Running your company finances doesn't always have to cost you thousands of dollars. There are plenty of free or open-source accounting systems that you can use to track expenses, revenues, invoices, and other financial processes in your company, which will suit your freelancing career, a startup or a small company with simple bookkeeping. "Free" can mean many things – either you get an account for free, or get access to the service only for the trial period, or have to pay for essential services even though there is a free version.
In this blog, we'll review various free accounting software for small businesses like Wave, ZipBooks, GnuCash, and FreshBooks. We will tell you about their capabilities, weaknesses and find out in what cases using free software won't work and will need professional bookkeeping or outside help.
Why Use Free Accounting Software for a Small Business?
Free accounting software can be handy if you do not have many transactions and don’t require any sophisticated financial management options. However, before opting for any particular free software, think about what your company really requires.
Lower Costs for Startups and Small Businesses
The most obvious benefit of free accounting software is that you can handle your basic financial functions without paying any extra money for software subscriptions every month. This could be quite helpful for self-employed people, start-ups, and even smaller companies with tight budget constraints.
But then again, it is also essential for businesses to consider what really comes with the free version. Many functions like bank links, payroll, payment processing, receipt scanning, more reports, and more users will cost you money in terms of subscriptions or transactions.
Basic Bookkeeping and Invoicing
There are many free accounting programs that allow you to record transactions, track your income and expenses, create invoices, and even generate some financial statements. These functions may be helpful for any entrepreneur in switching from Excel spreadsheets to an organized accounting process.
With the help of software, you will find it easier to organize your documentation during the entire year instead of figuring out all the transactions prior to taxes. However, accounting software does not always ensure you have accurate books.
When Free Software May Not Be Enough
Free accounting software can become restrictive as the company expands. If the company has inventories, employs many people, has many bank accounts, has sales taxes to pay, or is made up of different companies, it will probably require better accounting features.
The worth of the time spent must also be taken into account by the business. Owners wasting too much time each month in order to fix problems are better off using professional bookkeepers than free software.
Top Free Accounting Software for Small Businesses
The various options listed below vary significantly in terms of their pricing schemes and features. While some have free accounting solutions available, other options allow free trial periods instead.
Wave and ZipBooks
Currently, Wave provides free Starter plans that come with basic functions of accounting and invoicing. These free plans have functionalities such as accounting books, invoices, estimates, and bills; however, functionalities like automatic bank transaction import and receipt scan can be accessed using the paid Pro plans.
Also, ZipBooks provide free Starter plans that include unlimited invoices, unlimited customers and vendors, basic reporting, and only one bank connection. The more advanced functionalities can be accessed through paid plans.
GnuCash for Open-Source Accounting
GnuCash is an open source accounting program which is used by individuals and small organizations. It uses double entry accounting and also provides features like income/expenses tracking, reporting, automatic transactions and multi-currency. It is available for Windows, Mac OS X and Linux.
In contrast to cloud accounting software, GnuCash is a desktop application. This is an attractive option for people who want an open source software and more control over their accounting records, but it may be less user friendly than other programs.
FreshBooks: Free Trial Rather Than Free Software
FreshBooks can be an ideal choice for service-oriented companies requiring features such as invoicing, expense tracking, time tracking, and project management. Nevertheless, it cannot be regarded as a completely free accounting software forever. Currently, FreshBooks provides a free trial period; thereafter, customers can opt for its paid plans.
The free trial provided by FreshBooks can be a great way to check out the software before committing to it. In this case, organizations will have to distinguish between free software and trial software while choosing accounting software.
How to Choose the Right Accounting Software for Your Business
Not the lowest costing software would definitely mean the best software for you. The accounting software you use must meet the requirements of your current business operations and give you a fair future prospect of upgrading.
Match Features to Your Business Requirements
You should first determine the things that the software will be responsible for doing. A freelancer may need to do invoicing and expenses, whereas an ecommerce business may need functions like inventory management, payment processing, and sales tax preparation.
Take into account the volume of transactions, number of employees, bank accounts, customers, and entities. You also need to consider whether the software can produce the required accounting reports.
Check Integrations, Support, and Security
Check how well the software interfaces with your bank, payment gateway, payroll management system, ecommerce website, or other programs you use. This may save time in manual data entry, but it still needs to be reviewed periodically for accuracy.
Another critical factor to consider is the customer support available. Free versions of the software might offer less support than the paid version. You should also consider the security measures taken by the service provider.
Know When to Upgrade or Outsource
As the amount of transactions grows and the finance becomes more complicated, using paid accounting software might be helpful. It is recommended that the company review its current system and see whether it still meets the needs of the business.
Bookkeeping could become an added value to accounting software usage. Bookkeeping could help the company reconcile accounts, categorize transactions, keep accounting records and generate financial reports, while the owner uses the accounting software to track daily finances.
It may be sensible to start out with free accounting software, for small businesses that have simple financial requirements. Wave and ZipBooks both provide free accounting software services while GnuCash is the open source alternative and FreshBooks is presently providing a free trial.
The best fit will depend on many things including the size of your business, transactions needed, the software integration you require, reporting needs and even future scalability. With growing complexity in your finances, the combination of good accounting software and professional bookkeeping will serve you well.
The Fino Partners provides outsourced bookkeeping, accounting, payroll, tax preparation support, and financial reporting services for U.S. businesses and CPA firms. Professional bookkeeping support can complement your accounting software by keeping records organized, reconciled, and ready for tax preparation.
