If you're a sole proprietor or independent contractor who's tried using a desktop or cloud-based accounting application, you may have become discouraged quickly. It probably cost far more than you wanted to spend and did way more than you needed it to do. If you're like a lot of very small business owners, chances are you couldn't swallow what seemed like an unnecessary expense for an inconvenient solution and ended up going back to Excel for your bookkeeping—or even paper. After all, those tried-and-true methods may not be very convenient, but at least they have the benefit of being free.
It's kind of like using Microsoft Word when WordPad—or even Notepad—would suffice. Except that when you're using a productivity application, you spend most of your time working in the big empty space in the middle. If your writing needs are modest, you can use right-click menus and all but ignore those voluminous menus and icons at the top. The extra features you're not using are mostly invisible.
Intuit's QuickBooks Online Plus, Zoho Books, and other best-of-breed online accounting solutions aimed at larger businesses can do what you need them to do, even if you're only sending invoices and tracking your income and expenses. But with all the tabs and wizards and fields in these apps, the experience is nothing like the word processor's screen with an easily ignored interface limited to the menu bars. Instead, with these apps geared at larger businesses, you often have to navigate around the unused features, and you're constantly reminded of how few of the powerful tools that you're paying for are actually getting used. That inevitably leads you to the discouraging realization that you're not getting your money's worth out of them when the subscription fee comes out of your bank account every month. And, since you're being careful about your accounting, there's just no way to ignore this. Every penny matters to the sole proprietor of a small business.
Fortunately, there are several alternatives, cloud-based accounting applications that are designed—and priced—for sole proprietors and independent contractors. Developers started targeting this huge market segment many years ago with simple invoice-creation sites. Some have disappeared, but others have matured into the useful, focused applications we have today.
Each of these has its own unique blend of features—a combination of tools and capabilities that you should consider when making your purchase decision.
Online connections to your financial institutions. If you're already logging into your banks, credit card companies, and so on online, you only have to enter those same user names and passwords within your accounting application. As transactions appear in your online accounts, you can download them to your accounting service and track your income, expenses, and balances in close to real time, all from one convenient dashboard. Having this detailed picture of your complete financial picture affords small businesses the nimbleness so critical to their survival.
Invoicing. Most of the sites I mention here let you create invoices—sometimes recurring ones, even—and estimates, and send them to customers online. Some will even offer to generate and send invoices via U.S. Mail. You can sometimes also see when a customer has viewed an invoice, automatically send them reminders, and assess late fees.
Merchant accounts. One of the best ways to improve your cash flow is to accept debit and credit cards, so that customers can pay instantly and conveniently (extra processing fees apply). Most applications let you choose from among multiple payment gateways.
Mobile access. These cloud-based accounting applications have complementary mobile sites, so you can accept payments on your smartphone or tablet while you're away from your office computer, and do other business-related tasks.
Time-tracking. If you bill for time, a lot of that work may occur out of the office. Instead of scribbling notes or simply trying to remember, you can create time entries on your smartphone wherever you are.
Mileage-tracking. This is another area where you don't want to guess—and lose a reimbursable expense. If you're likely to travel for work, this is a handy feature to have.
Quarterly estimated income tax calculations. This is one of the most difficult tasks for sole proprietors and independent contractors. Some of these sites at least create a Schedule C worksheet, and some go beyond, offering a suggested quarterly payment based on the income and expenses you've entered.
E-commerce integration. GoDaddy Bookkeeping is the only site among those I've reviewed for sole proprietors to provide a bridge to PayPal, Etsy, Amazon, and eBay, which means you can automatically import sales data from those websites.
Reports. Because these applications have limited features, you won't see as many reports and customization options as you get in more full-featured accounting solutions, but they all at least offer multiple views of your data, and some of the services have a few preformatted report templates.
Security. Like their higher-end counterparts, these cloud-based accounting websites all use bank-grade security. Even the smallest of businesses need to keep themselves and their customers safe.
Click through the links below to read our in-depth reviews of these services that will work well for the very smallest businesses. And while you're getting your finances in order, you might also consider checking out our reviews for the best online payroll services and the best online tax preparation services.
PCMag may earn affiliate commissions from the shopping links included on this page. These commissions do not affect how we test, rate or review products.
By Kathy Yakal
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