System matter. Select the right systems and you get better insights into your business and spend less time managing accounting work. Select the wrong systems and you might pay more in the long-run through lower productivity and less information. For businesses, selecting the best accounting systems makes a world of difference.

Efficient financial management is the cornerstone of business success, and a well-chosen accounting system can make all the difference. With an array of options available, selecting the right accounting software while keeping costs in check can be challenging. This guide offers insights into making an informed decision and highlights the key features and trade-offs of leading accounting programs.

Getting the selection right early is important because the switching costs between systems is high and often requires retraining several people within an organization. We recommend doing your research before making your system selection.

This guide aims to help you with your research.

Let’s dig in.

Crucial Considerations When Choosing an Accounting System

Here are some key considerations to consider in your evaluation of systems:

Features and Scalability

The needs of your business will evolve over time, so opt for an accounting system that offers scalability. Ensure it provides the flexibility to accommodate additional features and handle increased data volumes as your business grows. A couple of indicators of scalable systems are customers with a long track record at the company, finding companies in your field that use the product and have been able to scale rapidly.

User-Friendly Interface and Training

A user-friendly interface and easy navigation are essential for reducing the learning curve. Choose a system that provides tutorials and reliable customer support to streamline the onboarding process. Questions inevitably arise on how to run a report a certain way, merge accounts, change product types, etc. When those questions come up, how will you find the answers to free you of your problems or roadblocks. The person doing the evaluation should see what level of community the product has, training materials and should evaluate the product’s forums, tutorials, and the level of customer support.

Seamless Integration

Businesses and software are getting more specialized than ever. Many businesses now use their accounting systems in conjunction with other specialized apps and pieces of software. Those software integration often cover key functions like sales tax calculations, revenue recognition and payroll.

Efficient integration with other crucial software (e.g., customer relationship management, inventory management) can optimize workflows and minimize manual data entry errors.

We recommend that evaluators look closely at the availability of integrations with the accounting software and the strength of the developer community. Otherwise, your business might be reliant on the features of the accounting system and their product road map. The number of apps and integrations can matter a lot.

Security and Compliance

Prioritize the security of your financial data and verify that the software aligns with relevant regulations (such as GDPR or HIPAA). The confidentiality of financial information is paramount. Businesses can face significant financial repercussions for data breaches or improper data protection. Do your research to evaluate how robust the security features are of each provider.

Advanced Reporting and Analysis

Select a system that offers comprehensive reporting and analysis tools. Look for customizable reports and visualizations to aid in data-driven decision-making. Unless you have a data-analyst on staff, the standard out-of-the-box reporting can be an important element to evaluate.

If you have more resources or want to look into advanced analytics, the question about integration with specialized software and apps becomes an important consideration. Accounting systems can provide useful advanced reporting and analysis. However, the best-in-class advanced reporting and analytics tools are created by companies that specialize.

Affordability

Consider both initial costs and ongoing fees in your budget. Subscription-based cloud software often presents cost-effective monthly plans that eliminate the need for hefty upfront expenses. Look closely at the pricing and the software provider’s history with their pricing. Vendors know switching costs between accounting systems are high and might have teaser pricing to start and hit customers with large price hikes in years 2, 3 and 4.

However, if you are interested in a more specialized and expensive integration like Netsuite, be careful to ensure your project scope is well defined and the integration team has deep experience with your tech stack. Otherwise, you run the risk of cost overruns and a sub-optimal integration.

Depth of Talent Pool

There is a reason software businesses tend to be winner-take-most. The largest companies have the most users and resources to invest in further developing and improving the product.

Having a working system that meets your business needs is an important part of the equation. An often-overlooked element is the number of people and professionals that know and are certified to operate an accounting system. Businesses that select systems without large customers bases, might have key person risk and may have trouble replacing an employee or accountant that leaves the organization. Systems that have large customer bases have bigger talent pools to find replacements.

Comparing Leading Accounting Software: QuickBooks, Wave, Xero, and Zoho Books

QuickBooks

Pros:

• User-Friendly Interface: QuickBooks stands out for its intuitive design, making it an excellent choice for small businesses and individuals without an accounting background. The system is pretty intuitive, even for non-accountants.
• Scalability: With various plans available, QuickBooks allows you to seamlessly upgrade as your business expands. Adding users is really simple and can be done in minutes and without needing to contact an account rep. I have run businesses doing over $50M in revenue on QuickBooks online, so it does scale!
• Integration Capabilities: QuickBooks easily integrates with a wide range of third-party applications, enhancing operational efficiency. The developer community is pretty vibrant, however QuickBooks tries pushing their own products over competitor products.
• Depth of Talent Pool: QuickBooks has a 65% market share and has the deepest talent pool of people trained to use the software.

