A few months ago I wrote about options for free and/or open source accounting software and I found a few good options. I liked Manager, which is a simple and clean accounting program from Australia. Its main issue, like most free accounting programs, is its limited types of reports and it has no capability for classifying transactions (which is possible with items and classes in QuickBooks). Still, Manager could work well for many small businesses and in many ways is easier to learn than QuickBooks.
Since I wrote that article, I realized there is a better way to organize this information so business owners can determine what software options is best for them to learn. Many of my clients ask me, “Do I need Quickbooks?” While I am reluctant to recommend software that costs a small business more money, I find it is very helpful for most small business owners. In some circumstances, I can still see the benefit of keeping it simple with free accounting software.
For The Micro-Business
For the one-person small business that has no inventory and does not need to depreciate many items or run unique reports, I recommend Wave, Microsfot Excel or Manager. Businesses that fall into this category often do their own taxes, have no payroll, and are service-based businesses.
Wave is an accounting service/app that is free to use and costs money to upgrade for payroll. It works well with people who are tech-savvy and have little accounting knowledge. Wave has the mac feel with a clean simple interface and is mostly intuitive. Like QuickBooks, it does a pretty good job of connecting with your bank account to download transactions. Wave does not allow you to use sub-accounts or to distinguish between types of transactions, so it’s main limitation is the data you can retrieve. You could create an account for each type of income account but at some point it could become annoying. Let’s say you were a farmer and sold eggs, milk, and fifteen kinds of vegetables. It may help you to track each item, which would be easy to do in Quickbooks, but Wave would require you to have seventeen different income accounts.
Microsoft Excel is great for people who already have experience with the software and are motivated to learn more about accounting. There are many opportunities to make a mistake in Excel so it helps to know the software well, but a well-trained user will have complete control over the data they are able to retrieve. It helps to keep multiple worksheets within one workbook so you have a general ledger (and vertical running totals for each of your accounts), accounts receivable, accounts payable, and reports. You can set up formulas so that the reports are automatically retrieved from the numbers on your general ledger.
Manager works for people who are comfortable with open-source software and have no problem asking people for help. From my eyes, Manager is similar to Wave except that it is on your computer rather than your web browser (although there is now a mobile version). It is completely free and easy to learn.
All Other Small Businesses
Any business that is manufacturing a product, retailing, or subcontracting, I highly recommend QuickBooks. QuickBooks allows you to generate customized reports, classify transactions by sectors of your business, generate 1099’s for vendors and is generally more foolproof when logging more complicated transactions. Even if you make a mistake, an accounting professional can always follow your movements with QuickBooks and get you on track.