Ethics Statement: Small Biz Doer is not paid to write about companies and there are no affiliate links in the article below. The opinions below are solely our own. Read the full ethics statement here.
I’m going to do an online accounting software review and comparison and try and help you figure out what’s best for your bookkeeping needs. However, I first have to define the problems that are trying to be solved.
This is going to be an ongoing document, that I’ll continue to update as I get more information. So please do ask questions, add comments, give suggestions in the comments section below and I’ll incorporate it into this document. This document may get so big that I’ll split it up into separate posts. Remember, it’s about the best online accounting software for your needs, not necessarily what the “best” software is. I’ll try to do an overall comparison of all the accounting software once I complete the individual reviews.
This article was last updated September 4th, 2012.
This is important to note, since software changes so rapidly, the facts in this article can and will change.
I’m currently reviewing various online accounting software providers, so will post them as I get them done, then do a roundup of all of them. This essentially means redoing a few months of bookkeeping for each software provider… it’s going to take a bit of time.
Don’t worry, giving us your email won’t result in a spam fest! You will get occasional emails when we have new articles on our site and you can unsubscribe at any time. We protect your privacy and do not sell or give your email to anyone else.
Here’s my dilemma. I’ve been trying to help myself and my bookkeeping clients work on the same set of files. I’ve traditionally been a QuickBooks user (have been since 2000). The old method of doing this was to physically go to wherever the computer with the software was. This was fraught with a few downsides.
The old year 2000 method of doing your accounting using bookkeeping software
- Travel time: to get from one location to another.
- Scheduling: had to setup a time to meet, taking time out of the bookkeeper’s and the client’s day.
- One software license: you need to have a license for each computer the software was on, which means extra money, extra hassle to install, and need to be on the same computer operating system.
- Different software versions: both parties, bookkeeper and client needed to have the same version of QuickBooks. If one party had a newer version of the software, it would update the file and then the party with the older software couldn’t use it.
- Portability of bookkeeping file: way back when (and even now honestly), the files could not be emailed, so you needed to physically get the file on something portable, like a CD.
- Versions of bookkeeping files: if the bookkeeping file was transferred over to a bookkeeper to work on, the client couldn’t touch their books, without the risk of having two different versions of the same file.
From 2000, some things progressed over the next decade which brings us to 2010. There were a few nice additions that cut down on the work.
Some 2010 solutions to problems from 2000
- Scanning: digitally scanning in your documents to an electronic format was possible, thus potentially eliminating the need to physically take all the receipts from a location or having to work at a location where all the receipts were located.
- Networking: if you had some tech savvy people, you could virtually network computers. This was quite complicated, but cool if you could get it to work. If you were a business that had multiple people that needed to use the same software on a daily basis, this may have been a worthwhile and necessary expense and effort.
- Emailing large files: services like yousendit arrived, allowing you to email large files. This worked and still works.
- File hosting / sharing service: Dropbox was the first big name on the scene. Dropbox was magical (and still kind of is to me) because it allowed you to sync one file across multiple computers and operating systems. You could even access your files via the web. It’s free and lets people share documents easily.
- Online Accounting Software: companies were starting to develop software that lived
- Remote Desktop: Remote desktop, whether through using something like the Windows based “Remote Desktop” or a service such as logmein allowed you to connect to your computer remotely. This meant you could work from and get access to your computer from anywhere.
- Digital bank downloads: you could download your digital file statements from your banks to make reconciling and data-entry easier.
New problems introduced around 2010
- Networking: unless you had a specialist on call at a moment’s notice, sooner or later your network would break, leaving you stuck with having to digitally send files back and forth or physically going to a location
- Size of files: as it became possible to email attachments with bigger sizes, the sizes of files grew. So if you had a small company file, it was possible to email files, but this didn’t last for long once your file size got bigger.
- Duplicate files: when sending files was possible, the problem of versions became even bigger. Who has the master file(s)? With a file hosting / sharing service like Dropbox, conflicts became an issue, since QuickBooks is database driven. Conflicts means that there is more than one version of the file. For regular non-database files, this happens when two people work on the file at the same time. However, I’ve noticed with QuickBooks, there are conflict issues even when two people are not using the file at the same time.
- Digital and paper filing system: Now that some transactions were done purely online, and receipts and invoices were sent digitally, you have to contend with two filing systems, a digital one and paper one. For people who hate filing, this is twice the headache. Paper in some ways was easy, because you had one master paper copy. With the mix of digital, you could have multiple versions of the same document. Which version was the real one, which one do you keep?
- Remote Desktop: Working at your desktop remotely is slow and buggy. You drop your connection and have to reconnect. You click on something or type something and there’s a few second lag. Very frustrating and difficult to work with. However, if you only needed to do a little bit of work, this could be acceptable. You also have an issue with security. When someone uses a remote desktop application to get to your computer, they have access to everything on your computer. This is a big risk.