Cons:

• Limited Customization for Reporting: Some users find the customization options for templates and reports slightly restricted. Folks often export data from Quickbooks into Excel to make reports
• Additional Costs: While base plans are budget-friendly, extra features and add-ons can drive up the overall cost.

Wave Accounting

Pros:

• Free Version: Wave offers a free accounting software option with basic features like invoicing and expense tracking. It is a great option for micro businesses of 10 employees and contractors or less and self-employed people. It also has unlimited users and invoicing.
• User-Friendly: The user interface is straightforward, catering to freelancers and micro-businesses.
• Automatic Transaction Import: Wave can connect directly to bank accounts for automatic transaction imports.

Cons:

• Scalability Challenges: Wave’s limited feature set might be insufficient as your business grows, compared to more comprehensive paid options. If your company is small and does not want to scale, Wave might be the choice for you.
• Support Limitations: The free version relies on community-based support, which might lack the depth of premium support. For simple businesses, this may not be a problem However, for those with little or no accounting background, you might end up paying with your time.
• Depth of Talent Pool: Wave has been around since 2010, which has allowed it to build a customer base, but the depth of the talent pool of professionals is less than the competitors.

Xero

Pros:

• Strong Feature Set: Xero offers an array of features even in its lower-tier plans, making it suitable for growing businesses. Xero especially does well with businesses that have international operations and deal with foreign exchange fluctuations. The system also has superior, standard features for time tracking and project management against a budget.
• Ease of Use: The intuitive interface simplifies complex accounting tasks, benefiting both beginners and experienced users. Xero has really strong invoicing features that have intuitive screens to set-up auto-billing and invoice past due reminders. Their home screen dashboards are also very user friendly.
• Unlimited Users: Xero’s pricing plans often allow unlimited users, promoting collaborative financial management.
• Integration Capabilities: Xero believes strongly in the developer community and does not have many competing product.  The developer community is vibrant and the lack of competition with Xero trying to create competing products incentives developers to make products that integrate with Xero. The company reports they have over 1,000 integrations with third-party apps, whereas Quickbooks claims integrations with 750 apps.
• Depth of Talent Pool: Xero is hungry to expand and they do a great job training and supporting accountants and users with their software. The pool of firms using Xero is large, although a fraction of QuickBooks, but expanding quickly as Xero does a much better job supporting its ecosystem than QuickBooks.

Cons:

• Pricing Tiers: While Xero’s features are impressive, its higher-tier plans might be costlier than some alternatives. Some of the add-on’s feel like they should be part of the basic offering.
• Advanced Reporting and Analysis: Xero’s standard reporting is basic and lags far behind Quickbooks. For those looking for basic reporting, Xero provides a good enough experience. For any intermediate or advanced reporting, users are better served by utilizing an integration with another software or using a different accounting system.

Zoho Books

Pros:

• Affordable Plans: Zoho Books offers various budget-friendly plans to accommodate different business needs. They are more of the value play and offer 1,000 free invoices and lots of invoice templates. Zoho might be right for small businesses that are more boutique in nature.
• Comprehensive Features: Despite its reasonable pricing, Zoho Books provides features such as project tracking and client portals. They also have integrations with other payroll providers and Zoho has some standard reporting, but less than QuickBooks.
• Customizable Invoices: The software allows for the creation and sending of personalized invoices.

Cons:

• Learning Curve: Some users might experience a slightly steeper learning curve, especially those new to accounting software.
• Integration Challenges: While Zoho Books integrates well within the Zoho suite, integration with certain third-party applications can be limited. Quickbooks boasts over 650 applications and Zoho has a fraction.
• Depth of Talent Pool: Few businesses that I have seen in the US use Zoho. Of the three options, Zoho has the smallest talent pool, so buyers need to rely more on the company to find answers to questions versus a broader community.

Wrapping Up

Selecting an accounting system that aligns with your budget and business requirements requires careful consideration. Before thinking through which system to select, we recommend evaluating the software based on the 6 criteria below:

• Features and Scalability
• User-Friendly Interface and Training
• Seamless Integration
• Security and Compliance
• Advanced Reporting and Analysis
• Depth of Talent Pool

Each software has its own strengths and weaknesses. There is no one, correct answer. It depends on your business, its needs and plans.

When selecting a plan, keep in mind where your business currently is and your vision of your business’ future. One common error businesses make is solving their current systems problem and not selecting the system that will be right 1 or 2 years down the line. Accounting system changeovers are difficult and expensive, so we always recommend investing upfront rather than planning for a switch at a later date.

If you are interested in talking about accounting system selection and what is the right fit, please reach out to us:

SanitasAccounting.com / LinkedIn / Email

We’re also proudly located in Boulder, CO.