As a small business owner, every penny counts. You need to keep a tight grip on your finances. Otherwise, you could blink and miss that you are operating at a loss. According to the Bureau of Labor Statistics, over 300,000 new businesses are registered every quarter, and about 20 percent fail within the first year. Most of these businesses pack up due to loss of income.
You indeed need finance organizing software to do your business finance calculations and recession-proof your small business. However, you could get lost in the internet's broad spectrum of financial management tools for small businesses.
Is it worth it? Will you get value for your money? In this all-in-one guide, we thoroughly reviewed and rounded up top financial management tools, including what they offer, pros and cons, and pricing to help you choose the best solution for your small business.
5 differences between financial management software for small businesses and large businesses
There is no one size fits all accounting software for all businesses — small, midsize, and large. Before choosing the best financial management soft for your small business, you should consider your business type, budget, employee number, and the software features you are looking for.
For instance, John Doe — a fictional character and CEO of a 3-man startup eCommerce business, could be looking to streamline tax calculations, track sales, manage invoices, and integrate expense and profit reports. These basic features may not suit a rapidly expanding large business that needs planning, forecasting, automation, and management of end-to-end accounting businesses.
Even then, financial experts recommend the "start small, go big" concept. This means you can subscribe to a basic small business finance management software plan and add extra features and customizations as you upscale.
Understanding the differences between financial management software for small and large businesses is critical to making the right choice.
Here are the five key dimensions by which financial management software can vary for small and large businesses:
1. Features
The accounting software need of small-scale businesses is a basic pain point that can be solved by cloud-based accounting software. This solution is hardly appropriate for large companies, where even the tiniest errors could lead to consequences running into millions of dollars. Most accounting tools for large businesses offer complex features to keep business reports, HR, and payroll management in one place.
2. Pricing
The price of an account management tool could range from free to a few thousand dollars. Free plans offer basic bookkeeping. While financial management programs for small businesses provide premium features and add-ons that are available only to subscribers, large companies often go for all-singing, all-dancing features. Therefore, financial tools for managing SMBs are way cheaper.
3. Usability and professional requirements
Some accounting software for small businesses is easy to use. All you need to get started is a knack for arithmetic and simple bookkeeping knowledge. In sharp contrast, finance management tools for large businesses usually require the expertise of a certified public accountant.
4. Scalability
Different from accounting tools for large businesses, basic finance tools for managing small businesses may not offer scalability features.
5. Integrations
The best accounting systems for large businesses provide integration with Application Programming Interface (API). This involves data integration with third-party software such as payroll management, Customer Relationship Management (CRM), Point of Sale (POS) software, and many more. This does not apply to small businesses.
What are the necessary functions of accounting software for a small business?
At this point, you must be wondering, "how do I find the accurate accounting software for my small business?". Figure this out by understanding essential functions of accounting software for SMBs:
Income and expenses tracking
Tracking your income and expenses helps you compare your spending rate with how much you make.
Billings and invoicing
Most accounting software generates custom invoices for sales and services your business provides, thereby helping you get paid faster.
Tax deductions
Nothing beats accounting tools when it comes to streamlining income tax filings. This software saves you the stress of manually preparing for tax season.
Budgeting and forecasting
If you run an ambitious small business, you can use your accounting software to make budget maps and plan resources for the future (for example, quarterly budgeting).
Cash flow
Using your accounting software, you can create cash flow projections, schedule bill payments, and designate expenses.
Payroll management
Financial management tools for SMBs are an essential instrument for scheduling and tracking employee payments. For example, some software offers integration with third-party payroll applications
Cost of financial management software for a small business
When deciding the best financial management tools for your small business, cost should only come second to functionality. The cost of accounting software for SMBs is between $0 and $180 per month, depending on the plan.
Note that there is no standard price model, meaning that each software provider sets its costs. So here's where it may get confusing — each of the best accounting tools for a small business has special terms for its plans.
The plan one provider calls "Advanced" could be tagged "Pro" by another, making it difficult to determine which offers the best value for your money. A closer look shows that the accounting software pricing structure follows a similar pattern despite these differences.
Key takeaways
Many popular financial management tools offer basic features at no cost. This may be the best solution for small businesses running on a one-person team. However, this serves as a hook to potentially convert small businesses into paying customers because the free features usually need to do more to get quality benefits.
On average, small businesses can expect to pay $1.99 per user per month. This largely depends on the number of features and customizations. So the good old trick to reduce costs is committing to annual plans.
Alternative to existing finance organizing software for small businesses
Reconciling the feature gap between financial organizing software for small businesses and large businesses is almost impossible. The difference is clear, but so are the cost disparities. So how do you get a financial management program that offers the best fintech integration opportunities without breaking the bank?
