Best accounting software for startups

I’m a leading startup-focused CPA, and my team has worked with many accounting software systems - QuickBooks is the best option for startups. 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:

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Vanessa Kruze, CPA
VANESSA KRUZE, CPA
KRUZE CONSULTING FOUNDER
  • QuickBooks Online: there’s a reason why Intuit is the market leader. They’ve taken the time to build software that works for nearly every kind of startup. Start with QuickBooks Online. Our clients can go straight from QBO to an enterprise solution like Netsuite when they get big enough. Plus, every accountant worth their salt knows how to use QBO, so you can hire, fire, outsource, insource, etc. to your heart’s content. 
  • QuickBooks Desktop: QuickBooks Desktop used to be the place to go when QBO couldn’t handle your business. Perhaps if you are an ecom or hardware business with a ton of inventory the desktop version MIGHT make sense, but these days the desktop version is just too clunky and out-dated to make sense for a legit startup business’ accounting needs. 
  • NetSuite: is a great option, but complete overkill for a startup. Too pricey, and implimentation can be a huge expense and pain. But consider this once you’re doing really high volume, high complexity transactions. (for example, 200+ FTEs and/or $20M+ annual revenue). Got international sub’s that you need to consolidate? Check out NetSuite. 
  • Freshbooks: may be able to handle very early stage startup accounting needs, but will not be able to grow with you as the volume and complexity of transactions increases. Great for sole-proprietors.
  • Wave: may be able to handle very early stage startup accounting needs, but will not be able to grow with you as the volume and complexity of transactions increases. Great for sole-proprietors.
  • Xero: I applaud Xero for a) putting a fire under Intuit’s bum and getting them to revamp some of their older systems and b) marketing themselves as the new and sexy accounting software (it’s working). But there’s still key functionality that’s missing that makes it more time consuming to use. We are well versed in Xero and we do use it in our practice… but only after expressly telling our clients about said missing features that make using Xero more difficult.

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’s why we use QuickBooks for pretty much 100% of our 700+ startup clients. It’s also important to us an online accounting software so you don’t need a bookkeeper to come to  your offices every month to do your books. 

Comparing the best startup accounting software

  QuickBooks NetSuite FreshBooks Wave Xero
Startup Solution Seed - Series C Series B+ Not a fit Not a fit Seed - Series B in Australia
Recurring Cost

$40+ per month

Get 50% off for 12 months here

$12k - $30k per year ~$360 per year $0 $33 per month
Implementation Cost* $0 $30k+ $0 $0 $0
Good for VC Backed Startups Best Good for later stage Not a fit Not a fit Good
Fit for Solo Entrepreneurs Yes No Yes Yes Yes

*Assumes your books are in order

QuickBooks also has a decent API, which many 3rd party software companies have integrated with. This means information from payroll like Gusto and Rippling, or bill pay solutions like Bill.com can flow directly into your accounting system, making your startup’s bookkeeping much, much easier. Forward thinking accounting firms like Kruze have development teams, and our development team has built proprietary software that integrates directly with QuickBooks via their API. We use technology to automate manual process (which saves our clients money!) and provide customized dashboards and better bookkeeping services. 

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 scaleability. VC backed companies can hire and grow expenses at an exponential rate. So you need an accounting software that can handle the growth with automation - and this is where QuickBooks Online excels; with many, many APIs, bank feeds, etc. a huge percent of the manual data entry can be done automatically.

Secondly, you need an industry-standard system that pretty much any accountant or CPA can use. This is because early-stage companies often start by doing their books themselves, then hire an outsourced provider like Kruze, then start to get big enough to bring that work in house - and eventually, switch to and ERP and/or get an audit by a Big 4 accounting firm (or if you get acquired you’ll need to merge your books into the acquiring company’s). All of those finance professionals need to be able to use the system, and that’s why QuickBooks is the best accounting software if you are an early-stage company - everyone you hire will be able to use it.

Third, as we just mentioned, you may eventually need to “upgrade” to an enterprise level system as you get ready to go public. The path from QBO to enterprise system is well understood, and most major ERPs can more or less deal with incoming data form QBO. 

Fourth, you need to own your company’s bookkeeping data. It needs to reside in a system that will work and always be yours, regardless of who is doing the bookkeeping work. Some bookkeeping tech companies have built their own accounting software, which means your data is stuck in their system. You don’t want that! You should also be careful of bookkeeping tech companies that use a ton of proprietary “connections” that sit in between QBO and your other systems, as this makes it harder for you to leave their system (and anyway, most of these 3rd party systems have direct integrations with QuickBooks, so just use those!!)

Fifth, you are going to have to do tax reporting, and QBO makes this super efficient and easy. You didn’t startup a business to deal with tax paperwork, so get a system that deals with most of the busy work people!

Finally, and very imporantly, the best early-stage founders love data. And financial data is one of the top sources of information on how your company is doing. Your burn rate, revenue, cash flows, etc. - you’ll want to track all of these carefully. Plus, you’ll want the standard outputs like Income Statements and Balance Sheets for your venture capital investors. QBO has these built off the shelf, so it’s easy to gather the data you want - and you can customize reports as well. 

