Deciding between free and paid accounting software can be a challenging task for business owners. It’s crucial to determine where it makes sense to cut costs and where it’s worth investing. While paid programs offer more advanced features and time-saving capabilities, there are some good free options available as well.
For small businesses with limited transactions and no employees, free accounting software may suffice. However, businesses with growth potential, multiple transactions, and employees should consider investing in a paid program for better functionality and scalability.
Here’s a breakdown of when to use free or paid accounting software, along with the pros and cons of each option.
When to use free accounting software
✔️ Your business will stay very small.
✔️ You’re a freelancer or solopreneur with no employees.
✔️ You complete a handful of transactions each week.
When to use paid accounting software
✔️ Your business has growth potential.
✔️ You have employees and/or a brick-and-mortar location.
✔️ You complete dozens of transactions each day.
What to expect from free accounting software
Free accounting software may lack some advanced features found in paid options, but it can still meet the needs of solopreneurs and freelancers with simple accounting requirements.
These businesses typically require basic functions like tracking income and expenses, creating invoices, and running basic reports. Free software can fulfill these needs, especially if you only work with an accountant during tax season.
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Track income and expenses.
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Create and send invoices.
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Run basic reports, like profit and loss statements and balance sheets.
Consider the level of integration you need with other software tools when deciding on free accounting software. Paid solutions typically offer more integrations, making them a better choice for businesses using multiple software applications.
No monetary investment required.
Fewer capabilities means less of a learning curve.
Often has competitive invoicing tools.
Often doesn’t include features like bank feeds, inventory tracking, and advanced reporting.
Fewer third-party integrations.
Comes with little to no customer support.
Our best free accounting software picks
Zoho Books: Best set of features. Zoho Books’ free plan is the most feature rich around. It includes up to 1,000 invoices per year, a customer portal, reconciliation tools and much more. You can also invite your accountant to access it. However, you’ll need to upgrade to a paid plan to automatically import your bank transactions.
Compared to other free accounting software products, Zoho Books is more scalable. It has five additional paid plans available.
Wave: Best for simple invoicing. Wave’s free invoicing tools compete with paid alternatives. You can send unlimited invoices and estimates, customize invoices and send clients automated payment reminders. However, there are no audit trails. You’ll also need to upgrade to the paid plan to automatically import bank transactions and invite your accountant.
GnuCash: Best step-up from spreadsheets. GnuCash is more manual than the alternatives, but if you’re a very meticulous person, that’s not always a bad thing. It’s a good middle ground if you’re ready to graduate from spreadsheets and don’t want to jump right into automated accounting software.
What to expect from paid accounting software
Paid accounting software offers more advanced features and time-saving capabilities compared to free options. These products can automate tasks like transaction categorization and reconciliation, as well as provide detailed reporting and audit trail logs for accurate financial records.
For small businesses, the benefits of paid accounting software, such as improved collaboration with accountants and more in-depth financial record-keeping, often justify the monthly subscription costs.