Maximizing Success: The Best Accounting Software for Solopreneurs
Starting a business and wondering when to set up an accounting system and which one to choose? Keep reading.
As a solopreneur, your days are filled with managing a balancing act of roles. While it may be tempting to deprioritize setting up your accounting system until you're making serious cash, establishing the right foundation early on will set you up for success as you grow.
Poor financial management contributes to the failure of up to 50% of small businesses in their first year. Having an accounting system in place will make it less likely for you to be part of this statistic.
When to Set Up Your Accounting System?
As a general rule, set up your accounting system as soon as you start receiving money for your goods or services or when you have your first business expenses. This ensures that you'll have financial data from your first dollar, which you can later use to decipher patterns and make informed decisions. You'll be able to quickly determine which service makes you the most money, where you are spending the most, and much more!
Setting up your accounting system early also establishes the right habits from the get-go. It's easier to avoid feeling overwhelmed by drowning in receipts and invoices, and trying to do everything retrospectively can be challenging.
Choosing the Right Accounting System
We'll explore the following options:
Excel or Google Sheets Spreadsheets
QuickBooks Online
MYOB Online
Xero
Excel: The Flexible Foundation with a Costly Crux
An Excel spreadsheet can be a tempting starting point for accounting with its undeniable flexibility and zero initial cost. It serves well for simplistic entry and can be highly customizable. However, scalability is its stumbling block. The more your business grows, the heavier the chains of manual entry, error-prone tasks, and absence of real-time insight become.
A spreadsheet will suit you best if you are deliberately choosing to get started slowly in business, as in your invoicing and expenses will be limited to one or two a month. Because of this very low volume, it’ll be manageable inside a spreadsheet. As your business grows, it will then be best to migrate away from the spreadsheet and into an accounting system.
QuickBooks Online: Best Suited for US-based Businesses
QuickBooks Online presents a well-rounded solution with cloud-based accessibility, simplified dashboards, and automated features. However, the struggle often lies in that it is US-centric and does not, for example, offer live bank feeds for all New Zealand banks.
A live bank feed makes your life easier; it means that your bank statements are automatically connected to your accounting system, and every time you receive or spend money, that is automatically already in your accounting system.
QuickBooks is a great option for US-based solopreneurs but not our recommended option for those outside of the US.
MYOB Online: A veteran in this space
MYOB is a long-time player in the accounting world and was once the preferred choice of many accountants in New Zealand. Traditionally a software and now offering a cloud-based solution, it’s a less costly option than Xero and has several tiers that will grow with you and your business.
Where MYOB does not stack up to Xero is in its third-party app integrations. Xero’s third-party marketplace is more extensive, meaning that as you grow, you will be able to find more niche solutions suited to the specific needs of your business.
The third-party apps can be quite helpful as you scale, so if scalability is not important to you but rather you’d prefer to keep your business operations smaller, then MYOB could be a great option for you.
Xero: Our preferred choice
Xero is the best end-to-end solution for solopreneurs to established small businesses.
Its Starter plan has everything you need as a solopreneur, including direct bank feeds, mobile access, and reporting. Its rules and automation make it easy for you to do your bookkeeping yourself and be familiarised with what is coming in and going out of your business.
Its reporting and integration capabilities especially will support you as your business grows. Xero isn’t just somewhere where you will record your transactions but your tool that puts your data together, enabling you to make links and connections towards the best decisions.
As you grow, you’ll be able to make the most out of its integrated payroll, more complex reporting, and third-party apps. Xero is the accounting software that you can maintain as a solopreneur today and that will still suit you as you have 20+ employees.