Best accounting software for startups

The best accounting software for startups is QuickBooks Online. It’s the industry standard every CPA can use; it scales cleanly from Pre-Seed through Series C; and it has the deepest integrations with the banks, payroll, and expense tools funded startups run on. Kruze Consulting runs QuickBooks Online for the large majority of our startup clients.

My team has helped over a thousand early-stage startups set up their financial systems. Here’s my overview of the best accounting software options on the market today.

Best Startup Accounting Software

We are CPAs who have used half a dozen different accounting software systems (and some horrific spreadsheets too!). These are the ones to consider today.

• QuickBooks Online: There’s a reason why Intuit is the market leader. They’ve built software that works for nearly every kind of startup, and clients can move straight from QBO to an enterprise solution like NetSuite when they get big enough. Every accountant worth their salt knows QBO, so you can hire, outsource, or bring bookkeeping in-house without switching systems. Start with QuickBooks Online.
• QuickBooks Desktop: Used to be the fallback when QBO couldn’t handle a business. If you are an ecommerce or hardware company with heavy inventory, the desktop version MIGHT make sense, but these days it is too clunky and dated for most funded startups.
• NetSuite: A great option, but overkill for most startups. Pricey, and implementation is a real expense. Consider it once you are running high-volume, high-complexity transactions (for example: 200+ FTEs and/or $20M+ annual revenue), or when you need to consolidate international subsidiaries.
• FreshBooks: Can handle very early-stage needs, but will not be able to grow with you as volume and complexity increase. Great for sole proprietors, especially with their built-in invoicing.
• Wave: Can handle very early-stage needs, but will not be able to grow with you as volume and complexity increase. Great for sole proprietors.
• Xero: Credit to Xero for pushing Intuit to modernize, and for marketing itself as the new, cleaner accounting software option. Key functionality is still missing that makes it more time-consuming to use. We know Xero well and use it in our practice, but only after telling clients about those gaps.
• Zoho Accounting: Fine in India or the UK, but not the fit in the US. Few US accountants know it, and it lacks the clean upgrade path to NetSuite that a VC-backed company heading toward an audit or IPO will eventually need.

I want my bookkeeping done as accurately, quickly, and efficiently as possible so that I can spend my time on higher “value add” activities. That is why we run QuickBooks Online for the large majority of our 800+ startup clients.

You’ll notice that we only discuss cloud accounting software. If it isn’t available online, it isn’t a great solution for early-stage startups today. The founders we work with are always on the move, so you and your accountant need to be able to log into your books from anywhere. Get an online solution, like QBO.

Comparing the best startup accounting software

*Assumes your books are in order

QuickBooks Online also has a solid API that many third-party tools integrate with, so data from payroll (Gusto, Rippling), bill pay (Bill.com), and expense/corporate card tools (Brex, Ramp) can flow straight into your books. Kruze Consulting has an in-house development team that has built proprietary software that integrates directly with QuickBooks via its API, automating manual work and lowering costs for our clients.

So, if you are asking the question:

How to pick the best accounting software for your startup

VC backed, early-stage companies have very different fintech needs than traditional SMBs. When choosing an accounting system, the most important thing to think about is scalability, because funded companies add headcount and expenses fast. QuickBooks Online handles that growth with APIs and bank feeds that automate most of the manual data entry. Second, you need an industry-standard system any accountant or CPA can use. Early-stage companies usually start out doing their own books, hire an outsourced provider like Kruze Consulting, then bring the work in-house before switching to an ERP or facing a Big 4 audit (and if you get acquired, you will merge your books into the acquirer’s). Every one of those finance professionals needs to work in the same system, and with QuickBooks Online, everyone you hire can already use it.

Third, you may eventually upgrade to an enterprise system as you head toward an IPO. The path from QBO to an enterprise system is well understood, and most major ERPs can more or less handle incoming data from QBO.

Fourth, you need to own your company’s bookkeeping data, and it should stay yours no matter who does the work. Some bookkeeping tech companies run their own proprietary software, which means your data is stuck in their system, and leaving is difficult. Insist on a standard platform like QuickBooks Online, where the third-party tools you use integrate directly, and your data stays portable.

Fifth, you will have to file taxes, and QBO makes this reporting straightforward. You didn’t start a business to deal with tax paperwork, so pick a system that handles the busywork for you.

Finally, the best founders run on data, and your financials are the clearest read on how the company is doing. You want to track burn rate, revenue, and cash flow closely, and hand investors clean income statements and balance sheets. QuickBooks Online produces those reports off the shelf and lets you customize them, so it’s easy to gather the data you need.

The Systems your Accounting Software NEEDS to Integrate with

Your startup’s accounting software is only as good as its integrations (and the accountant using the software, of course). QuickBooks leads the industry in integrations into important systems - only choose accounting software that integrates with your startup’s other financial systems such as:

• Bank
• Payroll
• Credit Cards
• International Payroll systems
• Bill pay / Expense management software
• Revenue systems (potentially)

Which accounting software do most startups use?

