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As a consultant, you stay busy helping your clients improve and take care of their businesses. So busy, maybe, that it can be easy to forget to improve and take care of your business. But if you’re not managing your consulting business properly, you won’t be able to help your clients manage their businesses—at least not for long.
One of the top areas of your consulting business that you need to manage is your accounting. Unless you are an accounting consultant, the thought of handling your accounting might be the stuff of nightmares. Using the best accounting software for your small consulting business can help tremendously. But, with so many options on the market, choosing the best accounting software can seem like an unsolvable puzzle.
Don’t panic! We’re here to help you find the best accounting software for your consulting business, based on your particular needs.
Consultants have specific needs when considering the best accounting software for their businesses. Some of these needs include:
Unless you maintain an inventory of products you sell to your consulting clients, strictly speaking you don’t need a balance sheet. That’s because, in most cases, consultants don’t have fixed assets or inventory to track, and any business debt is minimal. Many consultants aren’t interested in building equity in their business, either, at least not in the early stages of business.
Beware though: Even if you don’t need to track assets or liabilities, without a balance sheet your accounting system is “open” rather than “closed.” In other words, you are missing a piece of the accounting equation, which can help you make sure your bookkeeping is accurate. Most specifically, open accounting systems usually lack a separate reconciliation feature, which is vital to making sure all your income and expenses are recorded properly.
If you choose an accounting software for your consulting business that does not contain a balance sheet component—and one such accounting systems is recommended on our list (more on that below)—then make sure you are reconciling your bank and credit card accounts regularly outside of the accounting system.
There are numerous good accounting software options on the market for consultants. Out of all the tools available, though, three stand out in terms of ease of use, affordability, and functionality.
Maybe we’re cheating a little by including two options as our top pick, but here’s why we choose to rank both Quick Books Online and Xero at the top of the list:
With both QBO and Xero ranking at the top of the list, how do you know which one is the best accounting software for your consulting business?
It’s largely a matter of visual preference.
Xero’s layout is more visually appealing to many consultants than QBO’s. You can customize your Xero dashboard to show only the things that are most important to you, and you can easily and intuitively find the things you choose not to put on your dashboard. Xero also steers clear of using accounting jargon, which makes it less intimidating to many non-accountants than QBO.
Some consultants find QBO and Xero to be a little “too much” for what they need in their accounting software. If you are looking for an accounting software for your small consulting business that is still fully functional but less overwhelming, check out our runner-up pick, FreshBooks.
FreshBooks started out as an invoicing and time-tracking software for freelancers and other self-employed individuals. It has since evolved into a powerhouse accounting software for small businesses that don’t technically need a balance sheet component.
FreshBooks lets you track your expenses and mark them as billable, invoice and collect payments from your clients, and—with the MileIQ integration—easily track and import your mileage expenses. Since FreshBooks connects directly to your bank and credit card accounts, you won’t have to waste time with data entry. You can be reasonably certain of the accuracy of your data if you monitor your bank feeds closely, even without a separate reconciliation feature.
Although FreshBooks does not provide a balance sheet, they do provide a template if you need to create one. You will need to consult with an accountant if you need a balance sheet, but FreshBooks has a large and growing number of accountants and bookkeepers certified in their software.
If your consulting business is mostly time- and service-based, FreshBooks might be just what you are looking for. It’s less robust than QBO or Xero, but still able to provide almost all of the same functionality using any number of third-party apps that easily integrate with FreshBooks. In fact, QBO, Xero, and FreshBooks all depend to some degree on third-party apps to customize their software for any particular industry.
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If you don’t want to manage a suite of apps in addition to the accounting software for your consulting business, our honorable mention pick, Zoho Books, might be the best choice for you.
QBO, Xero, and FreshBooks are all robust solutions, but some of the features a consultant needs are available only as add-on applications. It’s easy to get caught up in a cycle of constantly shopping for the “perfect” application that suits all your business’s needs. This can be overwhelming and confusing.
Zoho Books solves the problem of app exhaustion by providing a full suite of applications right within the Zoho ecosystem. Regardless of the features you need in your accounting software, Zoho has solutions, called transaction modules, that will integrate directly with Zoho Books. Pair this with the rest of the Zoho ecosystem—including Mail, CRM, and Office Suite—and you can easily run your entire consulting business using only Zoho products.
With all this functionality, you might be wondering why Zoho Books is only an honorable mention on this list. There are a few reasons why Zoho Books doesn’t top the list:
The best accounting software for your consulting business is the software you are comfortable using. Even if you engage the services of an accountant or bookkeeper to help you do your monthly bookkeeping, you will still need to use your accounting software to track your expenses and bill your clients.
Before making a final decision about the accounting software for your consultancy, take advantage of the free trial period offered by QBO, Xero, FreshBooks, Zoho Books, or any other accounting software you are considering. Rather than using the free trial period to set up your books perfectly, test the features you will use most often and make sure the software you choose supports you best.
Choosing the right accounting software for your small consulting business will help you stay on top of your billing and bookkeeping, which in turn will ensure your profitability and your ability to continue helping your clients grow their businesses.