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 with 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

Alternatives to QuickBooks Online

By now, it should be clear that we are big fans of QuickBooks Online, and think that it is the best accounting software for VC backed startups. But, if want to consider other solutions, our COO, Scott Orn, breaks down the alternatives.

Here is the macro list:

  1. QuickBooks Desktop
  2. Xero
  3. NetSuite
  4. FreshBooks
  5. Accounting Seed
  6. Microsoft Excel or Google Sheets

There are very few startups that are still using QuickBooks Desktop. There are some companies that have inventory that do use QuickBooks Desktop, but a lot of the plugins that handle inventory are progressing pretty rapidly for the QuickBooks Online Ecosystem. So even that’s starting to change. But there are a couple of people who don’t want to use QuickBooks. And, personally and at Kruze we think QuickBooks is the superior piece of accounting software in the industry. And there’s a few reasons why. It’s really industrial-strength, great security, and very, very rarely goes down. It also has a huge ecosystem of other pieces of software that integrate into QuickBooks. And, Intuit has made a lot of progress on the APIs, even Kruze like we’ve built a bunch of software internally that automatically categorizes transactions and pulls financial reports automatically. It does just a ton of other stuff.

And so even we - little old Kruze Consulting with seven software developers is able to take advantage of the QuickBooks Ecosystem and QuickBooks API structure. And then most importantly, you just don’t have those glitches, like data disappearing or numbers disappearing or things like that. And I think also your startup is innovating and doing something, building some new technology or discovering a new drug or something like that, you probably shouldn’t be experimenting with stuff that isn’t industry standard. Sometimes we’ll have startup founders come to us using a free accounting software or something that’s not standard.

And we have to remind these clients that the best accountants use QuickBooks - and you want to work with the best accountants if you are raising millions of dollars. You don’t want to work with someone who’s willing to take a shot on a strange software that isn’t industry standard - that means that they may be using some software that they do not really know. There’s a lot of inherent knowledge in the accounting industry especially at Kruze around QuickBooks, so be careful.

But these are some of the alternatives. Xero is probably the number one alternative for the smaller company segment. And Xero started in New Zealand it’s actually a great company. I actually own stock in Xero. They are very, very strong in Australia and New Zealand, Asia, and some in the UK. And Xero was really the first cloud accounting software like truly cloud and that was a huge innovation. Actually, when Vanessa first started going to Kruze and I joined Kruze a couple of years later, we did do some Xero work. Sadly, we’ve never really been able to get a direct response to this, but it feels like there’s different versions of Xero. And the United States version just doesn’t feel like it has quite the horsepower, we’ve even had issues where data did disappear and that was a few years ago. I think Xero’s gotten significantly better. They’ve been investing in the product and making it better. They do have very good APIs. That is a strength of Xero. They were a real leader in that before QuickBooks got their act together.

But again, a lot of companies that come to us that are maybe from Asia, Australia or UK are oftentimes use Xero. It’s fine for something like a five-person company but I’d recommend switching to QuickBooks eventually. The other big alternative is NetSuite. NetSuite is a very powerful software more of an enterprise software. So we typically have clients going from QuickBooks Online to NetSuite when they hit $10, $15 million in revenue. Anything below that NetSuite is really overkill and really expensive and a major time sink for the companies.

And so we typically recommend QuickBooks up to that point. We have probably, have 5% of our client base on NetSuite, we’re very familiar with it. It is very powerful. One of the areas that NetSuite really excels for our client base is international consolidations. Like if you have a subsidiary in another country, that’s difficult to do with QuickBooks, you have to basically do a manual Excel, Google sheet consolidation. That means putting the two companies, the parent company and the subsidiary companies financials together. You have to do that through Excel. And that’s a lot of work. It’s not very easy. There’s currency problems. NetSuite makes that very, very easy. So, eventually, the companies get so complicated that it’s time for them to switch to NetSuite.

Now I do have to give QuickBooks Online some props here because they have been, it’s so much more reliable and so much faster and way more powerful that QuickBooks keeps pushing the window. When we first started Kruze five years ago probably would have been like a $5 million company, should have switched to NetSuite. Now it’s like a $10, $15, $20 million company. So QuickBooks is getting stronger but NetSuite is the gold standard for that late-stage startup, that’s got a full-on big finance team internally.

Now there’s a few other software companies like FreshBooks which is really great for independent contractors or super small businesses. It’s basically, it’s mostly, it started its life as an invoicing solution. And I actually worked with FreshBooks way back in the day before Kruze Consulting. Great company, great management team, huge commitment to customer service. They’re famous for only letting the phone ring one time before someone picks it up. So if you’re looking for that great customer service and you’re a very small company maybe an independent contractor, FreshBooks can really work for you. Wave was another company we saw a little bit of back in the day, it’s been quiet on the Wave front now, but they actually entered the market as being free and then tried to monetize through some other avenues which actually works for them. I believe they were acquired, I have to confirm that, but they had a good exit, but it wasn’t quite as powerful as QuickBooks. It’s never been a breakout success that would make it the industry standard of the best accounting software for funded companies.