- Digital bank downloads: some many download formats. If you were lucky, you’d get the right format to work with QuickBooks (QBO) and it could work. This was not always the case. Despite entering some data for you, you still needed to verify the digital download with your actual paper or digital documents (your receipts, invoices, etc…). If you made an error, you couldn’t easily undo the digital download. I actually have a whole articles worth of why digital downloads don’t work well with QuickBooks (this will be a link to the new post when I write it).
What I need my modern online accounting software to do
- Access from anywhere, by anyone, regardless of device, platform, operating system: this means that your accounting software is not dependent on if you are MAC or PC, whether you have the latest operating system (Tiger, Lion, XP, Windows 7), whether your computer is networked or not, even whether you are on a desktop, and where you physically are. Your data is truly mobile.
- No more file version problems: there is only one file, the online file, that’s the master file! No more emailing those files back and forth, no more worrying about who has the master file.
- No more software version problems: there is only one software version for every… single… user. It is always up-to-date
- Better user interface: QuickBooks was created in the 90′s. The world of bookkeeping and accounting was different back then. Writing checks was the norm and online shopping was not to be trusted and rare. This was before the dot-com boom and bust. Successful software remains powerful while being extremely user friendly. The more easy and intuitive, the better.
- Syncing with bank / Import of banking datas: All the electronic information is out there. Wouldn’t it be nice if your bank and your accounting software talked to each other? Reconciling is the process of matching your bank records to your accounting / bookkeeping records. Computers can do this for humans.
- Double-entry accounting: I want to see the proper method of bookkeeping / accounting with a general ledger that can be used for any non-standard, difficult, or custom scenarios you’ll inevitably run into. Ease of use is nice, and I’d like to have the majority of transactions done through a nice user interface that non-bookkeepers or accountants can understand. However, anything can be done with a general ledger, so it’s nice to have that in case the easy way doesn’t work.
- Document attachment: Since it is easy to digitize your records, it should be an easy task to attach your records (your proof) to each transaction you enter into your software. It should be as easy and effortless as dragging and dropping a file to attach to an email in Gmail (get picture).
- Data export: Your records should be your records. If I don’t like the software, I should be able to easily get my data. If your company goes out of business, I should get my data. If I no longer need the service, I should get my data. Get it, I should get MY DATA. My data should also be in an common format that can be read on any computer. Proprietary databases suck.
- Integration: It’s nice to have all the features you could want built into your online accounting software, but it’s an impossibility and unnecessary to get everything. Therefore, the better integration with complimentary services, the better.
- Auto enter my data: Why am I manually inputting all my bookkeeping transactions when there’s digital records of all of them?
I’ve added this section to add features that readers have suggested they would like to see that’s important to them.
- Multi-currency: many modern businesses now sell and buy in more than one currency.
- Import of existing bookkeeping / accounting data: Any existing business has legacy data that would be nice to import into their new software (for QuickBooks users, LessAccounting does this).
- Customer support: is there help available when you need it?
The reality of post-2010 online accounting software:
- Access from anywhere, by anyone, regardless of device, platform, operating system: this is mostly a reality. Different online accounting software services are better than others. As long as you have a web browser, the software should work. There are some native applications for mobile devices (whether iPad, iPhone, or Android) that make it easier to use on those devices, but you still have access through those device’s web browser. The native app makes it easier.
- No more file version problems: this really has been solved. There is only one online file.
- No more software version problems: this also has been solved for web browsers. The up-to-date software is the one you are working on in your web browser. This may not be so true for native apps on mobile devices.
- Syncing with banks: this kind of works, sometimes. How well it works depends on the online accounting software provider and the bank. The best case is that your bank and online accounting software love each other and once set-up, you don’t do a thing. The worst-case, your online accounting software have not even been on a blind date and there’s no getting the two together. You can’t even use the online accounting software because to function, it needs to talk to your bank.
- Document attachment:
I have seen no good solution for thisI have seen it work, it’s in lessaccounting.com. It must be a difficult engineering feat, since no one can do this or do it fully within it’s software. I’ve found out that kashflow integrates with dropbox.
- Data export: there are two types of data you’d want. 1. The actual software database file (in case of some server meltdown). I don’t think this is possible to get from any service. 2. The exported copies of the data. You can’t recreate your books easily from this file, but it has all the information that can be read in any spreadsheet or text editor. This export file is available in varying degrees of goodness from the different online accounting software provider.
- Integration: There is some good integration out there, but there can always be more. The most important one is with banks and merchant service providers (PayPal for example). This should be essential integration. The next set would be to integrate well with e-commerce stores, since more and more sales are going online. Lastly, with complimentary services such as an invoicing specific program (like FreshBooks which kind of is an e-commerce store in a way) and payroll.
