5 Recommendations on the Best Accounting Software for Sole Proprietorships

Billie Anne Grigg

Billie Anne Grigg

Billie Anne Grigg has been a bookkeeper since before the turn of the century (yes, this one). She is a QuickBooks Online ProAdvisor, Xero Certified Advisor, LivePlan Expert Advisor, FreshBooks Certified Beancounter, and a Mastery Level Certified Profit First Professional. Billie Anne started Pocket Protector Bookkeeping in 2012 to provide an excellent virtual bookkeeping and managerial accounting solution for small businesses that cannot yet justify employing a full-time, in-house bookkeeping staff.
Billie Anne Grigg

With all of the hats you wear running your business by yourself, it’s common to forget to take care of your books. So, before we get into the details on the best accounting software for sole proprietorships, we’ll give you kudos for taking the time to address your financials systematically.

This decision will pay off. We promise.

Good basic accounting practices are a key element of a successful business. With good accounting—and good accounting software for sole proprietors, of course—you can keep your business running smoothly and avoid driving both yourself (and your customers) nuts. It really trickles down!

But you already knew all of this, right? That’s why you’re looking for the best accounting software for your sole proprietorship. We’ll get on to the best business accounting software picks, plus how to decide which one is right for you as a sole proprietor.

What Advantages Can the Best Accounting Software for Sole Proprietorships Deliver?

You might be tempted to go about your business as a sole proprietor without accounting software, sure. And you can. But if you establish good accounting practices early and get into steady habits, even if you only have a side-hustle, you can reap a lot of benefits:

  • Keep your customers happy. Have you ever gotten a reminder for a bill you’ve already paid? You likely thought twice about doing business with that particular company again.
  • Keep your staff happy. Running out of money for payroll is a good way to lose employees. It can also get you into legal hot water.
  • Save yourself a lot of stress and money. The bookkeeping records that business owners throw together right before the tax deadline typically contain hundreds of dollars of costly mistakes (take it from a bookkeeper with 20 years of experience). It’s no fun to tell an exhausted business owner who just pulled an all-nighter putting together their books for the year that most of the file needs to be recreated.

→Too Long; Didn’t Read (TL;DR): Why does accounting software for sole proprietors matter? Not only does it keep your customers and staff happy, but you can save yourself stress and money by keeping your books in order.

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How to Pick the Best Accounting Software for Your Sole Proprietorship

Before we get to the list of the best accounting software for sole proprietorships, you’ll need to know how to identify the one from the list that’s best for your work.

Not all accounting software is created equal, and it’s very important to understand your business’s needs before investing in a certain one. At minimum, answer these three Qs before choosing an accounting software for your sole proprietorship:

  1. What accounting functions do I need to be able to handle?
  2. How often will I use my software, or reports from my software, to make business decisions?
  3. What do I envision for the future of my business?

If you want more help answering these questions, we get more in-depth here.

But know that your answers will help you make the right choice on accounting software for your sole proprietorship right out of the gate. Your accounting software should be able to grow with you. And this’ll save you the countless hours—and tons of frustration—that can accompany switching accounting software down the line.

→TL;DR: You’ll want to answer a few questions about what you want out of your accounting software before making your decision. Otherwise, you might pick the wrong one.

The 5 Best Accounting Software Picks for Your Sole Proprietorship

Feel good about your answers to those questions? Pick from the best accounting software for sole proprietorships and find the right match for you. We’ve listed them in the order we think you’ll want to consider them:

1. QuickBooks Online

There’s a very good reason why QuickBooks Online—or QBO, as it’s affectionately called—tops this list of best accounting software for sole proprietors. QuickBooks is the reigning incumbent for accounting and bookkeeping software in the US. It’s easy to use, inexpensive, and training resources abound.

QuickBooks Online comes in three different varieties. There’s Simple Start, Essentials, and Plus.

For the best accounting software for sole proprietors specifically, Essentials is the best place to start. That’s because Simple Start is too simple for most businesses. As your business grows, you can move up to Plus. But be warned—once you upgrade your subscription, you can’t downgrade it again.

What About QuickBooks Self-Employed?

QuickBooks Self-Employed is a nice solution for freelancers and independent contractors, especially now that Self-Employed users can collaborate with their accountant or bookkeeper right inside the software.

That said, QuickBooks Self-Employed lacks certain features that most sole proprietorships will need eventually—if not right away. As of this writing, there’s no way to upgrade from QuickBooks Self-Employed to other QuickBooks Online products. So, if you’re not a freelancer, you’ll likely want to in QuickBooks Online instead.

2. Xero

QuickBooks Online might be the US incumbent, but Xero tops the best accounting software lists in New Zealand, Australia, and several European countries. It’s gaining ground in the US, too, which is why it’s number 2 on this list.

