Choosing the right accounting software is a critical decision for any small business. Your accounting software helps with day-to-day processes such as invoicing, billing, and time tracking, and also offers an overall picture of your company’s financial health. The right accounting program can help you set goals, improve your cash flow, discover red flags, and increase profits. Choosing the best small business accounting software can affect your ability to successfully run your business.
What Ways Can You Do Accounting?
There are several ways to do accounting for your small business. Each method has advantages and disadvantages as each method offers a different level of automation and security. However, it’s important to note that some may require more time and effort than others.
If you’re already a number cruncher, manual accounting is a great way to keep tabs on your books. Manual accounting works well for sole proprietorships and for self-employed people who have a simple business model.
Manual accounting doesn’t necessarily mean sitting hunched over your desk making ledger entries by candlelight, but it is the most hands-on and work-intensive method of accounting. This method typically involves using a spreadsheet program like Microsoft Excel or Google Sheets. Before the advent of dedicated accounting software, Excel offered companies the best way to perform complicated calculations. Accountants used Excel to do taxes, figure out loan payment amounts, and determine payment schedules.
Although Excel was a great resource at one time and continues to be widely used, it’s been surpassed in efficiency by other accounting programs that automate a lot of the manual labour and data entry. Excel’s biggest drawback is that it can be quite time-consuming. Altering one cell means you may have to find similar cells in a different sheet and change those too. Most businesses have multiple sheets of accounting data at any given time, and over the course of balancing all those sheets, you might spend a lot of time hunting for the right numbers. Manual tasks like inputting formulas, finding the right cell to add a figure, or checking for errors can eat up time that might be better spent in other areas of your business.
Using Excel also allows for mistakes, which can be magnified over time as an error in one cell factors into other calculations. A small error in Excel can cost you down the road because of decisions you made based on data you thought was reliable. Inconsistencies among spreadsheets can make it harder to spot problems and red flags in your data.
Fortunately, manual accounting is only one of the accounting options available to you.
Desktop Accounting Software
This type of accounting software keeps all of your data on your main computer in the office. As the owner or proprietor, you can easily control who has access to it. Security for this type of system is usually fairly basic, in the form of access passwords. Basic desktop accounting software can work well for sole proprietors and self-employed people, as well as for small businesses. For example, if you run a business with 10 in-house employees, a desktop accounting system might be all you need.
Desktop accounting software programs in Canada tend to offer some connectivity, such as the ability to email invoices, send messages to customers, and submit or receive online payments. These software programs can also be integrated with other programs that you already have on your computer. In general, though, the accounting program is only accessible from the computer network that it’s installed on — meaning you can’t access accounting spreadsheets on your phone or your home laptop.
The functionality of desktop small business accounting software varies widely. You can download the most basic programs to track your income and expenses, or invest in a full suite of professional-grade software with decades of history. More complex programs can automate more of your financial processes, saving you time and money in the long term. The best programs back up data automatically and help you file taxes every year.
There are two main issues with desktop accounting software. The first is that backups are typically done manually, and they stay on your desktop. If your computer crashes or shuts down unexpectedly — for example, if a power surge occurs — you have no way to tap into your data, and there’s a chance of losing the data if you didn’t create a secondary backup. Second, a desktop system makes it harder to share your books with your accountant. A desktop accounting system usually means that your accountant has to physically come to your office or place of business, and unless you’re getting a pretty great accounting deal, that trip is going to cost you.
In general, desktop bookkeeping programs are ideal for business owners with some professional accounting experience. The nuances of a desktop system may go untapped if you only know basic bookkeeping functions. That said, if you don’t need automated accounting, don’t require any mobile app integration, and you don’t usually work remotely, then a simple accounting software package might be enough for you. While desktop accounting software comes with a cost, there is an alternative that doesn’t cost a thing — at least initially.
Free Accounting Software
Free accounting software sometimes comes at a so-called “freemium.” While you can probably download a basic version for free, you’re likely to require add-ons and more specialized capabilities later. Free accounting software companies often make their revenues by charging for these add-ons that are outside the scope of the “free” software.
While free accounting software can save you money if you don’t need that many add-ons, keep in mind that you get what you pay for. Security for free software may not be as robust as it is for paid programs, and some open-source accounting programs require some basic coding knowledge to be properly installed on a computer or network.
Plus, the lack of an initial fee still may not save you money over the long term. Depending on the type of software you opt for, you may still have to input data and update your books manually — or spend time figuring out how to install and integrate add-ons. Say you spend an extra 30 minutes per day using free accounting software for Macs in Canada; that’s 130 hours or 5.4 days spent yearly using simple accounting software. Those are hours that might be better spent on other elements of your business model.
