire software suite.

What if you don't use Zoho for all of your business needs? You can still take advantage of this cloud-based accounting software. Zoho Books allows you to conduct inventory management, handle invoicing, stay on top of your expense tracking, view your bank feeds on the app, understand sales tax, create estimates, upload receipts, manage purchase orders and collect online payments. In short, businesses large and small can benefit from the range of services available with Zoho Books.

Contact management, integrations, automation and reports are also available on Zoho Books. If you want to track time, however, you need to use Zoho's project management app, and a payroll option is limited to certain geographic areas. Like other online accounting software options, you can choose a monthly plan that has the price point and features for which you're looking. All in all, Zoho seems to offer a lot for a competitively low price.

When you're launching a brand-new business, money can be tight, and paid accounting software can seem like a luxury. Thankfully, free accounting software exists to get you through those first months until your revenue has stabilized a bit. Of course, the functionality of free accounting systems will be far more limited than their paid counterparts.

The accounting app Wave, for example, allows you to send invoices, scan receipts, add bank accounts and credit cards, track your income and expenses and add unlimited collaborators for free. The only catch is that the Wave app charges for payment processing. That means any fees you collect through this payment gateway will have 30 cents plus 2.9% diverted to Wave.

Other free accounting software options worth examining include GnuCash, ZipBooks and NCH Express Accounts. If all you truly need to do at this point is send invoices and collect online payments, consider signing up for a free PayPal business account or using Zoho Invoice.

There's no clear winner when it comes to choosing the single best accounting software option for all business owners. For example, even though QuickBooks Online has a plethora of tools, the lack of email support may be a dealbreaker. On the other hand, QuickBooks Online might be the only option that integrates with all of the other business tools you currently use, which would help automate and streamline your business processes from start to finish.

Start by making a list of the features you really need (don't consider the "nice to have" features just yet) as well as the number of people who would need to use the software, how many invoices you typically send per month and other software you currently use for project management, payment processing, etc. If you want to get really organized, put your list in the rows of a spreadsheet and fill the columns with the different accounting software option payment plans. Then, as you research each option, you can put a checkmark in the corresponding boxes to denote that a feature does or does not exist for that plan.

If you end up with a column full of checkmarks, you have a home-run winner that's right for you. Take a look at the cost and see if it fits your budget. Remember, accounting solutions are meant to be so efficient that they free up your time for other tasks, including sales, so it could end up paying for itself.