There’s another company called Accounting Seed which is based on Salesforce, which I’ve seen once or twice. This is one of those things where if you’re using Accounting Seed, it probably works but you’re probably also probably limiting your pool of exceptional accountants that you can work with. So just be aware of that. It is built on top of Salesforce. It seems like a perfectly fine alternative. I haven’t used it that much.

And then the old, age-old Excel/Google Sheets accounting system that always scares us when we see founders using it. And one of the reasons for that is it’s difficult is that it’s not really double entry. It’s like it, those Excel or Google Sheets can work on a cash basis, but it’s basically your income statement and then maybe a cash line item at the bottom. But it’s very hard to produce an income statement, balance sheet, cash flow statement and have everything reconciled. Like reconciling bank statements and bank accounts inside of an Excel sheet is just torture.

And, for those who don’t know reconciling basically means comparing what’s in the accounting system, like those numbers and those transactions, against what is in the bank PDF statement. The bank PDF statement never lies. That is ironclad, this is what happened, cash going in and out of the bank. In a accounting system, you can create, through journal entries and other things, other adjusting transactions, but eventually, everything needs to tie back to cash. And so you really no matter which one of these accounting systems you are using, you really want to tie it every month, your cash to do a reconciliation, your accounts to the bank statement that’s critically important. That’s how you find employee theft. That’s how you find weird stuff going on or incorrect revenue numbers, or things like that. So take it from me, do those reconciliations. I don’t recommend doing that in Excel or Google Sheets that is almost impossible.

There are some good alternatives to QuickBooks. We’re still a QuickBooks oriented firm ourselves because we just think it’s the best. And again, we’ve written a bunch of software on our own that interacts with QuickBooks. And so it saves us a tremendous amount of time by auto categorizing, auto labeling - there’s just a lot of benefits to being in the QuickBooks Ecosystem. QuickBooks Online is like the Salesforce of CRMs. There are other CRMs that are perfectly fine and good but if you’re going to be doing this you want to use the best in class. So hope that helps you. If you have any questions hit us up at kruzeconsulting.com, thanks.

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?

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 get bigger and roll out an ERP system, they will “upgrade” to an enterprise quality accounting system (like Netsuite, which we mention above), which has increased 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 the cost of QBO. However, here are the signs that it’s time to make the switch:

  1. You are on track to have over 100 employees within the next 6 months
  2. You are going to have $10M+ in Annual Recurring Revenue within the next 6 months
  3. Your company has over six domestic or 2 international subsidiaries (or an international parent and another international sub)
  4. 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 if 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 OBO, and you’ll get all the benefits of an online/SaaS accounting software - available anywhere, easy to share, great connections with banks etc. So we strongly recommend you use QBO instead of the desktop version for your startup’s accounting software. 

 

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

After you set up your accounting software, it’s important to reconcile your bank account vs what’s in your accounting system. Now,  this is super important.  The bank balance account never lies.  The bank accounts where all the transactions actually happen. The bank is the official record of your bookkeeping and accounting transactions - at least those that impact your cash position. 

The best accounting software, like QuickBooks Online, has direct API connections into your bank account. You enter in your username and password, and the accounting software grabs all the financial transactions.

Then, you can match all of the transactions in your bank account against what’s in the accountant software. It’s this nice little 
clearinghouse in what accountants call “reconciling”. 

The thing about accounting software is that you can manually create entries - they are called “journal entries.” This means that you could actually make transactions up out of thin air. 

But if you reconcile them and actually match them against bank transactions, you can’t make something up - your accounting data and system become reliable.  A  good example of why is it so important is sometimes people might put fake revenue transactions or fake expenses or make journal entries to cover up expenses so that no one could see them. But if you’ve compared your entries against the bank feed, you are much less likely to have fraud. So, reconciling cash is your way to detect fraud. 

We do this at Kruze for our clients, and if you are using the software to do DIY your accounting, you should to. 

To reconcile in QuickBooks Online, look on the left side of the screen at the navigation, and click on Accounting. You should see a Reconcile button pop up. 

What is the Best Accounting Software for Shopify Sellers/

We work with a lot of ecommerce companies, and many are 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 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.

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A CPA Firm Specialized in Startup Accounting & Finance

A CPA Firm Specialized in Startup Accounting & Finance

Startups are our niche, and our passion. Our clients have raised over $10 billion in venture capital financing. We are one of only a few outsourced accounting firms that specialize in funded early-stage companies - we only offer financial and tax services to fast growing startups in the Seed, Series A, Series B and Series C stages.

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Startup CFO services, startup accounting and bookkeeping services, startup annual taxes, expense reports, payroll, benefits: we've got you covered. Our software provides custom tailored dashboards that can be provided weekly or monthly, depending on your preference and plan. Founders are often so busy building their company that they don’t have time to take care of their finances. Traditionally, these companies have had to work with a basket of people to get their work done, including bookkeepers, accountants, AP clerks, CFOs, consultants, and tax accountants. At Kruze Consulting, our founders have one point person, saving time and money.

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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. Unless these handful of transactions are massive dollar amounts - if that’s the case, a 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 will reduce the likelyhood of fraud. 

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