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Your manufacturing business might be small for now, but you have big dreams. Maybe your vision is to supply boutique stores in your region with your unique product. Or maybe you have a goal of one day distributing your product worldwide, either through ecommerce or large chain retail stores.
Regardless of the goals you have for your business, you will need good accounting procedures in place to reach those goals. And the first step to establishing good accounting procedures is choosing the best accounting software for your small manufacturing business.
Accounting for manufacturing businesses is a little different than accounting for other industries. And small manufacturers need to make sure their accounting software can accommodate these unique differences with a minimal amount of effort.
Accounting for manufacturing businesses deals heavily with inventory valuation and cost of goods sold. While these accounting concepts are also used in retail accounting, there are a couple of differences manufacturers need to be aware of:
Typically, manufacturers have three separate inventory accounts. The balances in these accounts are constantly changing throughout the accounting period, so you must make sure you have a good tracking system in place in order to keep your accounting uncomplicated.
In retail and most service businesses, labor and overhead costs are considered operating expenses. In manufacturing, though, these costs are separated into direct costs and burden costs.
If your manufacturing business is still very small and you are doing most of the production yourself, you probably don’t need to be overly concerned with these accounting differences just yet. Check with your accountant to make the final determination on how to best conduct your accounting at this point in your business.
That said, you want to make sure you choose accounting software for your small manufacturing business that can accommodate these accounting differences as your business grows.
Many small manufacturing business owners think they can only get the functionality they need in their accounting software by using a desktop-based product.
This is no longer the case.
In fact, unless it’s absolutely impossible to get the functionality you need without using a desktop-based accounting product, you should always “shoot for the clouds,” either directly or by choosing software that can be hosted and accessed remotely. Using a cloud-based accounting solution will allow you to:
All of our picks for the best accounting software for small manufacturers are either cloud-based accounting solutions or are easily hosted in the cloud. These software companies are also all well-known, which means they are well-supported by accountants and bookkeepers.
You might have been told QuickBooks Online is not a good fit for inventory-based businesses like your small manufacturing company.
On its own, this is true. QuickBooks Online has a very limited inventory feature, though Intuit is continuously updating and upgrading it.
However, there are a number of very powerful third-party integrations specifically designed for small manufacturing businesses that integrate beautifully with QuickBooks Online. Fishbowl Manufacturing provides a full ERP system for your manufacturing business that integrates with QuickBooks Online using a plugin built right into the software. Fishbowl integrates with a number of other accounting platforms, as well, so if you switch accountants you will also be able to switch accounting platforms with ease (if necessary). Although it is server-based, there is a hosting option you can use to access Fishbowl via a URL.
MISys Manufacturing is another great option for your “back-of-house” manufacturing accounting needs. MISys is modular, meaning you can start small and build as your business grows and you need more functionality. This will help you keep your costs down while you are building your business. Unlike Fishbowl, MISys integrates only with QuickBooks and Sage products, so keep this in mind if you plan to work closely with an accountant or bookkeeper.
QuickBooks Online is supported by thousands of accountants and bookkeepers around the world, making it easy to find a provider who specializes in accounting for small manufacturers. This, combined with the ease of integration with software specifically designed for manufacturing businesses, makes it our top pick.
Although this is a desktop-based solution, QuickBooks Enterprise for Manufacturing & Wholesale can easily be hosted in the cloud. We recommend hosting this software with a reputable company like RightNetworks to provide you with access from anywhere, routine backups, and regular updates.
This version of QuickBooks has many of the features manufacturers need right inside the software, like assemblies management and available-to-promise functionality to help manage demand. Like with QuickBooks Online, finding support is easy, but you’ll want to choose an accountant or bookkeeper who has experience using the manufacturing and inventory features.
Even though QuickBooks Enterprise for Manufacturing & Wholesale is sold as an all-in-one solution, the manufacturing features aren’t as advanced as those you will find in Fishbowl or MISys. Take some time to consider not only your current needs but also what features you might need for your business in the future. If you will ever need advanced manufacturing features, your better bet will be to go with QuickBooks Online and a third-party application from the start.
NetSuite Manufacturing is a completely cloud-based, all-in-one solution built specifically for manufacturers. Used by large, global manufacturing companies, NetSuite has everything any manufacturing business of any size needs to run operate effectively and profitably.
With this level of robustness comes some challenges, though. NetSuite could be a little too robust for small and emerging manufacturing businesses, creating complexities where simplicity would benefit the business owner more. NetSuite is also not as widely supported as QuickBooks products, meaning you could have difficulty finding an accountant or bookkeeper to support it.
Still, if you are planning to grow your manufacturing business into a large enterprise, NetSuite is worth considering. Even if you choose to use different accounting software for your small manufacturing business now, keep NetSuite in the back of your mind as a solution to consider as your business grows.
Choosing accounting software for your small manufacturing business is easy once you understand the unique differences you need to consider for your accounting. As always, one of your first steps when establishing your accounting system should be consulting with an accountant or bookkeeper with experience in manufacturing accounting.
Whether you go with one of our top picks or a different solution, choose accounting software that has good support and will grow with your business. This will help you build the manufacturing business of your dreams.