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REVIEW: Small Business Accounting Software 2015

Driven by the growth of cloud computing and an understanding of how little most small businesses want to delve into the minutiae of accounting, the market for small business accounting software has exploded in the last decade. Still, it remains a hard market to serve. The new entrants are able to make use of the economies of "software as a service" in ways that the larger, more established vendors with their legacy customer base have some difficulties in matching.

The new entrants don't have to port their products from the existing code; they have simplified the accounting, payroll and other services to make them more palatable to small businesses; and they are able to move nimbly to adapt to market changes.

Making it even more difficult is the high failure rate of these micro-to-small businesses, their relatively light cash flow (e.g., fewer resources to spend on accounting software), and their lack of understanding of the importance of accounting concepts such as cash management and balance sheets.

The market leaders did not attain their positions by sitting still. They bring to the table an established customer base; a familiarity with the needs of accounting professionals who serve small business; and the financial resource to survive in the face of economic and competitive pressures. This is a powerful advantage that accrues primarily to QuickBooks and Sage.

It is impossible to cover the full range of participants in the low-end accounting market with new entrants emerging almost weekly, and others staying below the threshold of visibility. Of the dozen or so current competitors, we have chosen the ones we consider to be important from an accounting standpoint. That is, the services of every size that show the most potential for survival into the next decade.

Accounting by Wave
Toronto, Ontario
(416) 521-9141
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Price: No cost to customers for accounting, invoicing, receipt scanning and personal finance. Payments, 2.9 percent plus 30 cents per transaction. Payroll, 10-person company: $55 per month (United States), $50 per month (Canada). Payroll fees include direct deposit, and tax service where available.

Accounting by Wave
The Wave suite of cloud-based, small business software is offered at no cost to small businesses and their accountants. It is primarily aimed at freelancers, contractors, entrepreneurs and small to micro-businesses, generally those with 10 employees or less. It is a true double-entry accounting system, streamlined in an online service that is funded by advertising.

Designed to be the first step in professional accounting, Wave is moving businesses into an organized system that includes accounting, invoicing, payments and payroll. For their accountants, the system offers full-fledged journal transactions, balance sheet, trial balance and general ledger reports. The company also offers a referral service for accountants called the Wave Pro Network.

Core programs include Accounting by Wave, which offers free unlimited bank connections, multiple businesses and unlimited collaborators; Invoicing by Wave, which sends unlimited, customizable invoices to an unlimited number of clients; Personal Finance, including bank connections, investment tracking and collaborators; and Receipts by Wave, a free unlimited program to scan receipts into the Accounting module.

Other modules for a small additional fee are Payments by Wave, a credit card processing service that is a companion to Invoicing by Wave; and Payroll by Wave, a per-employee payroll program.

Among new features added in the last year are new customer statements feature; bank reconciliation; Full payroll tax service in California and Florida; Improved invoice workflows; improved "send" options for invoices, including invoice reminders and invoice PDF attachments; native payment processing platform (U.S. only at this time); allowing more seamless insights and better customer support; and premium support services available (phone and live chat support; email support is still available as always).

Toronto, Ontario
(866) 303-6061
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Price: Tiered and depends on the size of company. A freelancer with one client can use FreshBooks for free, while a growing business typically pays about $19.95 per monthly.

FreshBooks , a cloud accounting software system, serves service-based businesses such as freelancers, consultants and creative professionals online and on the iOS and Android platforms. It offers invoicing, expense management, time tracking and online payments. Recognized in 2014 with six Stevie awards for "Best Customer Service in the World," FreshBooks serves paying customers in 120 countries.

Notable features are invoicing; timesheet entry and tracking; expense capturing and receipt attachment; reports that include P&L, a tax summary, expense reports; late payment reminders; in-app timer; and multi-currency support.

Enhancements recently introduced are a security upgrade with fingerprint and passcode identification; mobile-friendly invoices; online credit card payments via the We Pay payments processor; receivables collections via Fundbox; and addition of a customer rating/feedback system.

Kashoo Cloud Accounting
Vancouver, B.C.
(888) 520-5274
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Price: Free for accountants, $12.95 per business they bring on board.

Kashoo Cloud Accounting
Kashoo is cloud accounting for small business, available on App Store's most-downloaded iPad accounting app list, the iPhone and the web. It enables small business owners to generate invoices, create expenses, review transactions, reconcile accounts, and generate standard reports (i.e., Profit & Loss, Balance Sheet, AR/AP and Journal Report).

Kashoo was the first "Most Downloaded iPad App" in the iPad App Store. The company unveiled an Android application in December.

