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 business accounting software for self-employed individuals, 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 self-employed accounting software, 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.
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:
Before we get to the list of the best accounting software for self-employed individuals, 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:
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.
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:
There’s a very good reason why QuickBooks Online tops this list of best accounting software for sole proprietors. QuickBooks is the reigning incumbent for accounting and bookkeeping software in the U.S. 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.
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.
QuickBooks Online might be the U.S. incumbent, but Xero tops the best accounting software lists in New Zealand, Australia, and several European countries. It’s gaining ground in the U.S., too, which is why it’s number 2 on this list.
Similar to QuickBooks Online, Xero has an extensive network of accounting professionals who support it, and it’s easy to find good online training resources for this software. Sole proprietors will especially appreciate the lack of accounting jargon that Xero uses. That means no “debits” and “credits” here—just good old-fashioned “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 best self-employed accounting software.
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 self-employed accounting software. For a limited time, FreshBooks is offering 60% off for 6 months on Lite, Plus, and Premium plans when new users skip the 30-day free trial period and opt to buy now.
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.
Sage doesn’t get the love and attention it deserves. So we’re going to change that here and now! The platform is very competitively priced, it’s easy to learn and use, and Sage software also has an international presence.
Even though it doesn’t often make the “most popular” software lists, Sage is worth a good look before you decide on self-employed accounting software. It’s robust enough to grow with you but simple enough to not overwhelm you as you’re getting started.
You’ve probably seen the ads for free accounting software for self-employed individuals. 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.
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 a 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.
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.