For example, instead of tinkering with free accounting software, that extra week or so of time could go toward widening your customer base, improving your marketing strategy, earning more money, and expanding your profits. In the time it takes to work with your accounting software for 30 minutes a day, you could be increasing your sales or landing more customers.
The best small business accounting software lets you go mobile and track real-time results. And the best part is this software costs relatively little in terms of your overall cash flow. If you don’t need a lot of complex functions and don’t mind spending a few extra minutes a day working with basic features, free accounting software in Canada might be the right choice. If your business model is more complex, however, you may want to look at other options.
Cloud-Based Accounting Software
More and more financial firms and businesses in Canada are moving toward cloud-based software. A benchmark survey conducted in 2017 by Robert Half found that 67% of Canadian respondents use at least some cloud-based technology, or rely on it exclusively for their financial functions — a 20% increase from 2016. This means around two-thirds of Canadian companies believe that cloud-based financial software is the best choice for their business. Cloud-based accounting software can protect your privacy and security while saving you time.
As more companies rely on cloud-based software to run their businesses, the cost of such programs decreases. There are plenty of affordable cloud-based systems out there, and the advantages of cloud accounting software are numerous. These include:
- Greater versatility. Cloud accounting software allows your staff to log in and use the program. People can track their hours, note any billable time, and send invoices to customers. You can also link apps and mobile devices to cloud programs, enabling you to handle your company’s finances from anywhere.
- Better security. Cloud-based accounting software stores information on servers in a remote location accessible only though a secure login. When no one is logged into the system, the remote server itself stores the data. If your computer fails, the hard drive malfunctions, or your computer is stolen, your financial files will be safe from harm.
- Subscription service. Software as a service (SaaS) companies allow you to pay for cloud software as you go. While a desktop service will have a yearly fee and may cost more, a subscription service for cloud-based computing lets you use it for one month, six months, or 60 months depending on your needs. Companies often offer different tiers of service, so you’ll pay less for a simple accounting service than for a comprehensive package.
- Sync data automatically. When you give other programs permission to access your files, those programs sync information with your accounting software. For example, when you receive a payment from a customer, it can go directly to your bank account. If you set up an appointment on Google Calendar, it updates in your customer database within your accounting program.
- Mobile use. Mobile apps work with cloud-based systems to give you access any time and anywhere. Simply log in and you’ll be able to send an invoice or estimate from a remote location.
- Regular updates. Accounting software companies create updates to their programs on a regular basis. Receive these updates automatically so your software remains as current as possible.
What Features Do You Need From Accounting Software?
Different types of accounting software offer various features, and you must decide what your business requires. Some key things to think about are: how much automation you need, how much time and money you want to save, and how hands-off you want the accounting functions to be.
Basic programs, such as Excel, require a significant time investment. These basic programs might not be the right fit for someone with limited time. A desktop system has many of the same features as cloud-based accounting software but lacks the connectivity — something that a very small business might not require, anyway. Cloud computing works well for larger operations that are growing and need more in-depth programming. Take a look at the features that several dedicated accounting programs have in common.
- Inventory Management. Businesses that maintain an inventory, whether that’s in raw manufacturing materials or saleable goods, benefit from inventory management software. Great accounting programs alert you when stock is low and if you need to place an order.
- Sales Tracking. Sales tracking informs you of your earnings and profit. This facet of the software also lets you know what items sell best at what time. For a restaurant, it’s crucial to know what dishes sell better at lunch and dinner so you can tweak your menu and staffing levels.
- Contacts Management. Contacts range from suppliers and partners to employees and customers, all of whom can work to increase your sales. Send people notices, invoices, purchase orders, and payroll through your contacts pages.
- Budget Creation. Accounting software analyses your numbers from the previous months, quarters, or years to derive a budget for the future. Create custom reports based on sales, profits, losses, investments, and staffing levels to chart a clear path forward through the next year.
- Estimates for Potential Customers. Cloud accounting software makes estimates easy. Say you’re a landscaper looking over someone’s three-acre property. As you assess the situation, you create an itemized estimate on your tablet computer. Once you’re done, you can show your customer the virtual document, and then send a copy to their email address. Great programs can convert that initial estimate into an invoice after you complete the work.
- Payroll. Convert timesheets into paycheques with an integrated payroll option. Send funds through direct deposit or as printed cheques, depending on how you pay your employees.