Similar to QBO, Xero has an extensive network of accounting professionals who support it, and it’s easy to find good online Xero training resources for this software. Sole proprietors will especially appreciate the lack of accounting terms and jargon that Xero uses. That means no “debits” and “credits” here—just good ol’ “money in” and “money out.”

If you are a sole proprietor in a creative industry, you might discover Xero is the best fit for you. Many marketing firms, writers, designers, etc. like to use Xero as the accounting software for their sole proprietorship.

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3. FreshBooks

You could argue that FreshBooks, like QuickBooks Self-Employed, is accounting software that’s better suited for independent contractors than sole proprietorships. But depending on your business, FreshBooks might actually be the perfect fit for you.

Here’s why. FreshBooks started out as time-tracking and online-invoicing software. But it’s since evolved into a platform that can be ideal for simple, service-based businesses.

If you have inventory, payroll, or need advanced job costing, you’ll need to look elsewhere for accounting software, or plan to learn an integrated app, too. But if your business is a relatively simple service-based business with no fixed assets to track, FreshBooks could be the solution you are looking for when choosing the best accounting software for your sole proprietorship.

4. Zoho Books

If you already use the Zoho platform for your CRM, mail, and/or expenses, adding Zoho Books could be the accounting software solution of your dreams. All of Zoho’s products integrate nicely with each other, giving you a true ecosystem for a relatively low investment.

Zoho Books works best for extremely small and simple businesses. If you often have “split” expenses (i.e., you go to the office supply store and buy not just office supplies but also janitorial supplies and have brochures printed for advertising), you might find Zoho Books to be a bit frustrating. That’s because you can’t easily split expenses from the bank feed.

There are some other quirks to Zoho Books, too, but again, these only really become an issue in more complex businesses.

Unlike Xero, Zoho Books sometimes uses terminology that isn’t the most intuitive to non-accountants. (Full transparency: It’s not always intuitive to professional accountants, either.) Still, with a little bit of patience during the learning process, sole proprietors already working within the Zoho ecosystem will probably enjoy working with this accounting software.

5. Sage One

Sage One doesn’t get the love and attention it deserves. So we’re going to change that here and now! Sage One is very competitively priced, it’s easy to learn and use, and it has an international presence.

Even though it doesn’t often make the “most popular” software lists, SageOne is worth a good look before you decide on an accounting software for your sole proprietorship. It’s robust enough to grow with you but simple enough to not overwhelm you as you’re getting started.

About Free Accounting Software for Sole Proprietors

You’ve probably seen the ads for free accounting software for sole proprietorships. Many claim to be just as good as subscription-based software. And although it’s true that some business owners get good results with these solutions, for the most part, you usually get what you pay for.

If you’re truly looking for the best accounting software for your sole proprietorship, then steer clear of the free accounting software. This is your money after all—so invest in a tried and true solution for your sole proprietorship.

→TL;DR: We recommend QuickBooks Online, Xero, FreshBooks, Zoho Books, and Sage One. We generally don’t recommend free software.

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It’s Time to Pick the Best Accounting Software for Your Sole Proprietorship

Although even basic accounting can get overwhelming, you’re doing the right thing by getting yourself set up with the best software for your sole proprietorship that you can find. By picking your best match, you’re making your life easier—and your accountant, too, come tax time.

It might be a good idea to reach out to your certified public accountant before you file your taxes, though—and they can even help you make this choice. Most top-notch accountants will want to review your accounting software file prior to filing the tax return to make sure there are no major errors that will impact your tax situation, anyway. So, if you’ve already chosen an accountant, reach out and ask what accounting software they recommend to other sole proprietorships.

Also, if you haven’t chosen an accountant yet, your software of choice might be able to help you find one! All of the software companies mentioned above have partner programs for the accountants and bookkeepers who use their products, and you can usually access these directories when you’re logged into the software.

And remember! Even if you choose to pass the bookkeeping hat off to a professional at some point, you should be comfortable enough with your accounting software to perform basic functions in it and to access the reports you need to make decisions about your business. Use those free trial periods to evaluate your options before choosing an accounting software for your sole proprietorship.

That way, you’ll definitely end up with the best fit for your business.

Editorial Note: Any opinions, analyses, reviews or recommendations expressed in this article are those of the author’s alone, and have not been reviewed, approved, or otherwise endorsed by any of these entities.
Billie Anne Grigg

Billie Anne Grigg

Billie Anne Grigg has been a bookkeeper since before the turn of the century (yes, this one). She is a QuickBooks Online ProAdvisor, Xero Certified Advisor, LivePlan Expert Advisor, FreshBooks Certified Beancounter, and a Mastery Level Certified Profit First Professional. Billie Anne started Pocket Protector Bookkeeping in 2012 to provide an excellent virtual bookkeeping and managerial accounting solution for small businesses that cannot yet justify employing a full-time, in-house bookkeeping staff.
Billie Anne Grigg

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