Managing the finances of a business is challenging, time-consuming work, especially for small business owners who have to do it all themselves. Moreover, no two businesses have the same accounting needs. PCMag has been testing and rating accounting software for more than 20 years. Here, we evaluate the best accounting apps for small businesses based on their ease of use, capabilities, and costs. Two products stand out as Editors' Choice winners: FreshBooks for service-based businesses or those with modest product tracking needs, and Intuit QuickBooks Online for SMBs with more complicated accounting requirements. Make sure to read our in-depth reviews of all the small business accounting applications below and scroll past the list for an overview of everything you should know about choosing the best software for you.

How We Pick the Best Small Business Accounting Software

Eight small business accounting applications scored high enough to make this list. Solopreneur ($20 per month) targets sole proprietors like freelancers and independent contractors, while the more advanced Wave Pro ($16 per month) can handle a very small business with employees. The other six are more expensive ($30 to $99 per month), feature-rich, and customizable. They target larger small businesses that might have a few employees. Each has multiple tiers of service to meet the needs of companies that vary in size and complexity.

We rate these applications primarily based on how easy they are to use, how much they do, and their price. We also consider anything we encounter during our hands-on testing.

What Do Small Business Accounting Services Do?

Financial bookkeeping is complicated and time-consuming. Business owners find it challenging enough to cover the basics—paying the bills and tracking incoming revenue—let alone answering critical questions like, "Are we profitable, and why or why not?" Will we have enough money to make the required tax payments on time? Should we invest in new equipment? Do we need to explore financing? Can the appropriate staff access your accounting data if they have to work from home?

A good small business accounting service gives you information that helps you answer these questions based on the input you supply. Once you populate the service with details about your financial accounts, customers and vendors, and the products or services you buy and sell, you can use that data to create transactions that will invoice your customers, pay your bills, and track incoming payments. Instant search tools and customizable reports help you track down the smallest details and see overviews of how your business is performing. Mobile apps and websites give you access to your finances from wherever you are.

How Do You Set Up Accounting Software?

Depending on how long your business has been operating, getting started with a small business accounting service can take anywhere from five minutes to several hours after you sign up for an account. Most offer free trials or a demo account, only charging a monthly subscription fee once you're ready to commit. Generally speaking, the more you need from an accounting service, the longer it takes to set it up and the higher the monthly payment.

Early setup involves creating an account and answering questions about your business type and fiscal year. Some applications encourage you to enter a record or create a transaction to get your feet wet. It's also a good idea to browse the accounting software's settings. For example, do you plan to use specific features such as inventory tracking and purchase orders? You can usually turn tools on or off, which can help you either simplify the user interface or maximize the functions.

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Next, you have to decide whether you want access to the transactions from your online financial accounts (checking, credit cards, and so on). Once you enter your login credentials for that account, the software imports recent transactions (usually 90 days' worth) and adds them to an online register. This process is not as simple as in the past. Banks have been tightening up their security (which is a good thing), so you may have to jump through a couple of hoops to get connected. Sometimes, the connections break, forcing you to set them up again.

Would you like to let customers pay with credit cards and bank withdrawals? If so, you need to sign up with a payment processor such as PayPal or Stripe. Of course, this service involves paying transaction fees that can differ slightly from app to app.

It's possible to do a minimal setup and then jump into accepting payments, creating invoices, and paying bills. All the accounting services we reviewed let you add customers, products, and vendors during the process of completing transactions. You need to do this anyway as you grow and add to your contact and product/service databases. You have to decide whether you want to spend the time up front building your records or take time out when you're in the middle of purchase or sales forms. 

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Most small business accounting services also offer the option to import existing lists from CSV and XLS files, but your lists’ configurations aren’t likely to exactly match those of your application. You should still be able to modify the fields your lists include, however.

Once you start entering records and transactions, your app’s dashboard will show your data. These pages display a real-time overview of the financial information you need to see frequently, including account balances, charts comparing income and expenses, and invoices and bills that need immediate attention. They’re interactive, meaning there are many links to related pages where you can get more information and take action.

