Small Business Accounting Systems: A Brief Overview
Updated March 14, 2018
In the late 1990s, a company called Intuit revolutionized the world of accounting with an affordable, easy-to-use, PC-based software program called QuickBooks. The program was a huge hit with small business owners from day one, and QuickBooks began its rise to stardom.
While QuickBooks desktop is still tremendously popular, technologies have changed enormously over the past ten years (two words: mobile and cloud). As a result, small businesses now have a wider range of accounting options to choose from, including hosting services and an amazing lineup 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 (old school) and cloud accounting systems (new school).
Desktop Accounting Software
- 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). Update: QuickBooks for Mac has now been discontinued. 2016 was the last version released, and Intuit will support it through 2019.
- All QuickBooks desktop versions are powerful and proven with lots of add-ons available.
- A stronger version of QuickBooks for businesses that have more advanced accounting needs.
- The familiar look and feel of QuickBooks 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 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 50cloud (formerly Sage50)
- A lineup of full-featured accounting programs that compete against QuickBooks Premier and QuickBooks 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).
- In 2016, Sage began selling an updated product lineup called Sage50cloud. Although the word cloud is right there in the name, that can be a little misleading. In reality, Sage50cloud is a hybrid: It's the original desktop solutions (which are very robust and have been around for many years), now with cloud access built-in. For that reason, we're still calling them desktop-based products... although it's fairly obvious which way Sage is headed.
Cloud Accounting Systems
- The leading alternative to QuickBooks for the SMB market.
- Xero pioneered cloud-based accounting, bank feeds and bank rules, 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)
- Honestly, QBO was running behind Xero for several years — but then Intuit completely redesigned the product and started making QBO its new champion. As a result, QBO and Xero are now running neck and neck in terms of overall functionality and performance (and the game is still in the early innings).
- Four versions available: Self-Employed (for independent contractors), Simple Start (for startups and new businesses), Essentials (for service-based businesses that track time), and Plus (for product-based businesses that track inventory).
- Integrates seamlessly with Intuit's other products: payroll, payment processing, tax, etc.
- An easy-to-use solution that allows users to invoice online, track time, capture expenses, and generate simple financial reports.
- Designed especially for freelancers, self-employeds, and service-based businesses with 1-10 employees.
- FreshBooks is a great product for small businesses with simple accounting needs. However, it is not a full general ledger accounting solution like Xero or QBO, so it's basically in a different category.
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 widely regarded as the strongest platforms for manufacturers and businesses with complex inventory needs, because they've been around for many 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 coming to an end and from here forward, most 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.