The 6 Best Accounting Software for Self-Employed Business Owners of 2020

Accounting software is designed to help businesses track their revenue and expenses. In addition to tracking transactions, many programs calculate tax liability as well as streamline federal and state filings. The best accounting software for self-employed business owners will offer specific software options to help business owners meet the unique needs that they have, such as calculating quarterly tax requirements. In fact, the IRS’ biggest internal team is the one that deals with audits of self-employed individuals, with over 47,000 people looking for mistakes you’ve made.

The needs of business owners vary based on the business entity they use, but generally, all business owners need to do certain things like capturing receipts, tracking miles, and managing other expenses that may be tax-deductible later. Most self-employed business owners are required to keep track of all these things, and accounting software helps save time, avoid confusion, and keep you out of tax trouble by properly calculating what you owe.

With this in mind, we researched more than 15 of the best accounting software options nationwide and narrowed down the list based on factors such as ease of use, self-employed options, and cost. Check out our top picks below.

The 6 Best Accounting Software for Self-Employed Business Owners of 2020

QuickBooks: Best Overall
Xero: Runner-Up, Best Overall
Wave: Best Value
FreshBooks: Best for Freelancers
Zoho Books: Best for Very Small Businesses
OneUp: Best for Small Sales Teams

QuickBooks: Best Overall

QuickBooks is industry-leading accounting software for all small businesses. They offer a unique package for self-employed business owners that provides the ability to properly track expenses and potential tax write-offs and to calculate what your tax obligations should be on a quarterly basis. This special package combined with their ease of use and competitive pricing makes QuickBooks our best overall accounting software.

Here’s a more detailed breakdown of QuickBooks’ software:

Pricing: $15 to $150 per month
Ease of Use: Leads the industry in how easy it is to use, and there are hundreds of courses across the web to learn how to use the software
Self-Employed Features: Track receipts and miles, estimate quarterly taxes, invoice and accept payments
Free Trial: Free for 30 days
Add-Ons: Can add payroll software for an additional cost

QuickBooks reviews are mixed online. Many small business owners love their software but struggle with their overall customer service. If you know you’re going to need customer help based on your accounting or software experience, then you might consider other options on the list that have a better customer support reputation.

Xero: Runner-Up, Best Overall

Xero offers a similar solution to QuickBooks but is not quite as good for those who have less accounting experience. Xero is our runner-up for best overall because it’s a great overall solution with a strong business accounting offering, smart features to capture receipts, and helpful invoicing options. Xero can be more difficult to use for those who are inexperienced at keeping their own books, but overall it’s a good solution for most small business owners.

Here’s a more detailed breakdown of Xero’s accounting software:

Pricing: $9 to $60 per month
Ease of Use: Average but intuitive for experienced bookkeepers
Self-Employed Features: Send online invoices, organize receipts, keep track of tax obligations
Free Trial: Free for 30 days
Add-Ons: Can integrate with Gusto for payroll at an additional fee, and can connect with over 700 tools for payroll, CRM, POS, and more

Xero’s customer service is rated higher than QuickBooks', and experienced bookkeepers find the software easier to use than much of the competition. If you’re looking for the closest thing to QuickBooks with higher-rated customer support, Xero is your best option.

Wave: Best for Value

Wave is the best accounting software for value on our list because it’s a very good and useful platform that is completely free. If you’re not sure whether you can do your accounting and taxes for your business on your own, then Wave is the perfect option to try while you learn. It’s solid accounting software that many self-employed business owners use because of the many features they offer combined with their promise of it being completely free forever.

Here’s a more detailed breakdown of Wave’s accounting software:

Pricing: $0 (Free)
Ease of Use: Easy to use
Self-Employed Features: Payment collection, keep business-related expenses organized and separate, calculate tax obligations
Free Trial: Free forever
Add-Ons: Credit card payments, invoicing, payroll—all for additional costs

Wave has average customer service reviews online, but most negative reviews have nothing to do with their accounting software. The fact that an entirely free product offers a customer support team at all is pretty amazing, even if they have an average overall satisfaction rating. Their software is well-liked and it’s free.

FreshBooks: Best for Bookkeepers

FreshBooks is our best accounting software for bookkeepers because that is the audience their software is designed for, and they provide a number of great features self-employed business owners will use and appreciate. FreshBooks offers software that will help you track your time, invoice your clients, and keep track of all appropriate business expenses so that tax time becomes easier.

Here’s a more detailed breakdown of FreshBooks’ accounting software:

Pricing: $15 to $50 per month for up to 500 billable clients, custom pricing for more than that
Ease of Use: Easy to use for bookkeepers with many clients but can be more difficult than other options on this list
Self-Employed Features: Accept payments, unlimited time tracking, reports for tax obligations, send estimates, track receipts
Free Trial: Free for 30 days
Add-Ons: Freshbooks offers most features included in their price but can integrate with leading payroll providers if needed

Customers online rate FreshBooks as average to use and below average when it comes to their customer support team. This is a middle-of-the-road solution that is best used by the very niche group of bookkeepers or other small business owners who have billable clients.