Kashoo's key features include: easy invoicing, expense management, business dashboard, bank reconciliation, quick entry, reporting, bank-level security, multi-business, free support, third-party app integrations and easy collaboration. For accountants, Kashoo offers true double-entry accounting professionals the tools needed for reconciliation, reports, tax preparation and anytime, anywhere client collaboration.

Updates to the application are posted at roughly two-week intervals.

QuickBooks Online
Mountain View, Calif.
(800) 446-8848
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Price: QuickBooks Online Simple Start, $12.95 per month; QuickBooks Online Essentials, $26.95 per month; QuickBooks Online Plus, $39.95 per month.

QuickBooks Online
QuickBooks Online is used by small businesses to perform essential financial-related business processes that include entering sales receipts, tracking expenses, preparing and sending invoices, tracking sales tax and payments, preparation of basic financial statements and reports, and inventory management. Seamless data transfer is available via bank feeds and bank rules to reconcile bank and credit card transactions for faster reporting.

QuickBooks may be purchased in one of several versions: QuickBooks Online Simple Start, which includes basic reports, tracking income and expenses, creating estimates and invoices as well as the ability to sync bank accounts and apps; QuickBooks Online Essentials, which includes everything in Simple Start plus the ability to create recurring transactions, manage and pay bills, and access instant sales and profit reports; and QuickBooks Online Plus, which includes everything in Essentials plus the ability to budget, track inventory, categorize by class and location and prepare and print 1099s.

As a cloud-based service, QBO is updated automatically with new features. A wide range of other integrated small business applications are available through Intuit's Apps.Com site, providing the ability to sync, link, and import data. Third-party applications available in Apps.com support PayPal, American Express and Square.

Sage One
Sage One
Lawrenceville, Ga.
(866) 835-9301 9am-6pm ET
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Price: Free subscription (allows for one user). Premium subscription, $5 per month (introductory rate), regular price, $10 per month for unlimited users.

Sage One
Sage One is a simplified online accounting and invoicing system designed for entrepreneurs, freelancers and small businesses. It allows small businesses to create and send professional quotes and invoices, effortlessly track income and expenses and know where their business' financials stand with a few clicks of a button. It is a service focused on effective cash flow management and services via a U.S.-based phone support and education training.

Each subscription provides unlimited access to support; income and expense tracking; a cash flow management dashboard; cash flow forecasting; batch entry; invoice creation for up to five invoices per month; bank feed from a single account; GAAP compliance; mobile app access; and storage of client data with automatic backups.

In addition to these features, the premium subscription offers unlimited invoicing; the ability to link to more than a single bank account; multi-user controls; multi-currency capabilities; and accountant collaboration via the Sage One Accountant Edition.

Since its launch, Sage has implemented a number of new enhancements such as deeper reporting and analytics; cash flow management; audit trails; data import and export; bank account integration; credit card processing; contact import; and the ability to create quotes and estimates.

San Francisco, Calif.
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Price: Starter Plan, $9 per month (five invoices and five bills per month, reconcile 30 bank statement lines per month). Standard Plan, $30 per month. (Hundreds of invoices per month, reconcile hundreds of bank transactions per week). Premium 10 Plan $70 per month. (Hundreds of invoices per month, hundreds of bank transactions per week, multi-currency). Xero Partner Edition (for accountants), free.

Xero is a cloud-based accounting software platform for small and medium-sized businesses that allows for real-time communication between small businesses and the financial professionals that serve them. It offers a complete suite of accounting, cash management and payroll applications accessible from any Internet-connected device.

The software is offered at no cost to accountants and bookkeepers, with fees for Xero's three editions based on the needs of each client company. It features a professional toolset featuring Reporting and Practice Management software, as well as a Business Performance Dashboard for simplified collaboration and management. Xero also supports an expertise-based, value-pricing model for accountants that replaces traditional time-based billing.

Currently in version 9.6, Xero releases new updates every three weeks. Features added recently are the Business Performance Dashboard that provides small businesses to have more visibility and control of their business by presenting a range of industry-standard metrics; inventory management that enables real-time tracking of the quantity and value of their small business inventory. Also added were online quotes and estimates that can be created on the go on any device; and Practice Reports, which allow accountants to create customized reports in real time.

Dave McClure

David P. McClure is a technologist and business consultant whose career has included eight years with the NASA Space Shuttle Program and assignments in marketing, environmental services, software publishing and broadband.  He founded the US Internet Industry Association, the nation's primary trade association for Internet and broadband companies.  In 2004 he was awarded a Cornerstone Award for leadership in the broadband industry.  In the same year, he was named to the Board of Directors of the Universal Service Administrative Corporation, the non-profit corporation that oversees the nation's $8 billion universal service telecommunications fund.  His areas of expertise include software management, strategic and market planning, global technology policy and technology audits.  He is the author of more than 100 white papers on business management, technology, customer service and strategic planning.

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