Best accounting software for startups

*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.

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)

• 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!!

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.