7 features of the best small business accounting software tools

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Modern accounting software is packed to the brim with features that automate essential financial tasks and deliver actionable business insights. But bigger isn’t always better for your small business. Between all the built-in tools, optional add-ons, and differing software plans, it’s easy to overspend or end up with unnecessary features. 

To help you cut through the noise, we’ve compiled a list of the seven must-have features of the best small business accounting software options. While no two businesses are exactly alike, these features ensure you have the best chance for robust financial management whether you’re an ecommerce startup or life sciences enterprise.

1. Core accounting tools

At the heart of all accounting software is a set of basic financial tools that let you record your business transactions and neatly categorize income, expenses, assets, liabilities, and more.

Most businesses need to practice double-entry accounting, in which two journal entries are made for each transaction — a debit (an increase) and a credit (a decrease). For instance, when you buy $2,000 of new fabric for your ecommerce clothing business, your cash account decreases, but your inventory account increases. 

As a result, any accounting software you choose should provide a general ledger, chart of accounts, trial balance, accounts payable, accounts receivable, and financial reports. Your toolset may also include compliance support, like guidance on domestic and international sales tax, payroll tax, or state-specific financial requirements. These will come in handy particularly when tax season rolls around.

2. Automatic bank reconciliation

Bank reconciliation is the process of comparing bank statements, catching any discrepancies, and balancing debits and credits at the end of each financial period. For high-volume businesses like restaurants and retail, you may need to reconcile on a daily basis. This is one of the most vital bookkeeping responsibilities, and the best small business accounting software can do the hard work for you. 

To get started, you’ll need to connect your business bank account and credit card accounts. The software should automatically balance your books — or flag entries that don’t match up. This feature transforms bank reconciliation into a quick daily task instead of a time-consuming monthly ordeal. Furthermore, the real-time bank feed eliminates the need for error-prone manual data entry.

3. In-depth financial reporting

Any accounting system worth its salt will include basic financial statements, like balance sheets, profit and loss (P&L) statements, and cash flow statements. Having this functionality ensures you can stay compliant with any reporting regulations and see an accurate record of your financial health at any time. 

Expense reports, receivables and payables aging reports, and budget vs. actual reports also help you pinpoint opportunities to improve cash flow and spending. But some of the best small business accounting software goes above and beyond, offering a wide range of custom interactive reports and rich data visualizations. Some plans even include an artificial intelligence (AI) assistant to suggest new metrics and draw out trends you can apply to your business decisions. 

4. Customizable dashboard

At first glance, this may not seem like a top-of-the-list feature for your payroll software. But a user-friendly dashboard is crucial for efficiency whether you’re a business owner, accountant, or bookkeeper.

When you open up your software, you should be greeted by a clean, centralized view of your go-to tools and reports. Generally, it won’t take more than a few clicks or taps to navigate to the financial information you need. Some of the best small business accounting software allows you to customize your dashboard, either across the board or by user. 

5. Fast invoicing and billing 

Accounting software has expanded to encompass invoicing and billing, to the benefit of small businesses. Late invoices and missed payments plague every vertical and squeeze bottom lines. According to Sage, up to 10% of invoices are either never paid or paid so late that ultimately, businesses have to write them off as bad debt.

With the invoicing and billing features included in leading software solutions, you’re able to create and track detailed estimates, quotes, purchase orders, and sales orders. You can also easily schedule one-time invoices or recurring invoices if you offer subscription pricing

Automatic email payment reminders and online payment processing capabilities help you get paid faster. Many accounting tools already support processors like Stripe and PayPal, and offer some level of multi-currency functionality.

Although they’re not typically included in lower tier plans, time-tracking tools are increasingly available. This is particularly handy for businesses that bill clients or employ contractors by the hour, such as plumbing companies, freelancers, and marketing consultants. 

6. Easy expense management 

Expense management is a broad category, but it generally refers to submitting, processing, and tracking work-related expenses. With costs coming from so many directions — payroll, rent, office supplies, staff lunches, and interest payments — most small businesses have to upgrade from paper spreadsheets and receipt boxes fairly early.

Look for accounting and bookkeeping software with convenient expense tracking tools, like a mobile receipt scanning app. For example, the Brex mobile app automatically matches your receipts to your bank transactions and works with both Android and iOS devices. Some software options will also generate audit trail reports. These reports provide a confirmation of your total expenses, which you can reference when you’re filing small business taxes.

7. Useful integrations

Accounting app integrations are a win-win development for small business owners and software vendors. You get the freedom to keep your favorite business tools — like Shopify, Gusto, or Amazon FBA — and sync them up seamlessly. Meanwhile, software vendors get to focus on improving their primary accounting solution instead of developing their own payroll service or inventory management system. 

Useful integrations are where you can truly customize your accounting to serve your business needs. So, before you commit to a particular software choice, make sure it offers direct integrations — or easy workarounds — so you can continue using your tried-and-true resources. 

Quick hit list of the best small business accounting software options

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While this guide has covered the baseline features of the best small business accounting software, you may have unique accounting needs. A certified public accountant (CPA) can help you craft a functional financial foundation, whether you’re just starting up or several years into business. A CPA will let you know if you need advanced features, like a project management module, and steer you toward the right accounting software based on your business model and growth goals.

If you’re ready to start comparison-shopping now, there’s no need to wait. Explore these highly rated accounting software options that are suitable for any stage of business:

  • FreshBooks: Cloud accounting tool aimed at self-employed business owners
  • Intuit QuickBooks Online: Robust, scalable small business accounting software
  • Kashoo: Light accounting software with a simplified user interface
  • Wave: Free accounting software for early-stage small businesses
  • Xero: Inexpensive online accounting tool with unlimited users 
  • ZipBooks: Comprehensive, low-cost accounting software for growing businesses
  • Zoho Books: User-friendly accounting tool that’s part of a more extensive business software library

Software that does the hard work

You don’t need a lot of bells and whistles to take control of your financial information and manage it efficiently. Build on the accounting and bookkeeping essentials — like a general ledger, accounts receivable and payable, financial reports, invoicing, expense tracking, and convenient integrations — and it’s hard to go wrong.

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