What's the Best Free Accounting App for Small Businesses?

Wave (which H&R Block owns) used to be the best free accounting solution. The company has split the app into two versions. Wave Starter is free but doesn’t include some of the most useful features, like the ability to import transactions from your financial institutions. It also charges $8 per month if you want the ability to scan and upload expense receipts, a feature other small business accounting apps offer for free. Wave Pro is $16 per month, and it contains all of the app’s tools (including uploading scanned receipts). If you need payment services and payroll software, those cost extra, like they always have with Wave.

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Zoho Books has a surprisingly robust free version. It's an excellent choice if you already use other Zoho software or your business is set for growth since it easily scales. Features of the free version include client management, expense and mileage tracking, multilingual and recurring invoicing, online payments and automatic payment reminders, and reports. You can import bank and credit card statements but can’t set up direct connections to your financial institutions. 

The IRS continues to expand its Direct File program, which allows you to file your federal return free if you live in one of the 24 states it currently supports. Visit this page to see whether your state is on the list for the 2024 tax year and to learn about the income, deductions, and credits it supports. You can also subscribe to the Direct File newsletter here. We have been unable to test this free option.

Direct File is different from the IRS Free File program, which is a partnership between the IRS and trusted commercial software partners. This program has been around for years. If you meet certain eligibility requirements like AGI, you might be able to file federal and state returns for free using one of the partner websites. Stay tuned for more information about the Free File program for the 2024 tax year.

Which Accounting Software Is Easiest to Use?

Accounting can be complicated, and your work must always be accurate to avoid problems with customers and vendors, income taxes, and reports. The companies that make small business accounting software have worked hard to make it as simple and pleasant as possible. FreshBooks, Solopreneur, and Wave are among the easiest accounting programs to use.

Accounting professionals love to use terms like "accounts receivable" and "accounts payable" to describe the primary elements of accounting: recording and tracking expenses, income, purchases, and sales. FreshBooks and QuickBooks Online are still understandable if you don't use that terminology because they rarely use it. 

How Can Accounting Software Help With Creating Records?

Creating records can be tedious work, but you’ll thank yourself later when you don’t have to pause in the middle of a transaction to add one. Some applications let you include more than basic contact details in their contact records ("customer since" date, birthday, and other similar fields), which can be helpful as you develop and maintain relationships with them. You do the same thing for the products and services you buy and sell, so you can add them easily to transactions.

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One of the great things about using small business accounting software is that it reduces repetitive data entry. Once you fill in the blanks to create a customer record, for example, you never have to look up that ZIP code again. Sites provide drop-down lists of customers wherever they’re necessary, primarily in transactions. The same goes for employees, items, services, and vendors. Completed records get dedicated pages where you can access related information like historical activity.

Record templates vary in complexity, so you need to understand the differences before you go with one accounting service or another. Some, such as Patriot Software Accounting, support simple, descriptive product records. Others, such as QuickBooks Online, do more, such as asking how many of each product you have in inventory when you create a record and at what point it should alert you to reorder. They actively track inventory levels, which provides insights into selling patterns and keeps you from running low.

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Which Transactions Do Accounting Services Support?

Bills, estimates, and invoices are the most common types of transactions that small businesses need; most of the services we review support them. Xero and Zoho Books go further by letting you create more advanced forms, like credit notes, purchase orders, sales receipts, and statements. They also provide templates for them. All you have to do is fill in the blanks and select from lists of variables like customers and items.

How Do Accounting Apps Handle Completed Transactions?

Once you complete an invoice, you have several options. You can save it as a draft or a final version and either print it or email it. If you do the latter and have established a relationship with a payment processor, then your invoice can contain a stub explaining how the customer can return payment via credit card or bank withdrawal. You can sometimes create a PDF version of the invoice, copy it, record a payment on it, and set it up to recur on a regular schedule.

Can You Manage Expenses and Bills With Accounting Software?

Accounting services pay special attention to your company's expenses—not bills that you enter and pay (though most support this), but rather other purchases you make. This is an area of your finances that can easily get out of control if you don't monitor it. 