Zoho Books: Best for Very Small Businesses

Zoho Books is best for very small businesses to use because they seamlessly work with the other affordable software that Zoho also makes. Zoho does not offer a specialized option for self-employed business owners, but their accounting software can do most things that the other reviewed products can do. If you need to save money on your entire software package from accounting to CRM, then this could be the best option for you.

Here’s a more detailed breakdown of Zoho’s accounting software:

Pricing: $9 to $29 per month
Ease of Use: Zoho is one of the more difficult options to use and generally presents a bit of a learning curve for inexperienced accounting users
Self-Employed Features: Time tracking, invoice management
Free Trial: Free for 14 days
Add-Ons: Zoho CRM, Inventory, Projects, and more

Zoho has a low customer rating online, with reviews claiming their product is difficult to use and telling of bad experiences with their customer support team. Zoho Books isn’t one of the best options with the exception of small business owners who need an all-in-one solution with an easy-to-integrate CRM and help desk software offerings.

OneUp: Best for Small Sales Teams

OneUp

OneUp offers accounting software that integrates a free CRM and invoicing option, which is why we chose it as the best option for small sales teams. OneUp has a mobile-first solution that many self-employed business owners who are constantly on the go will love, and you can close your books in as little as a single minute. The only drawback is that, while it’s a great business option, the software doesn’t focus on some of the most important features for the self-employed, such as calculating quarterly tax obligations.

Here’s a more detailed breakdown of OneUp’s accounting software:

Pricing: $9 to $169 per month, based on the number of users
Ease of Use: Easy, mobile-first software that inexperienced accounting users will love
Self-Employed Features: Invoice management, bank automation
Free Trial: Free for 30 days
Add-Ons: None, but can integrate with many leading software options in the POS, CRM, and payroll spaces

OneUp has one of the best customer review ratings of all the options on our list. When the automation features work, customers seem very pleased with the software. Customers also like their interactions with the customer support team overall. This is a solid option that’s a good fit if you need an integrated CRM.

What Is Accounting Software for Self-Employed Business Owners?

Accounting software helps self-employed business owners abide by all of their tax obligations while also giving them detailed financial data that can help them run an efficient business. Self-employed business owners have unique needs for account software because it’s so important for them to keep their business finances separate from their personal finances. The way in which they pay themselves and account for these payments via their accounting software will dictate whether or not they are in compliance with various tax rules.

We asked an expert about the ways that accounting for self-employed businesses differs. “The major difference is that, as a self-employed individual, you are the business. As such, there is often a thin line between personal and business expenses. The advantage here is that a lot of personal expenses are able to be deducted. The downside is that, since every business is different, there's no clear-cut rule that says you can deduct this and not deduct that,” says R.J. Weiss, Certified Financial Planner & Founder, The Ways to Wealth.

Why Do Self-Employed People Need Accounting Software?

Self-employed individuals need accounting software for many of the same reasons any business needs it, to manage and keep track of the finances of their business. However, self-employed individuals also have an extra responsibility to make sure their personal finances are separate from their business finances or they could find themselves putting their personal assets at risk. So the right accounting software is even more important for someone who is self-employed.

Depending on how your business is structured and what your tax treatment is, there will be certain tax rules that you’ll need to follow. Most self-employed business owners end up paying a self-employment tax. Proper accounting is important to make sure that all tax laws are followed. Accounting software can automate most financial obligations for the business owner.

How Much Does Accounting Software Cost?

Accounting software for self-employed business owners costs about the same as regular accounting software for small businesses. Proces range from $5 to $100 per month. Some software has specific solutions for self-employed business owners, which are often cheaper than many of the other business accounting plans.

These specialized plans will help you organize receipts and keep track of miles or other expenses, estimate your quarterly taxes, and invoice or accept payments from customers. The best accounting software typically requires a monthly or yearly subscription so that you’ll be eligible to receive any updates the software requires.

How Is Accounting Software Different for the Self-Employed?

Accounting software is very similar for all types of businesses, regardless of whether you’re a self-employed business owner or not. You’ll still need to book journal entries, keep track of business expenses, and make sure you know the level of profitability of your business. The major differences for self-employed business owners are almost entirely tax-related. You’ll end up paying a different type of tax if you are required to pay the self-employment tax, and you’ll have different deduction opportunities. How your business is structured legally will determine what your obligations are.

We asked a CEO of a small business for his recommendation on the tax situation for small business owners, what’s different, and what he recommends to help you navigate these waters.

“It's really going to come down to how you file. If you're filing as an S-Corp, you'll file differently than you will as someone who's self-employed without an LLC. That said, I strongly recommend anyone who runs their own self-employed business look into incorporating it and filing as a business entity rather than an individual. You'll get a lot more in the way of tax breaks and write-offs. If you're filing as an individual, I recommend at least using software for it, which is what I did. My software helped me get together quarterly taxes, and I was able to keep track of business expenses and cash in/out without much issue,” says Rex Freiberger, CEO of Discuss Diets.

How We Chose the Best Accounting Software for Self-Employed Business Owners

We looked at over 15 of the leading accounting software options available on the market today and narrowed our list down to the top six. The most important features for self-employed business owners include ease of use, pricing, customer reviews, self-employed options, and how the software calculates taxes. The ideal software will automate as much as possible for the business owner.

Article Sources

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