Some small-business owners who have been around a while still do things the old-fashioned way: They keep their books in paper journals and ledgers. In this age of technology and instant information, however, the majority of today’s business owners computerize their books.
Computerized bookkeeping is not only easier but it minimizes the chance of errors because most of the work done in a computerized system’s ledgers and journals involves inputting data into forms that even someone without training in accounting or bookkeeping can understand. The person entering the information doesn’t need to know whether something is a debit or credit because the computerized system takes care of everything.
Mobile accounting also is becoming popular, with major accounting software packages now available as online tools that you can access from any mobile device. Companies with multiple locations, if they purchase an online accounting software package for multiple users, can allow employees to log on from anywhere and access a central accounting system.
This article explores the three top accounting software packages for small businesses, discusses the basics of setting up computerized books, talks about how you can customize a program for your business, and gives you some pointers on converting your manual bookkeeping system to a computerized one.
Best Accounting Software
More than 50 types of accounting software programs are on the market, and all are designed to computerize your bookkeeping. The more sophisticated ones target specific industry needs, such as food services or utilities, and can cost thousands of dollars.
Luckily, as a small-business person, you probably don’t need all the bells and whistles offered by the top-of-the-line programs. Instead, the software programs reviewed in this article can meet your needs. Using one of the systems recommended in this article, you can get started with an initial investment of as little as $10 a month — the cost of Intuit’s QuickBooks Self-Employed. It may not be fancy, but basic computerized accounting software can do a fine job of helping you keep your books, and you can always upgrade to a more expensive program, if needed, as your business grows.
QuickBooks and Sage meet any small business’s basic bookkeeping needs. Both programs offer cloud-based software for $10 a month and physical software packages that cost $112 to $300 depending on enhancements you choose.
Most small businesses need a more advanced program, however, and monthly costs can vary from $20 to $60, depending on the functions you need and the number of people who need access to the software. FreshBooks is a good option.
Accounting software packages are updated almost every year because tax laws and laws involving many other aspects of operating a business change so often. In addition, computer software companies are always improving their products to make computerized accounting programs more user-friendly, so be sure that you always buy the most current version of an accounting software package.
If you own a small business and don’t need to worry about formal reporting under generally accepted accounting principles (GAAP), FreshBooks may be a good option for you. It doesn’t use double-entry accounting but is a good tool for invoicing and time tracking.
Warning Although this software is a great option if you want to keep things basic and don’t want to worry about learning a lot of accounting rules, it doesn’t offer product recordkeeping or inventory tracking, and it lacks expansive customer records. It’s truly for a freelancer or sole proprietor who has basic accounting needs.
Pricing for FreshBooks depends on the number of clients you have: $15 a month for a Lite plan that lets you bill up to five clients, $25 per month for 50 clients, and $50 per month for up to 500 clients.
2. Sage 50 Pro
Sage 50 Pro is an excellent software package for your bookkeeping and accounting needs, but I definitely don’t recommended if you’re a novice. You need to be familiar with accounting jargon to use the Sage 50 system, and its interface isn’t as user-friendly as the ones for Bookkeeper and QuickBooks. Sage Business Cloud offers various products for small-, medium-, and large-sized businesses.
Warning To use Sage 50, you need to know your way around the General Ledger and be comfortable with accounting terms such as Account Reconciliation, Accounts Payable, and Cash Receipts journal. Although Sage 50 offers training options, it lacks the sophistication of the excellent QuickBooks learning center. If you’re a beginner, I don’t recommend starting with this software.
Sage 50 offers inventory-management tools that are the best in its class. New versions of the software even automatically generate purchase orders when inventory reaches a user-specified level. You also can export Sage 50 customer, vendor, and employee databases into Microsoft Word and use the data with Word’s mail-merge feature to send emails or letters.
Sage Cloud options vary depending on the type of industry, number of employees, and types of uses. Key industries served by the Sage Cloud accounting systems include construction, manufacturing, wholesale distribution, chemicals, food and beverage, professional services, and not-for-profit.
Sage 50 offers a utility that makes it easy to use to convert data from Intuit’s QuickBooks. You also can import files from Quicken, the popular financial/money-management software package. No conversion tool is available for Microsoft Excel data, but you can import and export Excel files without problems.
3. QuickBooks Pro
QuickBooks offers the best of both worlds: an easy user interface (for the novice) and extensive bookkeeping and accounting features (for the experienced bookkeeper or accountant).
