Accounting software for small business: 8 helpful features

Key takeaways

• Accounting software can help you be more accurate in your financial records while saving you time and money
• Prioritize accounts receivable and payable, reconciliation, and financial reporting features to completely overhaul manual processes
• Cloud-based tools are ideal for growing businesses as they make scaling easier and more affordable

No matter how much you hate crunching numbers, accounting is a practice no business can go without. But manual processes can lead to huge inefficiencies that end up stunting your growth rather than pushing it forward—especially when you’re not an experienced accountant yourself. To keep your finances healthy and your financial records accurate, it may be time to invest in some tech. Discover what you need to know about accounting software for small business owners, including its benefits and key features.

What is accounting software?

Accounting software helps you streamline key accounting and bookkeeping processes. Depending on the software you choose, you may be able to automate data entry, bill clients, get instant financial reports, and much more.

There are software solutions compatible with practically every device, from PCs and Macs to Androids and iPhones. Simply log into a secure browser site or install desktop software to access your own personal dashboard.

Benefits of accounting software for small business

Accounting software for small businesses helps minimize the risk of error and makes it easier to track your finances. There are plenty of simple-to-use and customizable options, saving you a tremendous amount of time and paper—and rescuing you from the headache of crunching numbers. And thanks to automation, you don’t even need to be your own bookkeeper any longer.

The cost savings alone make accounting software worth the switch from manual processes. Beyond that, accounting software helps you achieve the following (among other perks):

• More accurate records
• Better financial planning
• Easier tax compliance
• Streamlined invoicing and billing

8 small business accounting software features to consider

There are hundreds of accounting software options for small business owners. But depending on your business needs, some may be better suited for you than others. As you’re shopping for software, keep the following features top of mind.

1. Accounts receivable and payable

Accounting software should always track accounts receivable (AR, or payments that are owed to you) and accounts payable (AP, or payments your business owes).

AR features allow you to see which clients need a follow-up call, as well as which you may need to send to collections. AP features keep you on top of invoice payments, sometimes with automated payment reminders so you never miss a deadline. Together, these accounting features help you get a clear picture of your financial health, including your debt and expected income.

2. Bank reconciliation

Reconciliation—which is the process of making sure your financial records and bank statements match up—is a key function of small business accounting. It’s a crucial step that helps you better organize records into categories, catch fraud, or (at the very least) confirm your records are accurate. 

Some accounting software options link to your bank account and automatically record every bank transaction, simplifying your workflow.

Accounting platforms also commonly link to business credit card accounts, making expense tracking and accurate reconciliation even easier.

3. Billing and invoicing

Some online accounting software for small business owners lets you create and send invoices. No need to use manual Microsoft Excel or Google Docs templates anymore. If you have a subscription-based business, you can even find software that supports billing automation for recurring invoices, so you don’t have to repeat the same work.

Seek out accounting software with a time-tracking integration if you frequently bill by the hour.

4. Payroll services

Do you have employees? Consider choosing accounting software that doubles as a payroll management service or integrates with your existing one (like Gusto or Patriot Payroll). This option not only streamlines your weekly payment processing, but it also makes tax filing easier by keeping all your financial data in one place.

Some software can even separately track expense reports, so you’ll know the extra amounts you owe employees. If you work with freelancers, your software should also make it easy to track contractor payments.

5. Inventory management

Product-based companies (such as Amazon store owners or brick-and-mortar retailers) can benefit from accounting software that supports inventory tracking. Solutions like Zoho Books see exactly what you have in stock in real time, so you know how quickly you’re going through inventory and when you can expect to purchase more product for better budgeting and purchase order management.

Inventory management can even be helpful for small businesses that frequently order office supplies or packing materials.

6. Financial reports

Financial reports are crucial for any small business owner to get a clear picture of their company’s financial health and profitability. Your accounting software should provide at least basic types of reports, including cash flow statements and balance sheets.

7. User-friendliness

If you’re not in the financial industry, accounting probably isn’t in your realm of expertise. The best accounting software for small business owners is easy to understand and use, allowing you to focus on what you do best.

User-friendly software also reduces the amount of training needed for team members to contribute to or take over your accounting processes. Take advantage of free trials or demos to get a feel for the level of complexity.

8. Scalability

As you grow your small business, having software that can scale with you will be key to keeping your financial data precise and well-organized. Online accounting software—such as Xero, FreshBooks, QuickBooks Online, and Wave—tends to be far more scalable than desktop software options.

Cloud accounting allows you and your team members to access the platform from anywhere, without having to purchase and install software for every device. Instead, all your team needs is a browser or even a mobile app to log in. Plus, there’s no need to manually back up data, so your company can keep years of financial information safe with low effort.

Beyond choosing between desktop and online accounting systems, pay attention to how much you can upgrade. Free accounting software with basic features can be great for new businesses initially, but some options may not offer advanced features like payroll services or software integrations.

You may also want to seek out software with multi-currency support if you plan to have international clients or employees. The more features and customization your software offers, the better it can support you over time.

How much do accounting solutions cost?

Great software solutions don’t have to be expensive. Popular accounting software like Sage, Xero, and Kashoo start at $10 per month or less. As your company grows, you can easily access advanced functionality by upgrading to pricing plans that are often less than $50–$70 per month.

Small business owners rarely need to spend hundreds of dollars a month on enterprise-level software. Still, make sure to do your research to properly budget for the solution that best fits your needs. Pay attention to add-on costs that may come with select features. It’s worth noting that self-employed individuals can usually write off accounting software investments during tax season.

Find the right accounting tool for your business

Accounting software for small business owners is an affordable investment that can easily pay for itself. It’s a major time-saver that can help your company perform more accurate forecasting and create stronger financial plans. With a good accounting tool, you’ll also be able to track who owes you payments, so you can easily follow up. 

What’s more, your records will be well-organized for every tax season, which will make your CPA happy and protect you in case of an IRS audit. With accurate financial records, you’ll never underpay. And to make sure you never overpay taxes either, check out these small business tax deductions you need to know about.