We analyzed different financial management software for small businesses, and none offers a comprehensive software package. In addition, it creates problems for tech startups and small businesses in the eCommerce, SaaS, and financial advisory industries. Suppose your small business falls into any of the above categories. In that case, your best bet is to develop custom-made, comprehensive accounting software that offers dependable ERP management and transparent finance analysis.
Examples of financial management software for your small business
Examples of leading financial management software for small businesses include:
QuickBooks Online (QBO)
Description: QuickBooks Online is a cloud-based financial organizing software with robust features and affordability. Industry experts consider it the best software because of its convenient user interface.
Pros
Excellent user interface
Custom financial reports such as invoicing and payment approval automation
Basic features are relatively affordable
Cons
Inability to restore previous transaction data
Costly to add extra features
A limited number of users per plan
Cannot be integrated with third-party sites
Pricing: Quickbooks provides four plan tiers. The pricing ranges from $15/month for the Self-Employed plan to $100/month for advanced plans.
Final Verdict: QBO is a good financial tool for managing small businesses with few team members. If you have multiple small businesses, you will need several subscriptions or find other alternatives.
Xero
Description: Xero is a financial management software popularly known for its robust payment and tracking customizations. It integrates with third-party sites such as GoCardless, Gusto, and Stripe.
Pros
Payroll management, including batch payments
Third-party integrations
Clean, user-friendly interface
Scalability
Cons
Random bugs and duplicate reports
Limited reporting and number of users
Poor customer service
Pricing: Xero provides three plans — Early, Growing, and Established. Pricing ranges from $13/month for Early, $37 for Growing, and $70 for Established. It also offers an optional full-service payroll integration with Gusto for $40/month plus $7/employee.
Final Verdict: Xero is best suited for growing micro-businesses because of its scalable features and pricing plans.
FreshBooks
Description: Besides basic bookkeeping, FreshBooks is well-known for its good invoicing features.
Pros
Cost efficiency
Friendly user interface
Time and mileage tracking
Cons
FreshBooks is limited to mobile app
Pricing: It has four plan pricing tiers. The first three plans cost between $15 and $55 monthly. The fourth plan is called Select, which provides custom services and pricing.
Final Verdict: FreshBooks is best suited for service-based businesses such as freelancers, independent contractors, and micro-businesses.
Waves Financials
Description: Waves offers financial management software solutions to micro businesses that don't need payroll management.
Pros
Free receipt and invoice scanning
No limit on billing and transactions
No limit on the number of users
Cons
Limited full-service payroll
High payment rates for ACH and credit cards
Pricing: Although Waves is free, it charges processing fees — 3.4 percent plus 60 cents per transaction for American Express and 2.9 percent plus 60 cents per transaction for other credit cards.
Final Verdict: Waves best suits freelancers, independent contractors, and micro businesses.
How Dworkz can help you with software for a small business
Small businesses looking to upscale quickly have the best option — creating personal financial organizing software for their team. This provides service-based customizations and an opportunity for your small company to compete shoulder-to-shoulder with your industry's top guns.
Know this: Designing and developing custom software for small businesses is our bread and butter at Dworkz.
We've been on a mission to change the myth that data-driven financial management software has been tedious and difficult to use for over 18 years.
Our strategy is simple. We will examine your company's entire business to identify your core financial needs and create customized accounting software for your small business using open-source technology.
We've worked with top brands like eBay, Yahoo!, Parley Pro, Headroom, Kantola, Gett, and many more. Get in touch with us today!
FAQ
What kind of accounting software is used in small businesses?
Most accounting software used in small businesses is cloud-based. This means that collected data is hosted on remote servers and stored on the cloud
How does small business financial management software work?
You can open a small business financial management software on your computer or mobile phone, either online or by installing the app. After registration, you'll be required to sync your business' credit cards and bank account with the tool. The accounting software will then start providing transaction statements, and the user can run report analysis and get quality results in a matter of seconds.
What is the benefit of accounting software for a small business?
The most crucial benefit of accounting software is finance tracking. It helps small businesses to access accurate financial data at a glance and manage account receivables and payables. It also protects SMBs from getting into trouble with the IRS.
Which financial management software for SMBs is the best?
Based on user ratings and functionality, Quickbooks is the overall best financial management tool for SMB. Even then, it's recommended to do your own research and ascertain your accounting needs before making a choice.
Should your finance organizing software for small business act as an invoice generator?
Yes, most small business finance organizing software can generate invoices, automate payments, and subserve many more functions.
Does Excel suitable accounting software for small businesses?
No, Excel is spreadsheet software used to process data manually. It could benefit small businesses, but as the business expands, it will become a bottleneck, and reconciling transactions would be more challenging than 1-2-3.
