The Best Home Business Accounting Software to Run Bookkeeping Efficiently

Maybe you started your home business as a side hustle, or as a bold first step toward 9-to-5 freedom. So, to make certain that you’re running your business to the best of your ability, you’ll need to make sure you have a full toolkit—which includes the best home business accounting software for all of your bookkeeping needs.

Finding business accounting software is a lot less glamorous than building your website, running your first marketing campaign, or, you know, doing the work you care about. But you can still find the home business accounting software you need without ever leaving the comfort of your yoga pants and T-shirts—if that’s what you really want.

After all, even if you run your company out of your home, you still run a business. It’s important to make sure your venture is profitable and compliant. Choose a good business accounting software and cash management plan for your home-based business, and you’ll be free to work on the things that you do best.

Answer These 3 Questions to Find Your Home Business Accounting Software

You know better than anyone that getting set up with a work-from-home business is so much more than opening a laptop on a table. With setting up your LLC, getting your business licenses, and—oh, right—finding customers, you’re not alone if choosing home business accounting software has fallen straight to the bottom of your priority list.

But don’t make the mistake of ignoring it! Choosing your home business accounting software can be easy. You just have to answer three essential questions first:

1. What are you selling?

Are you selling a product, a service, or a combination of the two? Product-based home businesses need different accounting software functionality than service-based businesses—just like the accounting needs for a retail store would be different than accounting for a SaaS company. Inventory tracking and sales tax collection and reporting can be time-consuming without the correct software, so choose carefully.

2. Will you require payment in advance, or will you bill your customers?

Some home-based business owners require payment in advance, and others bill upon delivery of the product or completion of the service. Decide how you want to operate before choosing your accounting software so that you have all the features you need.

3. How important are software integrations?

Does your accounting software need to integrate with your website or another platform? Will you be working with independent contractors who need to be able to easily work with your software? The answers to these questions will impact your software decisions.

Now, Pick the Best Home Business Accounting Software for You

Have your answers? Once you know your needs, picking the accounting software for your home-based business is going to be a lot faster, easier, and less painful than you think. Let’s get it done!

Home Business Accounting Software for Everyone: QuickBooks Online or Xero

Good news: There are two business accounting software programs that can work for every type of home-based business. These are QuickBooks Online or Xero Accounting.

Why do we recommend choosing one of these providers for your home business accounting software, regardless of your industry? Unless you have a background in bookkeeping or accounting, you need someone to help you with your accounting and tax responsibilities from time to time. Choosing QuickBooks Online or Xero will guarantee that you’re able to find an accounting professional who supports your software and who can help you stay compliant.

Another benefit: QuickBooks Online and Xero both work with an ever-growing number of applications that streamline every aspect of business. Whether you have an inventory-based business, a service business, or a combination of the two, QuickBooks Online or Xero will work for you.

QuickBooks Online and Xero are easy to use, but, that said, when you’re first getting started, you might want to explore some of the other great alternatives, too.

Home Business Accounting Software for Hobbyists: GoDaddy Bookkeeping

There are few things as rewarding as turning a personal pursuit into a money-making business. Marketplaces like Etsy allow home-based businesses to find customers willing to pay top dollar for their creations. No more antique mall booth rentals or weekends spent sweating at local craft fairs!

If you have an Etsy store, consider using GoDaddy Bookkeeping for your accounting software. Formerly called Outright, GoDaddy Bookkeeping connects directly to Etsy Payments, which means your transactions will be automatically recorded into your bookkeeping software. No manual entry!

Don’t be surprised if your accountant tells you GoDaddy Bookkeeping isn’t a “real” accounting solution. GoDaddy Bookkeeping doesn’t provide an accounting balance sheet or a separate bank reconciliation feature, and you’ll have to keep track of your inventory outside of your accounting software.

Still, it automatically and accurately records your Etsy transactions, and it connects to your bank account to capture your business expenses, so you’ll be able to easily provide your income and expenses to your accountant at tax time. When your home-based business outgrows Etsy and GoDaddy Bookkeeping, you can easily upgrade to more robust accounting software.

Home Business Accounting Software for Freelancers: FreshBooks

Whether you want to make some extra money outside of your 9-to-5 job or build clientele so you can eventually strike out on your own, freelancing can be a profitable venture if you stay on top of your billing and other accounting functions. FreshBooks makes this easy.

FreshBooks started out as an invoicing and time-tracking software, but it’s since evolved into a powerhouse for home-based freelancers and service providers. FreshBooks lets you invoice and collect payments from your clients, track your expenses, and collaborate with your subcontractors, too. It also works with a suite of external applications to help you build a truly customized solution for your business.

What FreshBooks does not do is keep a balance sheet. A template is available if you need to create one, but FreshBooks recommends seeking the help of your business accountant if this is necessary. The upside is that most freelancers don’t technically need a balance sheet, though, so whether you require payment up front or bill upon completion of services, FreshBooks remains our top accounting software pick for home-based freelancers.

Home Business Accounting Software for Ecommerce: QuickBooks Online or Xero, Plus Add-Ons

Online sellers face unique challenges. Much like traditional brick-and-mortar retailers, online sellers must have a storefront (website), a point-of-sale system (online shopping cart), and an inventory management system.

Online sellers also have to manage multiple sales tax rates and reporting requirements. These multiple systems can streamline your accounting—or create a total nightmare if they don’t integrate with each other the right way.

Because of the number of integrations required, we recommend using either QuickBooks Online or Xero Accounting for your online store’s primary accounting software. The add-ons you need depends on the type of online store you have. For instance, Amazon sellers have different needs than Shopify users for inventory management. Consult with a bookkeeper who specializes in your particular type of ecommerce for guidance on the best inventory management software for your online selling platform.

Then, for sales tax, you can’t go wrong with either Avalara or TaxJar. Both connect directly to your online selling platform and—for a small fee each month—will file and remit all necessary sales tax returns and payments due for you.

One More Thing: Don’t Forget to Manage Your Cash, Too

Choosing the right accounting software for your home-based business is important, of course. But you also need to keep an eye on your cash.

Many home-based business owners make the mistake of sweeping all the profits from their business into their personal bank accounts, leaving no cash for business growth… or tax payments.

Using the Profit First cash management method will help you make sure you leave enough money in your home-based business to keep it running, save money for your taxes, and know exactly how much you should be taking out of the business for your own personal compensation. Profit First works with all accounting software, so all you need to get started is a copy of the book and a few bank accounts. (And make certain that you’re using a business bank account for your business—whether it’s home-based doesn’t matter!)

Accounting From Your Home Business Isn’t Hard—With the Right Software

Now that you know what accounting software you need to run your home-based business, the only thing left to do is to start using it!

Set up your software now, or consider hiring an accountant or bookkeeper to set it up for you. Make a commitment to spending some time each week—or each day, if you can—to updating your software and reviewing your accounting reports and cash position. Knowing where you stand is the best way to stay on track with your goals for your business and ensure your profitability, and updating your software regularly will prevent the stress of having to rush at tax time.

CPO at Pocket Protector Bookkeeping

Billie Anne Grigg

Billie Anne Grigg is a contributing writer for Fundera.

Billie Anne has been a bookkeeper since before the turn of the century. She is a QuickBooks Online ProAdvisor, LivePlan Expert Advisor, FreshBooks Certified Beancounter, and a Mastery Level Certified Profit First Professional. She is also a guide for the Profit First Professionals organization. 

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.

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