At first glance, cloud-based accounting systems seem like the way to go. Sure, these programs have benefits for end users, but if you’ve worked with desktop-based accounting software programs at all, you’ll find the cloud-based versions markedly different.
The following sections review some of the more popular cloud-based accounting software. You can generally access these programs on any internet-enabled device—PC, Mac, smartphone, or tablet.
QuickBooks Online
QuickBooks Online (qbo.intuit.com) is cloud-based accounting software that’s offered on a subscription basis. As of this writing, QuickBooks Online is available in three versions, with three different price points:
Simple Start: This basic version enables you to track income and expenses, create estimates and invoices, and sync your bank account with your accounting records. It’s best suited for business owners who have little or no accounting experience and few transactions to process.
Essentials: This middle-tier version provides all the functionality of QuickBooks Simple Start but adds the capability to pay bills online along with an expanded group of reports. Reporting is meager in the Simple Start version.
Plus: Plus has all the features of Essentials plus the capability to track inventory and prepare and print 1099s. Creating purchase orders, entering billable hours for a customer, using classes (departments), and accounting by location (branch offices, etc.) are other Plus features.
Bottom Line
You can migrate between the desktop and cloud-based versions of QuickBooks with relative ease. So if you’d like to give cloud-based accounting a try and you’re already using QuickBooks, it’s a simple process to move from your desktop to the cloud.
An important distinction about QuickBooks Online: you can easily upgrade from Simple Start to Essentials or Essentials to Plus, but once you move to a given tier, you can’t downgrade. The only way to move from the Plus version to the Essentials plan is to cancel your Plus subscription and start over with the Simple Start or Essentials plan. This catches many QuickBooks Online users by surprise; other users are frustrated because a key feature such as generating 1099s can cost an additional $150 a year if you don’t need any of the other Plus features.
You can access cloud-based accounting programs such as QuickBooks Online online.
Xero
One of the main companies going head-to-head with QuickBooks Online is New Zealand–based Xero (pronounced zero). Xero (xero.com/us) first launched in 2006 and was designed to be cloud-based. It shares similar functionality to QuickBooks Online, and it even offers a free conversion service from QuickBooks to Xero. It’s designed to appeal to all types of small businesses.
Some of Xero’s key features include connectivity with banks around the globe and automatic reconciliation features; inventory tracking; dashboards that show at a glance how your company is doing; and of course, the cloud capability that enables you to view and work on your accounting records online.
Xero partners with more than 400 add-on products that enable you to customize your accounting experience to fit your business or your clients’ business.
Xero offers a company dashboard where you can keep tabs on key metrics for your business.
FreshBooks
FreshBooks (freshbooks.com) started as cloud-based software designed for professionals who bill by the hour or project to send invoices. It’s since grown into full-fledged cloud-based accounting software. Ideal FreshBooks users are freelancers, consultants, or micro businesses that utilize contractors. The program includes automatic bank feeds, expense management tools, time tracking, and document sharing.
Accounting Hack
You don’t have to make any irretrievable decisions when settling on an accounting package. Each program we discuss here either offers a free trial, money-back refund period, or dummy demonstration company you can play around with before you purchase. To determine if an accounting package offers a free demonstration version, do a web search for “online demo” and the name of the software you’re interested in. In some cases, such as with Xero or FreshBooks, you must sign up for a free trial.
Click a tab at the top of FreshBooks to select your next activity, such as entering business expenses.