As a Small Business Consultant and Tax Professional who specializes in the recently self-employed/ sole proprietorship, I get asked very often “what is the BEST online accounting solution for my NEW business?” Well…“It depends.”
I say that because it’s important that I get a better idea about which factors are important to my clients before I can recommend an online accounting solution that will best fit their needs.
Today, the accounting professional is focusing on a more trusted advisory role. For this reason, we need to listen to our client’s pain points and unique needs before advising them on yet another solution for their business.
In this blog, I am going to focus on a newly self-employed individual (also referred to as a 1099 Independent Contractor) in a Service-Based profession with limited need for invoicing and no product selling. Based on this type of individual, what are the must-haves for a good accounting solution? Keep reading below.
10 Key Elements of an Online Accounting Solution
These are the main features that you should look for in an online accounting solution. The tools featured in this article include, even in their basic packages, many of these functions.
- Anytime, Anywhere Access –This type of individual is usually on the go
- Pricing – As first-time self-employed, low-cost solutions are best; Free Trial is a plus
- Bank & Credit Card Transactions With Import Capabilities – Bank feeds (i.e. automated bank transaction import) are the future of efficient bookkeeping; No more manual entry
- Reporting – Basic financial reports are essential for year-round profitability analysis & preparation for year-end taxes
- Mobile App Capabilities – such as Receipt Capture & Auto Mileage – If the accounting solution can provide additional features that eliminate the need for more apps, that’s a plus. For example, features such as scanning or receipt capture are very useful, because they allow you to save all your receipts in one place and attach an image to each transaction.
- Your Accountant’s biggest Request – Shared Access to Your Books
- They are 100% cloud-based – all these solutions are based on the cloud and have mobile applications for different operating systems.
- They are very simple to use – they have intuitive interfaces, with easy-to-use navigation menus. Learning to use them is very simple.
- They can separate business transactions from personal ones – some independent workers may not have opened a separate business account yet, or they are still getting used to a business account exclusively for the company. Being able to separate business transactions from personal ones is a very useful function in these applications.
- You can import transactions from bank accounts and credit cards – adding or importing a new bank or credit card account into the system, and assigning the type of profit or expense, is one of the main functions you should look for.
Top 5 Online Accounting Solutions
After analyzing many electronic accounting tools that mostly meet these requirements, and offer other resources, including QuickBooks Online (Simple Start, Essentials, Plus), Wave Accounting, Xero, Zoho Books, FreshBooks, Kashoo and Sage, I have reduced the list to 5: QuickBooks Simple Start, FreshBooks, Wave, Zoho Books and Xero (with no particular order).
Below you will find a list of features, advantages and disadvantages of each of these five online accounting applications. However, remember that you can use the list above, as well as Internet reviews, as a reference for you to choose the online accounting solution that best suits the specific needs of your company.
QuickBooks Simple Start
This solution is perfect for very small businesses. If you are an independent contractor or run a small business from home, you can take advantage of this online tool for $7.50 per month. It offers essential accounting features, leaving out advanced options that you probably will not need.
With this online accounting solution you can separate personal and business finances, send and track invoices, keep track of profits and expenses, and share information with your accountant.
- It allows you to access the application from the cloud and integrate it with others.
- It’s easy to use.
- You can create and customize invoices.
- It allows you to customize up to twenty reports, such as balance sheets, sales, losses and profits.
- Because of its basic functions, it is recommended only for very small businesses.
- If your business handles inventory or needs fiduciary supervision, it is not the right option for you.
This online accounting solution for small businesses has a very intuitive interface, and its users highlight its excellent customer service platform, as they receive support by phone and email at no cost. It’s a great alternative for independent workers and sole proprietors, and it costs $15 per month.
It runs on the most common browsers and has applications for different operating systems.
Despite its simplicity, this online accounting solution has all the features you need to keep track of your business. You can create invoices, record company expenses, accept credit cards online, and import and export information to and from a bank account.
- Thanks to its interface is very intuitive, and the user experience is exceptional.
- It has collaborative tools to work as a team.
