One of the first steps when establishing your bookkeeping processes is to identify what software to use. Choosing bookkeeping software for your small business can feel overwhelming, especially when looking at the price of some of these subscriptions.

Let’s talk about what your software needs probably are:

What to look for in bookkeeping software

Usability

This may seem sort of obvious, but you want software that is relatively easy to navigate. You should be able to log in, enter your transactions, reconcile your accounts, and pull reports.

If you find the software difficult to understand, then you’re less likely to use it. Eventually, your bookkeeping processes will fall behind when you become frustrated. When performing your own bookkeeping functions, the state of your books can heavily depend on how well you can navigate your bookkeeping software.

Versatility

You want software that allows room for collaboration.

Maybe you do your own bookkeeping, but you work with a tax preparer at year end. Or you think you’re doing great, but you run into a pesky issue that you can’t seem to fix and need to hire a tutor (👋 Hi! That’s me!).

One day, you might be at the point where you’re ready to hire a bookkeeper (👋👏 Congratulations! And that’s also me!).

All of those scenarios will require you to share access to your software with a professional. You’ll want software that allows you to do that.

Another versatility consideration is how well apps integrate with the software. Depending on your needs, you might want accounting software that integrates well with other related software. You want it to be compatible with additional software and apps that are related to your processes.

Business practices

This is one that you won’t see on similar lists.

There is a certain software giant in the industry that has anticompetitive business practices. They advertise themselves to be a support for small businesses, but routinely have business practices that are exploitative of small and micro businesses.

While it’s difficult to have ethical spending practices in late-stage capitalism, there are accounting software companies that have better business practices.

Things to look for:

• They collaborate with other apps and developers.

• They don’t try to take over the tax prep industry by offering these services themselves.

• They don’t engage in price gouging.

What bookkeeping software do I actually recommend?

Xero: my first choice

This is the software that I prefer to use as a bookkeeper. I funnel my clients to Xero as much as possible.

I like Xero because my clients find it easy to navigate. They don’t build a glut of functions or rabbit holes into the software. It’s affordable, especially compared to their biggest competitor.

And Xero as a company has historically treated accounting professionals like me as collaborators rather than competitors.

Wave: my second choice, but only the free version

Wave is fairly simple to use. The software isn’t overly complicated and is easy to navigate. It’s good for really small businesses that don’t have a lot of transactions.

If you’re a consultant with a small amount of transactions and only one or two accounts, this would be a great option for you.

A few drawbacks: I can’t remember if their free version includes invoicing. Their reconciliation process is a little confusing and could lead to errors.

Last I checked, their paid version was comparable in price to Xero. You would get a better product for a comparable price if you use Xero instead.

QuickBooks Online: my third choice

The elephant in the room that I’ve been avoiding.

This is my third choice, and I use it with reluctance. They’re slowly losing this title, but they are the industry standard. I have a laundry list of things that I hate about Intuit and QuickBooks. But I grew up using this software. I performed bookkeeping on other software before QuickBooks was a thing, but a vast majority of the work I’ve done throughout the years has been on QuickBooks.

Their reconciliation process is the best I’ve used. This could just be a me issue, but I find QuickBooks’ reconciliation process to be slightly easier than Xero’s.

Folks use QBO for understandable reasons. Due to Intuit’s marketing budget, this is the software most entrepreneurs think of when they’re choosing bookkeeping software.

If you choose this, it will do the job. Just remember that it’s more expensive than it needs to be and their customer service is notoriously bad. Their business practices do not assist true small businesses.

My biggest gripe with them is that they cultivated collaborative relationships with accounting professionals, built their customer base on our recommendations, and then created competition in the relationship by offering bookkeeping and tax preparation services.

Many accounting professionals are small businesses; these practices contradict Intuit’s claims to support small businesses.

Need help choosing or setting up bookkeeping software?

Want to learn more about what bookkeeping software to choose or need assistance getting your accounting software set up?

Schedule a time to talk with me about it.

Frequently asked questions about bookkeeping software

How do I know when I’ve outgrown my bookkeeping software?

You might find yourself doing more work outside the software just to keep things organized. Maybe it doesn’t connect with the apps you need, or sharing access with your bookkeeper is difficult. If you’re regularly working around limitations, it may be time to reconsider whether the software still fits your business.

What should I do before switching bookkeeping software?

Start by identifying what isn’t working with your current software and what you need the new software to do. You don’t want to go through the trouble of switching only to run into the same frustrations.

You’ll also want to save your reports and confirm what information can be transferred. Some information may need to be entered manually. Talking with a bookkeeper before making the move can help you figure out what’s involved.

Do I need to clean up my books before moving to new software?

Ideally, you’ll want to address outstanding bookkeeping issues as part of the move. Switching software won’t fix transactions that were categorized incorrectly or accounts that haven’t been reconciled.

That doesn’t mean you have to figure it all out yourself before getting help. A bookkeeper can help you determine what needs to be cleaned up and how to coordinate that with the software change.

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