- Income and Sales Taxes. Calculate and collect the proper amount of sales tax with cloud-based accounting software like QuickBooks Online to reduce errors and eliminate penalties for not collecting the right amount of tax. Accounting software also makes income tax time easier by providing your accountant with important figures needed to file taxes.
- Time Tracking. Labour costs, for both you and your employees, are a big factor in your company’s overall expenses. Track billable time so you can properly assess labour costs and report them to clients, whether you’re a mechanic, a doctor, a lawyer, or a plumber.
- Receipt Scanning. Cloud accounting wins again with receipt scanning. Simply take a photo of a receipt with your smartphone, upload it to your cloud program, and file it away into your expense ledger. This saves time versus manually inputting the figures into your system.
- Multiple Users. Manage multiple users from an administrator’s login while controlling access to what’s behind your password-protected account. Give your accountant access to certain files, let your employees track their time, and allow accounts receivable to send invoices from specific modules within your overall software suite.
- Bill Management. Accounting programs link to your bank account, but they also pay the bills. Set up recurring payments for rent, utilities, and suppliers. Great systems send you alerts when you make payments successfully, and they update your overall financial picture.
- Invoice and Accept Payments. Send invoices to clients quickly and effortlessly. Many services, including QuickBooks, have templates for invoices. Add a full-colour logo to the top of the page, along with other pertinent information like your phone number or address. Online accounting software allows customers to pay outstanding invoices online using a credit card.
- Bank Reconciliation. Thanks to secure connections, accounting software can transfer funds to your bank account instantly. Once you have the money from a customer, it appears in your bank ledger and you don’t have to go to the bank to make a deposit for the transaction.
- Mobile Apps. If you value your time in the field, or have employees who work remotely, a mobile app comes in handy for your financial programs. Most small business accounting software programs have integrated mobile apps.
- Security. Rather than risk all of your data on one computer that could break down, cloud programs routinely back up your information. They also have secure logins that you control as an account administrator. A bank of servers likely has better cybersecurity than your computer system.
Consider all of these factors as you choose the best accounting software for your business.
Find Online Reviews
A simple Google search turns up reviews on software packages from many companies. Capterra is a website specifically designed to compile reviews on various software and computer programs; its Best Accounting Software page lists hundreds of programs, some of which have thousands of reviews. Each software is given a rating from one to five stars, with five stars being the ideal.
The QuickBooks page on Capterra shows more than 10,000 reviews with an average 4.5 out of five stars. Ratings have three main categories: Overall, Ease of Use, and Customer Service. Sort reviews by Most Helpful, Most Recent, Highest Rating, and Lowest Rating from a drop-down menu on the right side of the main page.
Capterra offers honest reviews from a wide range of actual customers, from self-employed individuals making a modest income to lawyers who own their own firms and make seven figures. Vendors who have profiles on Capterra can respond to people who leave reviews, much in the same way Yelp works for restaurants.
Capterra is a great way to connect with Canadian reviewers. If you want to speak to a reviewer directly, look up that person’s LinkedIn profile or contact email to ask them what they thought of a particular accounting program. It never hurts to ask someone who owns a similar business as your own.
Ask Your Accountant
Ask your accounting professional what accounting software is best for your company. Most financial professionals have tried multiple types of accounting software and can recommend practical accounting software that meets your needs. If you regularly work with a certified professional accountant, choosing a cloud-based system that lets you easily share your financial data might be the most convenient for both of you. With easy, secure access to your books, your accountant can make recommendations for your business and ready your firm for tax time.
Even if you don’t have an accountant, a Canadian CPA’s website to see what they say. Many accountants have blogs that they update regularly, so try to find one that mentions the best small business accounting software in Canada. Find an accountant in your area, and give them a call or send them an email.
Look for Free Trials and Special Pricing
As you shop around, see if any accounting software you like offers a free trial or special pricing for new users. Subscription-based services often give you a discount when you buy a package for three, six, or 12 months at a time. The caveat is that you may have to pay in advance or set up recurring payments. If you back out of an agreement before your time period is up, you may owe the balance at a higher rate, so be sure to read the fine print.
Free trials usually last for 30 days. Again, read the fine print when you sign up for a free trial with an accounting software company in Canada. You might have to input a credit card number to access the free trial. Keep an eye on charges — the SaaS business might run your card if your free trial expires and you’re still using the program. The best accounting software companies alert you well in advance or show a count down on the software interface, to let you know how much time you have left of your trial. QuickBooks regularly offers special deals and trials to help you make a smart decision; pick your plan and try it free for 30 days.