Small Business Accounting Systems: A Brief Overview

 

In the late 1990s, a company called Intuit revolutionized the world of small business accounting with an affordable, easy-to-use, PC-based software program called QuickBooks. The program was a smash hit with users from day one, and QuickBooks went on to completely dominate the small business accounting market. 

While QuickBooks and PCs aren’t going away anytime soon, technologies have advanced a lot and businesses now have a wider range of accounting options to choose from, including hosting services and an exploding number of cloud-based systems and apps. To help you get a grip on what’s out there, here’s a quick overview of the leading accounting systems for small to midsize businesses (SMBs). For the sake of simplicity, we’ve divided the systems into two groups: desktop accounting software and cloud accounting systems.
 

Desktop Accounting Software

QuickBooks

  • The reigning champ for 20 years.
  • Three versions available: QuickBooks Pro (all-purpose), QuickBooks Premier (with more capabilities and industry-specific tools), and QuickBooks for Mac (for Mac lovers).
  • All QuickBooks desktop versions are powerful and proven with lots of add-ons available.

QuickBooks Enterprise

  • A more powerful version of QuickBooks designed for businesses that have have more complex accounting needs and/or have outgrown QB Premier.  
  • The familiar look and feel of QB with more features: higher transaction volumes, multi-location inventory, advanced pricing features, and greater financial reporting capabilities.
  • QuickBooks Enterprise is traditionally installed in desktop or network-server environments, but hosting is now widely available and the program can be run from the cloud (a nice option for companies that don’t want to maintain their own network or server).

Sage 50

  • A full-featured accounting program that competes directly against QB Premier and QB Enterprise in the SMB market.
  • Available in three versions: Pro (basic), Premium (with inventory management and multi-company capabilities), and Quantum (with job and project management, industry-specific functions, and dashboards).
  • Like QB Enterprise, Sage 50 has been traditionally installed in desktop or network-server environments but is now widely hosted and can be run from the cloud.
     

Cloud Accounting Systems

Xero

  • The leading alternative to QuickBooks for the SMB market.
  • Xero pioneered cloud-based accounting, automatic bank feeds, and the continuous reconciliation process (innovations that other companies have since adopted).
  • Well-designed and user-friendly (Xero has been called "the Apple of accounting").

QBO (QuickBooks Online)

  • Redesigned and dramatically improved in 2013.
  • Three versions available: Simple Start (basic), Essentials (with A/P capabilities and more reports), and Plus (with inventory, class tracking, and budgeting capabilities).
  • Integrates seamlessly with Intuit's payroll and merchant account services.

FreshBooks

  • A super-simple solution that allows users to invoice online, track time, capture expenses, and generate basic financial reports.
  • Designed especially for freelancers, self-employeds, and service-based businesses with 1-10 employees.
  • FreshBooks is highly regarded for its ease of use but does not have the same full-strength accounting capabilities as Xero or QBO (a fact which FreshBooks prides itself on).

All in all, it’s a buyer’s market and the choices are dramatically better than they were just a few years ago. QuickBooks Enterprise and Sage 50 are still considered stronger platforms for manufacturers and businesses with complex inventory because they've been around for years and have had plenty of time to master those difficult functions. However, cloud-based systems like Xero, QBO, and FreshBooks are now easier to use, cheaper to deploy, and fully capable of handling the type of basic accounting functions that most small businesses need. Therefore, there’s a widespread feeling that the desktop era is over and, from here forward, the majority of businesses will want to handle their accounting in the cloud.

Legal stuff: This information is provided for educational purposes only and does not constitute advice for your specific situation.

William Keller