Dear Olga,
Is there an inexpensive accounting software that is easy to use? Or would that be too good to be true?
Thanks,
Me
Dear Me,
Believe it or not, there are quite a few options that are cost efficient out there! One of the fabulous benefits of cloud computing is things like accounting software are available to more people and can be more affordable than ever.
When I worked at a CPA firm for several years, the majority of our clients used QuickBooks because it has a solid history of supporting successful businesses. It's also a software that can scale-up with your business and it's technically easier to upgrade the software as you scale-up. The cheapest QuickBooks plan is $10 per month.
Xero is a relatively new accounting software that has taken the industry by storm and is a strong competitor with QuickBooks. Their selling point is their focus on cloud-based computing, ability to provide financial reports, and accessibility anywhere with an internet connection. The cheapest Xero plan is $9 per month.
My experience with other software has been primarily on the company side when I worked as an accountant for corporations. When it hasn't been QuickBooks, the accounting applications I used don't have small business versions available or aren't cost efficient. I found a very thorough article, "The Best Business Accounting Software for 2019" from Fundera which discusses both software in greater detail, as well as several others, to give you some ideas of what is possible.
There are a few things you should ask yourself as you decide on a software:
Does your business provide goods or services? If you're providing services, especially in the beginning you may not need a robust reporting structure. If you're selling goods, you'll need to be able to track inventory and costs of goods sold. When dealings with goods, it's important to set this part up correctly from the start or it can become a hot mess very quickly!
What is realistic for your budget? Sometimes, it's better to have the numbers down with supporting documents in Excel until you have cashflow that can support a more robust accounting system. Yes, thinking about scalability is important, but also investing into an accounting software that won't suit you for another two years doesn't make financial sense.
Is there someone you know who has a similar business to you, that you can ask what they do to organize their bookkeeping? If I fellow coach reached out to me, I'd be happy to tell them what works for me and which traps to avoid from the start.
I recommend QuickBooks to my freelance and small-business clients because I found it's the most intuitive for business owners who don't have a finance or accounting background. It's a software that is used by many businesses of various sizes and can be scalable as your business grows. Most importantly, any questions you may have are one google search away!
For my own bookkeeping, I use QuickBooks' Self-Employed version and I'm very happy with the set up. All of my invoice and expense recording processes are automated. Most of my time is spend reviewing that things are recorded where they should be each month.
My favorite functions:
Tax estimates and summaries - this is a hot area for many freelancers who have a difficult time estimating their taxes each year and may not have the money to afford a CPA's advice. Logging your invoices and expenses each quarter will give you an estimate for your taxes and can help you avoid a surprise tax bill! It also provides amazing reports (with receipts!) that make tax time a breeze.
E-mail forwarding for receipts function - whenever I receive a receipt for a recurring charge, I forward it to a QuickBooks email and based on the rules set up the charges are categorized for me.
Image capture in app - You can take a picture of a receipt after a meal or in a cab, process it through QuickBooks app on the phone and it will be ready to be categorized when you log on next
Mileage tracking in app - I actually don't use this function because I don't need to drive in NYC, but knowing how frustrating mileage tracking can be for freelancers this is a great tool.
Drawbacks:
If you need to pay sales tax, you need to upgrade to the Small Business version. This feature doesn't come with the Self-Employed version.
It can be confusing how to set up revenue recording if you're not tech savvy or don't have a background in accounting.
If you're interested in checking out this version, you can get a 30-day free trial with 50% off for the first 6 months here. That's only $5 per month for the first 6 months and $10 after that.
I can give you a much better answer with a few more details about your business. Here is a link to my calendar to schedule a 30-minute consultation.
I hope this gives you some insight on the accounting software options out there. Feel free to write in again, we can do a follow-up post about any additional questions you may have.
Best of luck!
Olga
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