More small-business owners today use QuickBooks than any other small-business accounting software package. In fact, QuickBooks is the number-one software in PC Magazine’s “The Best Small Business Accounting Software for 2019”. You can check out reviews of other top accounting programs at this address.
QuickBooks offers novices an extensive learning center that walks you through every type of key transaction. An interactive program not only shows you how to perform functions, but also explains bookkeeping basics. You don’t have to use the tutorial, but the option pops up when you perform a task for the first time, so the choice is always yours. You also can go back to the learning center for a review at any time. For additional information on this software, check out QuickBooks 2019 For Dummies, by Stephen L. Nelson (John Wiley & Sons, Inc.).
Most people have a love/hate relationship with Intuit support. (Intuit is the company that makes QuickBooks.) Many people have had good support experiences with QuickBooks and the company’s other popular software packages, such as TurboTax and Quicken. Others have complained loudly about support problems.
QuickBooks Online Simple Start may be able to meet most of your bookkeeping and accounting needs. At this writing, the price ranges from $20 to $60 a month, depending on the features you want. This program gives you mobile access from your PC, Mac, and iOS or Android device. If you want to integrate your bookkeeping with a point-of-sale package, which integrates cash-register sales, you need to get QuickBooks Pro 2019, which starts at around $149 for the simplest version and one user. The most expensive version (for five users) costs about $1,000.
You also need to upgrade to QuickBooks Pro if you want to do inventory management, generate purchase orders from estimates or sales orders, do job costing and estimates, create a budget automatically, or integrate your data for use with Microsoft Word and Excel. You can add payroll services for an additional cost, depending on the size of your payroll.
QuickBooks is the most versatile software if you plan to use other software packages along with it. It can share data with more than 325 popular business software applications. You can share sales, customer, and financial data easily too, so you don’t have to enter that information twice. To find out whether QuickBooks can share data with the business software applications you’re currently using or plan to use, go to https://quickbooks.intuit.com/ and then click the Chat button. Operators are standing by.
Set Up Your Computerized Books
After you pick your software, the hard work is done, because setting up the package will probably take you less time than researching your options and picking which program to get. QuickBooks even has an interactive interview that asks questions about all aspects of how you want to run your business and then sets up what you’ll need based on your answers.
Sage 50 and QuickBooks produce sample Charts of Accounts that appear automatically after you choose the type of business you plan to run and the industry in which that business falls. Sage and QuickBooks ask you to enter a company name, address, and tax identification number to get started; then they generate a Chart of Accounts for the business type you selected.
If you’re operating as a sole proprietor, or if your business is based on a partnership and you don’t have a federal tax ID for the business, you can use your Social Security number and select an accounting period. If the calendar year is your accounting period, you don’t have to change anything. But if you operate your business based on another period of 12 months, such as September 1 to August 31, you must enter that information.
If you don’t change your accounting period to match the way you plan to develop your financial statements, you have to delete the business from the system and start over. After you set up your business, you can customize the software so that it matches your business’s needs.
Customize software to match your operations
With the basics set up, you can customize the software to fit your business’s operations, such as the type of invoices and other business forms you want to use.
This time is also when you input information about your bank accounts and other key financial data. Your main business bank account is the one that you should use for the first account listed in your software program, Cash in Checking.
After entering your bank and other financial information, you enter data that’s unique to your business. If you want to use the program’s budgeting features, for example, enter your budget information before entering other data. Then add your vendor and customer accounts so that when you start entering transactions, the information is already in the system. If you don’t have any outstanding bills or customer payments due, you can wait to enter vendor and customer information until the need arises.
If you have payments to be made or money to be collected from customers, be sure to input that information so that your system is ready when it comes time to pay the bills or input a customer payment. Also, you don’t want to forget to pay a bill or collect from a customer!
You may be able to import data about your customers, vendors, and employees from the software packages you’re currently using to track that information, such as Excel or Microsoft Access. Full instructions on importing data come with the software program.
Remember Don’t panic about entering everything into your computerized system right away. All programs make it easy to add customers, vendors, and employees at any time.
Other information collected includes the type of accounting method you’ll be using: cash-basis or accrual. You also need to specify whether you collect sales taxes from your customers and, if you do, the sales tax rates. Also, you can pick a format for your invoices, set up payroll data, and make arrangements for paying bills.