• QuickBooks Online - by far the market leader in the US (for good reason!)
• Xero - low cost, flexible, less popular in the US than abroad
• NetSuite - after you hire a VP of Finance + internal accounting team
• FreshBooks - good for solo entrepreneurs, not companies
• Wave - low cost, but mainly for small businesses, not funded startups
• Zoho Accounting - only popular in India, but quite popular in India!!

Alternatives to QuickBooks Online

By now, it’s clear we’re big fans of QuickBooks Online, and think it’s the best accounting software for VC-backed startups. If you want to weigh other options, here’s the short list:

• QuickBooks Desktop
• Xero
• NetSuite
• FreshBooks
• Accounting Seed
• Microsoft Excel or Google Sheets.

Very few startups still run QuickBooks Desktop. The inventory plugins that once justified it are moving fast into the QuickBooks Online ecosystem, so even that use case is closing. QuickBooks Online is industrial-strength. It has strong security, is rarely down, and has a deep ecosystem of tools that integrate with it.

Intuit has invested heavily in its APIs, which is what let a firm our size build software that auto-categorizes transactions and pulls reports automatically. That same infrastructure is why you avoid the glitches of lesser tools, where transactions or balances quietly disappear. Your startup should be experimenting on its product, not on non-standard accounting software.

The best accountants use QuickBooks, and if you are raising millions, you want the best accountants. An accountant using unfamiliar software is risky because they may not truly know the system your books live in.

Xero:

Xero is the top alternative for smaller companies and is strong in Australia, New Zealand, Asia, and the UK. It was one of the first genuinely cloud accounting platforms and has very good APIs. The US version has historically felt less powerful, though Xero has invested in the product and improved it. It works for a five-person company, but we would recommend moving to QuickBooks Online eventually.

Netsuite:

NetSuite is enterprise-grade and the gold standard for late-stage startups with a full internal finance team. Companies typically move from QuickBooks Online to NetSuite around $10M to $15M in revenue; below that, it is expensive overkill. Where it earns its cost is international consolidations: combining a parent and foreign subsidiary in QuickBooks means manual spreadsheet work and currency headaches, and NetSuite handles that cleanly.

Credit to QuickBooks Online here, because it keeps getting more reliable and more powerful. A few years ago, a $5M company might have needed NetSuite; now that threshold is closer to $10M to $20M.

FreshBooks and Wave

FreshBooks started as an invoicing tool and is great for independent contractors and very small businesses, with a strong reputation for customer service. Wave entered the market free and monetized through other services, and while it had a solid exit, it never became powerful enough to be the standard for funded companies.

Accounting Seed

Accounting Seed is built on Salesforce and is a workable option. The tradeoff is a smaller pool of accountants who know it, so factor that in before committing.

Excel and Google Sheets

Spreadsheets worry us whenever we see founders relying on them, because they are not true double-entry systems. You can track a basic income statement, but producing a reconciled income statement, balance sheet, and cash flow statement is extremely hard, and monthly bank reconciliation in a spreadsheet is close to impossible.

Reconciling means matching the transactions in your accounting system against your bank record, which is the one source that cannot be faked. Everything has to tie back to cash eventually, and reconciling every month is how you catch employee theft, wrong revenue, and other problems. This is one of the strongest reasons to run real accounting software rather than a spreadsheet.

QuickBooks Online Pros and Cons

PROS

Pros

• Cloud-based, allowing easy access from anywhere with an internet connection
• Integrates with many other business apps and services commonly used by startups
• Provides features like invoicing, expense tracking, and financial reporting
• Scalable plans to accommodate growth as the startup expands
• Allows adding multiple users with different access permissions
• Regularly updated and improved with new features and security measures
• Affordable monthly subscription model with no large upfront cost

CONS

Cons

• May lack some advanced accounting features needed as the startup becomes more complex
• Customization options can be limited compared to more robust accounting software
• Not specialized for any particular industry (like ecommerce, SaaS, etc.)
• As a general rather than startup-specific tool, may lack some desired integrations
• Customer support is not always the most responsive
• Requires some training or coaching to really understand how to use it
• Pricing can get expensive as more features and users are added

Web3 and Crypto Accounting Software

Startups working in or with Web3/Web 3.0, NFTs, Distributed Finance, etc. need an additional piece of fintech infrastructure to process their accounting efficiently and correctly. Our review of the Best Crypto Accounting Software explains what to look for, but the basic premise is that startups need to automatically connect their crypto transactions into their accounting software so transactions can be correctly booked and recorded.

Our general rule is that a handful of transactions a month can probably be handled manually using journal entries. That’s unless these handful of transactions are massive dollar amounts. If that’s the case, software that can pull the data directly into the GL is a very good idea. This will prevent bookkeeping errors from causing incorrect swings in the financial statements, and reduce the likelihood of fraud.

Best Accounting Software for Startups FAQ

Here are some of the most frequently asked questions startup founders ask us about accounting software.