- It was designed from the beginning as a mobile application, where you can manage your business accounting while you visit your clients or travel.
- It is not designed to handle large inventories.
- Some accounting features are not available, such as payroll or accounts payable.
It is designed for small businesses and microenterprises, including independent professionals and consultants. Your basic plan is free, but this does not mean it is not a powerful online accounting tool.
It connects with your bank accounts and credit cards to track income and expenses. Then it automatically generates financial statements, including profit and loss reports, and tax reports.
Among other features, Wave can create and send invoices, generate automatic payment reminders to customers, manage and scan receipts through mobile applications, and link to third-party platforms, such as PayPal and Etsy.
- Its great advantage is that it is free, a huge incentive for businesses that are just beginning.
- It contains the essential accounting functions for small businesses.
- Excellent management of invoices and transactions.
- It has a very good user interface and simple navigation tools.
- Functions as a payroll service are not included in the basic plan.
- Wave does not allow tracking time or projects, a very useful feature for sole proprietors and independent contractors.
- It is not possible to manage inventory with this tool.
- As it is a free service, you are exposed to constant advertisements in the system.
If you have less than 10 employees, this is the perfect tool for you. This online accounting solution is affordable even for the smallest business. For $9 a month you can create and send invoices, synchronize your bank accounts, keep track of your expenses and time. With the basic plan, you and your accountant have access to these and other functions.
Zoho Books is compatible with all major browsers, and has applications for mobile devices.
- The price is quite affordable.
- Its user interface is very intuitive, making navigation smooth.
- This online accounting platform has several support channels.
- It does not have an integrated payroll function.
- The personalization of reports is minimal.
- It does not offer many possibilities for integration with third-party products or solutions.
This online accounting solution is perfect for small and medium businesses. The large number of functions of Xero and its intuitive interface have made this platform a very popular option among users. It can be used in different browsers and also has mobile applications for the most important operating systems.
Although it offers three different plans, the Starter is the most appropriate for independent workers and contractors. If you don’t make many transactions per month, the basic features will be enough: you can issue up to five invoices, manage five payments and up to 20 bank transactions.
If your business is a bit bigger, the Standard version offers these same services with no limit. The Starter plan costs $20, and the Standard $30.
-You can integrate different third party products to the Xero account.
-The platform offers its clients training, through video tutorials, on how to use their functions.
-The plans are quite expensive for small businesses.
-The Starter plan does not have access to a payroll function.
– It looks like a function to record time or follow up on projects.
-The user support system is very poor.
To have a better idea of the features of these five online accounting applications, check the table below:
|Online Accounting Solution||Features||Price||Customer Support|
|QuickBooks Simple Start||Track income and expenses |
Track sales and sales taxes
|$7.50/month*||Phone and chat|
|FreshBooks||Generate invoices and estimates |
Track time and expenses
Accept credit card payments
Import your bank account expenses
|$15/month||Phone and email|
|Wave||Banking and credit card connections |
Monitoring of income and expenses
Invoices in different currencies
Accept credit cards and bank payments
Scanning receipts with mobile applications
|Zoho Books||Bank reconciliation |
Access for a user and an accountant
|$9/month||Phone and email|
|Xero||Send five invoices and budgets |
Enter five invoices
Reconcile 20 banking transactions
|$20/month||FAQ system |
*Discount price when consulting the information for this article
To sum up
With these online accounting solutions you can access basic accounting functions, which will allow you to keep track of your profits and expenses, keep track of your banking and credit card transactions, analyze your annual earnings and prepare your end-of-the-year tax report, among others.
The beauty of all of them is that they have mobile applications to stay connected on the go, and as your business grows and you need more functionalities, you can acquire more advanced plans.
Another good idea for your company to continue making progress is to identify its growth opportunities. To discover the potential of your business, we invite you to make this brief growth evaluation, which will only take you a couple of minutes. It’s free and you don’t need additional documents to complete it.
In less than 72 hours you will receive a report with everything you need to know to start transforming your business. Click HERE to access the evaluation!