- Auto enter my data: This is the main touted benefit of some the online accounting software out there. As long as your bank and your online accounting software talk to each other, this can work quite well.
The downsides of post-2010 online accounting software:
- No internet connection: if you don’t have an internet connection, you can’t get access to your data. Yes, you can download your data from the good services, but still, you can’t do any work on your files until you get your internet connection back.
- Always paying: some services are free, but as your business gets bigger, you’ll probably find yourself subscribing and paying for some things. This is fine, but this also means that to keep your data up-to-date, you always need to be paying. Although, at the end of the day, if you decide to stop using the service, the good services light you export all your data to a common digital format (like CSV) that will let you keep all your digital records, even if you don’t have the software.
- Document attachments: your accounting needs to be backed up by proof. Attaching your proof to your bookkeeping records in your online accounting software is an absolutely necessary feature that no one is really doing as well as I’d like (although some do ok at this). This needs to be native feature, something that’s not an add-on or plugin, but lives within the software itself. These files need to be accessible, downloadable, and named in smart manner (date, transaction id, name-whether vendor customer, etc…, amount). Names like 0358626342.pdf are no good.
- Syncing with banks: this is spotty, since not all banks works with all versions of software. It’s kind of like Betamax vs. VHS. You can only use online accounting software that your bank works with. This is not entirely true for all software, and there are work-arounds, but there is definitely not a standard of banking information transfer amongst all banks and accounting software providers.
- Auto enter my data: sometimes this works well, sometimes not so well. It really depends on your online accounting software and it’s workflow / user interface. The good ones let you find and easily delete duplicate entries, split transactions into different accounts, and recognize previous entries and record new ones in the same fashion.
- Double entry accounting: if you’re not a bookkeeper / accountant, you may not know what this is. Essentially, it’s the method by which all bookkeepers and accountants are taught to work with financial transactions. If the online accounting software doesn’t do this, your bookkeeper / accountant will not like it and if you grow, you’ll need to switch to software that does this. It should be noted that even though the software does this, it usually does this in the background, meaning you can still have a good user interface and work flow for those not familiar with bookkeeping and accounting.
- Are you picking the winner?: how long will your online accounting software provider last? With so many options out there, there’s bound to be a thinning out of services where only a company or two emerge as the leader and go-to solution. Think Google for search or Facebook for social networks. Yes, there definitely are competitors, but they truly are the leaders and the standard. This is why data portability is so crucial. You don’t want, and can’t have, your data gone. You are required to keep your records by law.
What are some different online accounting software providers out there that are good for small and micro businesses?
It’s important to define the target market of users. I didn’t do this when I first wrote the article. Here’s the rough demographic of the target user:
- small or micro business
- 1-100 employees (although more in the 1-10 employees range)
- 1-5 people touching the books (the more people that need to touch the books, the more requirements for limited access for certain users, which requires more robust (read: expensive and complex) software
- Wave Accounting
- Quickbooks Online US, Quickbooks Online Canadian, QuickBooks Online UK
- Mint (not intended for business)
- FreshBooks (more invoicing than accounting, but in August 2012 started calling its services cloud accounting)
- Sage One US, Sage One UK, Sage One Ireland
- Intacct (suited for large small businesses and medium sized businesses – starting at a few hundred dollars a month, it’s not designed / practical for micro and small businesses)
Topics I’ll cover in my reviews
I’ve done up a full article on the evaluation criteria I’ll use for the accounting software comparisons I’ll be making.
The actual online accounting software reviews
I’ve realized the scope of this article is definitely bigger than a single post, so I’m going to break this up into different parts as I continue to collect information. Below is the list of what I plan to write on. As I get the articles posted, you will be able to click on them below.
- Kashoo review
- Wave Accounting review
- LessAccounting review
- Quickbooks Online review
- Xero review
- FreshBooks review
- FreeAgent review
- Mint review
- Outright review
- KashFlow review
- Indinero review
- ClearBooks review
- Why I’m really not digging QuickBooks Desktop, but QuickBooks Online US is cool… and what happened to QuickBooks Online UK and Canada?
- Why can’t we easily digitally attach documents?
- When and why importing bank statements into your accounting software fails
Need a better way to do bookkeeping?
Our course teaches you how to set up, manage, and understand your business financials. You'll learn bookkeeping basics, a document management system, how to use accounting software, and how to keep your books up to date.
Spend less time worrying about bookkeeping and more time making smarter business decisions.
Don't worry, giving us your email won't result in a spam fest! You will get occasional emails when we have new articles on our site and you can unsubscribe at any time. We protect your privacy and do not sell or give your email to anyone else.