Best Accounting Software for Self-Employed Businesses in 2021

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Accounting technologies are designed for specific purposes and specific users. There are more sophisticated solutions with complex accounting and bookkeeping capabilities for larger companies, as well as more basic tools made specifically for small companies and self-employed businesses.

In this article, we’ll walk through those accounting software solutions that are best for self-employed businesses as we head into 2021.

What is a self-employed business?

Being self-employed means that you are earning a living by working for yourself. Gallup, an American analytics and advisory company, conducted a “Gig Economy and Self-Employment Report” for 2019. The report found that in 2019, there were 44 million workers in the U.S. who considered themselves to be self-employed.

The Internal Revenue Service (IRS) defines someone as as self-employed when they meet any one of the following conditions:

  • He or she carries a trade or business as a sole proprietor or independent contractor
  • He or she is a member of a partnership that carries the trade or business
  • He or she is involved in a business for his or herself, including a part-time business

Why do self-employed businesses need accounting solutions?

Self-employed business owners have to wear multiple hats every single day. They’re in charge of handling their business’ finances, sales, marketing, and inventory. Accounting solutions help to take the more repetitive tasks of bookkeeping off their plates, freeing up time that can be put towards more strategic planning and decision-making.

Some of the benefits of using self-employed bookkeeping and accounting solutions include the elimination of human error, having more time to meet with clients, and supplying immediate information for reporting purposes.

What features do self-employed businesses need in an accounting software?

Accounting software designed for self-employed individuals offers basic solutions to help owners stay on top of their revenues and expenses. These platforms also organize invoices, as well as prepare and calculate taxes in time for the annual and quarterly tax seasons.

Almost all of the best self-employed accounting software platforms are affordable and beginner-friendly because they only carry the fundamental features. Sole proprietors don’t always require extensive reporting of their financial transactions, payroll and benefits management, and inventory management. More often than not, they do require capabilities to capture, manage and store receipts, monitor profit and loss, prepare tax requirements, and keep their books balanced to ensure that the operations are sustainable and smooth-sailing.

Accounting solutions can be on-premise or cloud-based. On-premise accounting tools are software platforms that are downloaded to the computer where resources are deployed in-house. The structure usually allots for one person per account. Cloud-based accounting tools are those web-based applications that users can utilize wherever they are, regardless of what device they use.

 

5 Best Self-Employed Accounting Software Platforms

1. QuickBooks Online

QuickBooks Online

Source: QuickBooks

There are many reasons why QuickBooks is the top-grossing self-employed accounting software. Aside from tracking income and expenses, QuickBooks’ sole proprietor accounting solution also has integrations with PayPal, Shopify, and Square. This integration empowers users to crunch numbers from various sources all in one platform.

There are more than 4.5 million QuickBooks users from around the world, and that number continues to grow. QuickBooks Online offers bank-standard security. This means self-employed professionals won’t have to worry about their data being compromised on the cloud.

QuickBooks Online may be a little bit pricier than its sole proprietor bookkeeping and accounting counterparts, but the value it brings to users is worth the price. It’s also easy to reconcile accounts using QuickBooks Online, so self-employed organizations can compare their monthly bank and credit card statements with their financial records in the most accurate way. QuickBooks also offers 24/7 chat support.

2. Wave

Wave

Source: Wave Apps

Wave’s accounting software is one of the best-in-class tools available for self-employed individuals. This tool allows users to reconcile their accounts, sync expenses, process taxes, and keep the books balanced. Like any other solution, Wave also allows users to track, store and manage receipts in just a few clicks.

Wave uses 256-bit encryption for security, and the company is recognized for having PCI Level-1 certification for handling bank account information. Users can seamlessly create customized invoices using Wave’s iOS and Android apps, send receipts from e-mail to Wave, and setup recurring invoices or automatic credit card payments.

Wave was created by former self-employed business owners specifically for self-employed business owners. It’s ideal for overseeing cash flow and keeping taxes up to date, all completely free of charge.

3. Xero

Xero

Source: Xero

Xero is best for businesses with up to 20 employees. It’s a favorite solution by freelancers and small business owners who need fundamental accounting capabilities for their repetitive tasks. Xero allows users to gain a 360-degree financial overview using its dashboard, create custom-made reports, personalized invoices, prepare payroll, and manage expenses.

Self-employed individuals who own online businesses will find that Xero fits their needs, from managing purchase orders to managing multiple projects. The software also has a mobile app so users can finish their tasks anytime, anywhere. Subscription starts at $10 per month, with support coming from Xero’s expert advisors.

4. FreshBooks

FreshBooks

Source: FreshBooks

No degree in accounting? No problem. FreshBooks is a top-of-mind solution for solo entrepreneurs and freelancers because it’s features are compact and easy to navigate. Some of the most outstanding features of FreshBooks are seamless double-entry bookkeeping, time management, invoicing, easy reporting, and payment tracking.

FreshBooks is a reliable accounting software for self-employed individuals because it shows professionals exactly what their profitability is, their cash flow, and how much they are spending. Plus, the platform helps owners keep their clients informed with project proposals, timelines, and account statements.

Every account grants access for two people to utilize the services. FreshBooks only costs $6 a month for the Lite version, and the Premium version is up to $20 per month. A Plus plan, which runs $10 per month, allows the user to support up to 50 clients.

5. Zoho Books

Zoho Books

Source: Zoho Books

Zoho Books can perform different types of accounting solutions that may be too tedious for self-employed business owners to do on their own. This software is equipped with easy to manipulate dashboards and graphs, saving individuals time in sifting through financial data by seeing everything they need in one page.

Users will enjoy Zoho Books for up to $29 per month, depending on the subscription type they choose. Business owners have the option to sign up for the whole year to get huge discounts. There are more than 40 collaboration applications that users can add to their existing plan, depending on their needs. The add-ons include additional users to one account, auto-scans, custom domains, and more.

Bundled services are also available in Zoho. Sole proprietors who need help in overseeing their product inventory will enjoy Zoho because it offers advanced inventory and finance management in one platform. The platform also offers automated payment reminders for clients who are unable to pay on the date specified on an invoice

Conclusion

Self-employed accountants, creative freelancers, and other professionals may choose any of these five top-rated solutions to meet their needs. Sole proprietorship bookkeeping is a tedious task especially when the business is still in its infancy, so using accounting software to aid the operations will go a long way in ensuring that the financial health is continually in good shape.

Serine Alejandro
Serine is a graduate of Journalism from one of the most prestigious universities. She has broad experience in public relations and marketing communications for the lifestyle, travel, tech, and banking industries. She is now a co-owner of a growing condiments business, a manager of her family’s pharmacy, and a full-time writer for SMB Compass.

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