Which accounting program is best for your business? The answer is, it depends. In this post we will give a quick rundown of three popular programs and tell you why they may or may not be the best for your business.
Freshbooks is a relative newcomer to the accounting software arena. Their ideal customer is an Internet-based service company run by a single person or a small group. They are not a full accounting system, meaning they do not generate balance sheets with credits and debits, handle sales taxes, etc. They also don’t do things like loan amortization and inventory control. They are a simple financial program for small business invoices and expense recording.
As a new entrepreneur, you may not need a full accounting system. You may be okay with simply sending out a few invoices each month and generating reports that show your income and expenses. If that describes you, then Freshbooks may be all you need. However, you will probably quickly outgrow this cloud-based system. If you have over 20 transactions a month, you may be ready for something more robust.
Quickbooks is probably the most popular financial software available. Quickbooks is a full accounting software program, so it gives you more options than Freshbooks. Intuit, the company that makes Quickbooks, has marketed it heavily as a user-friendly system, and it is the top contender for the ease-of-use winner when it comes to full accounting software.
There are actually two different Quickbooks programs. It is difficult to migrate between the two, so it would be best to choose one and stick with it long-term. The first is the standalone desktop Quickbooks software. With this version, you load the software onto your personal computer. Anyone on your team can login to the software and input data, like deposits into the business’ bank accounts, checks written, or bills paid.
The second version of Quickbooks is the online, cloud-based software. You pay a monthly subscription for this service and additional fees for each user. This can be quite expensive if your company has a lot of departments and each handles their own accounts.
While it may seem like a good to save money by having everyone log in with the same credentials, doing so makes it difficult to reconcile errors in your accounts, because you have no way of knowing who entered incorrect information.
However, Quickbooks may be good for a small company that doesn’t have a lot of employees and doesn’t have a separate IT department. Its ease-of-use feature means it can be installed and set up by someone who isn’t particularly tech savvy.
The final software package we want to go over is Xero. This online, cloud-based software is a full accounting software package. If you start with Xero when you are a small company, it has all the options and integration you will need as you grow to be a large company.
Unlike Quickbooks, Xero works easily with different invoicing, project management, and payment processors. While Quickbooks makes it difficult to work with anything other than the Intuit Merchant account interface, Xero integrates easily with PayPal, Stripe, or Authorize.net as well as, merchant accounts from individual banks.
Another differentiation between Xero and Quickbooks is their pricing structure. With Xero, you pay a flat subscription fee that covers an unlimited amount of users, or seats. It also has unlimited bank transactions, unlimited invoices, unlimited contacts and unlimited cloud storage built into the product.
With Quickbooks, as your company grows, the fees you pay grow, too. You will pay a lot to stay with Quickbooks when your company becomes large. For this reason, many companies that are doing over a million dollars a year in revenue have their internal IT department write a custom program for their particular enterprise rather than stay with Quickbooks.
Xero, on the other hand, will grow with your business and is robust enough to handle even a large company’s finances. The disadvantage is that it is more difficult to install and set up. So unless you are more technically inclined than the typical start-up owner, you will probably want to hire an outside technology person to handle the initial set-up.
Another advantage of Xero is that it works easily with multiple currencies. This is perhaps the result of Xero being started by a New Zealand company where they are more used to working internationally than the U. S. based Intuit. If your company does a lot of business overseas, or may grow to do that in the future, Xero may be a better solution than Quickbooks.
The Bottom Line
While Freshbooks may work well for a small creative, service-based business, for a full accounting software solution, you need to go with Quickbooks or Xero. Of these two, Xero will allow your company to grow without your cloud-based accounting system becoming a major expense. If you anticipate your company growing (and if you don’t, you should reconsider your business plan), Xero may be the best solution that will grow as your company does, and integrate well with your other systems.