• What’s the difference between bookkeeping software and accounting software?
• When should a company upgrade from QuickBooks to NetSuite?
• Should you move from QuickBooks Desktop to QuickBooks Online?
• Why Tech Startups Should Reconcile Their Bank Account in their Accounting Software
• What is the Best Accounting Software for Shopify Sellers
• Is your accountant giving you QuickBooks access?
• What Features to Look For
• What Do People Use for Startup Accounting

What’s the difference between bookkeeping software and accounting software?

For an early-stage startup, bookkeeping software and accounting software are the same thing – and our advice is that the top bookkeeping software for a funded startup is QuickBooks Online. As companies grow, and roll out an ERP system, they will upgrade to an enterprise-quality accounting system (like NetSuite, which we mention above), which has functionality beyond just keeping the books clean and doing the monthly close.

When should a company upgrade from QuickBooks to NetSuite?

QuickBooks Online has become surprisingly robust for larger and larger companies; however, if your business is growing quickly, you will inevitably reach a point where it’s time to step up to a solution like NetSuite. Stepping up isn’t for the faint of heart. Implementations can be a pain, and the cost is many multiples of QBO. However, here are the signs that it’s time to make the switch:

• You are on track to have over 100 employees within the next 6 months
• You are going to have $10M+ in Annual Recurring Revenue within the next 6 months
• Your company has over six domestic or 2 international subsidiaries (or an international parent and another international sub)
• 50% of any of the criteria above PLUS you are in a highly complex/regulated industry like FinTech, eCommerce (yeah, state taxes), etc.

You can read our article on whether an upgrade to an ERP system from your accounting software makes sense.

Should you move from QuickBooks Desktop to QuickBooks Online?

Yes! We recommend you convert from QuickBooks Desktop to QuickBooks Online.

It’s easy to convert from desktop to QBO, and you’ll get all the benefits of an online/SaaS accounting software: Available anywhere, easy to share, great connections with banks, etc. We strongly recommend using QBO instead of the desktop version for your startup’s accounting software.

 

Why Tech Startups Should Reconcile Their Bank Account in their Accounting Software

Reconciling means matching every transaction in your accounting software against your bank record, which is the one source that cannot be faked. Journal entries let anyone invent transactions, so reconciling to the bank each month is how you keep the books reliable and catch fraud, theft, or wrong revenue. Kruze Consulting reconciles cash monthly for every client, and you should too if you keep your own books.

To reconcile in QuickBooks Online, open Accounting in the left navigation and click Reconcile to start.

What is the Best Accounting Software for Shopify Sellers

We work with many eCommerce companies built on the Shopify tech stack. We’ve found that QuickBooks Online is the best accounting software for Shopify sellers.

Xero is a decent option, but it’s not as robust and doesn’t have as many plugins and direct integrations as QBO.

Finally, QuickBooks Desktop is an OK option for companies with a lot of inventory, but the world is moving away from desktop software, so it’s hard to recommend.

Is your accountant giving you QuickBooks access?

At Kruze, we’ve noticed that when new startup clients come to us, sometimes their previous accountant hasn’t given them access to their QuickBooks account. That usually means one of two things:

• The accountant doesn’t want to be scrutinized, because they haven’t done a very good job.
• The accountant thinks that restricting your access to your financial data will make sure you keep working with them.

Either case is a red flag. Your accountant should be happy to have their work reviewed, and if they’re doing a good job, they shouldn’t be trying to hold your information “hostage.” Make sure you have access to your QuickBooks!

What Features to Look For

If you are going to run a metrics-driven startup, your accounting software needs certain, standard features. Here are some of the top features to look for when evaluating providers:

• Scalability and performance to handle increased transaction volume
• Used by many CPAs and professionals (so you can switch accountants easily)
• Upgradeable into an ERP system (when your startup gets big)
• Data portability (own your accounting data!)
• Financial tracking and reporting (metrics-driven founders perform better)
• Integration with banks, credit cards, 3rd-party payroll and other fintech systems
• Accounts payable and receivable management
• Bank reconciliation
• Expense tracking and reimbursement
• Invoicing and billing
• Payment processing and integrations
• Chart of accounts and general ledger (both standardized and customizable)
• Solid user permissions, security, privacy, and access controls
• Audit trails and compliance
• Dedicated customer support (maybe not QBO’s forte, tbh)

What Do People Use for Startup Accounting

In our experience as CPAs who have helped hundreds of startups set up their accounting software and systems, QuickBooks Online is the best software founders use to manage their books and financial metrics. It’s the go-to solution for its ease of use, flexibility, and scalability, and the APIs allow easy integration of data from banks and other financial systems. QuickBooks Online doesn’t just keep your books tidy; it also gives you a clear view of your financial health, which is crucial for making informed decisions as you navigate your startup journey.

Lower-cost options that may work for people who are focused on service businesses, agencies, and other traditional small businesses. FreshBooks and Wave offer a cost-effective way to manage your finances. Xero, which has a lot of the functionality of QBO and is very popular outside of the US.