If you have expenses on the road, you can usually take pictures of receipts with your smartphone and upload them to your accounting app. Some accounting services attach these receipts to an expense form. Others, such as QuickBooks Online and Xero, read the receipts and extract some of their data (such as amount, date, and vendor) to an expense form using optical character recognition (OCR) technology. 

Why You Should Import Transactions and Bank Balances

Daily accounting work typically involves paying bills, recording payments, and sending invoices. But you also need to closely monitor your bank and credit card activity. If you have connected your financial accounts to your accounting site, then it's easy to do. Balances usually appear on the app's dashboard. You can also view each account's online register, which contains transactions that have cleared your bank and arrived in your accounting app (along with those you've entered manually).

You can do a lot with these transactions once they appear in a register. First, you should assign them a category, such as office expenses, travel, and utilities. That way, you know where your money is coming from and where it's going. Every accounting solution tries to automatically categorize at least some transactions. You can change them if they're incorrect. Diligent categorization gives you more accurate reports and income tax returns.

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You can also match related transactions, such as an invoice and a corresponding payment. Again, some accounting services make educated guesses here. You can also make notes, split transactions that should be assigned to multiple categories, and reconcile your accounts with your bank and credit card statements.

How Can You Use Reports to Improve Your Business?

Reports are your reward for keeping up with your daily accounting and doing it correctly. Every small business accounting service has templates for numerous types of insightful output. You select one, customize it with the filter and display options, and let the software pour your company data into it. It takes only a few seconds to generate a report.

There are two kinds of reports. Most are the type that any small business owner could customize, generate, and understand. They tell you, for example, how much you owe in sales tax, whether you're making money, which customers are buying the most, which expenses and services haven't been billed yet, which of your products and services are selling well, and who owes you money.

Other reports aren't as easy to understand. Standard financial reports—such as Balance Sheet, Profit and Loss, Statement of Cash Flows, and Trial Balance—are the kind of documents you need if you ever want to get a loan from a bank or attract investors. Small business accounting software can generate them, but you might need an accounting professional to analyze them and tell you in concrete terms what they mean for your company.

Can You Use Accounting Software on Your Phone?

Accounting doesn’t exactly lend itself well to mobile access because it often involves data-heavy records, reports, and transactions. However, some accounting solution providers have still managed to build useful and intuitive mobile versions. Most are standalone apps, but Patriot Software Accounting allows you to access the software through a mobile browser, which makes it quite comprehensive. 

Can you run your business from your smartphone? Obviously, it wouldn’t be as easy as doing so on your desktop or laptop. But there’s a lot you can do, including creating, editing, and viewing forms, records, and transactions. As mentioned, you can accept payments and snap photos of expense receipts. Dashboards are very important here. Most of them are good at providing a quick overview of your finances, though they’re understandably not great at displaying reports.

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What Kinds of Help Do Accounting Services Offer?

All online accounting services simplify the accounting process, but you are still likely to have questions sometimes. You can often get help via chat, email, and phone. Some apps provide context-sensitive help along the way and a searchable database of support articles. 

Intuit has an option called QuickBooks Live that adds bookkeeping support to QuickBooks Online. You communicate with a dedicated accounting expert through one-way video chat (they can't see you) or email. This individual and their team work with you on customizing your setup and monitoring your transactions so they're accurate and use the proper category for tax purposes. They reconcile your accounts and close your books at month's end to prevent errors. They're also available for questions during regular business hours. Finally, they generate the reports you need so you're ready to prepare your taxes or hand them off to your accountant. Wave also offers fee-based bookkeeping and coaching services.

What Is the Best Accounting Software for Small Businesses?

Choosing a small business accounting application is challenging. The best one for you depends on your business needs. You want a product that allows room for your business to grow but not one that charges a lot of extra money for features you might never need. Most of the accounting services we review are available in multiple versions, so you can start at the low end and upgrade to a more powerful edition that looks and works similarly.

While you're thinking about your money, you should also consider our reviews of online payroll services and personal finance apps.