What to look for in free accounting software

This article was paid for by Intuit QuickBooks.

Many small business owners start out by managing their finances manually: According to the Intuit QuickBooks Small Business Insights survey from July, more than half of entrepreneurs use spreadsheets to record and manage transactions, and close to a third still rely on pen and paper.

That might work if you're a solo operation with only a few transactions per month, but as your revenue, expenses and customer base grow, you'll likely need accounting software to maintain a clear picture of how your business is performing.

If you're a new business owner and not quite ready to take on another monthly expense, though, free accounting software can help. The new QuickBooks Free platform, for example, offers essential tools to manage revenue and expenses.

Here's what to look for when evaluating free accounting software.

Accounting software should make it simple to record and categorize the money flowing in and out of your business.

Tracking revenue and expenses can help you see spending trends, understand where you can make adjustments and determine whether your business is profitable. Organized records will also make tax season easier.

Look for software that lets you connect your business bank account and sync transactions.

QuickBooks Free lets you link one financial institution and automatically import and organize transactions, saving time and reducing the risk of errors.

Getting paid on time is critical, especially if you have narrow profit margins. But 59% of small business owners report waiting more than 30 days for invoices to be paid, according to the QuickBooks Small Business Insights survey.

To help keep payments on track, free software should make it easy to create and send invoices and reminders, track invoice statuses and accept payments online.

Check how many invoices you can send with a free platform you're considering and what the fees are for processing payments.

QuickBooks Free lets you send up to two customized invoices per month with a link that clients can use to send payment via PayPal, Venmo, Apple Pay, ACH bank transfer or credit or debit card. There is a 2.99% processing fee for card and digital-wallet payments and a 1% charge for ACH payments.

Your bank account doesn't give you the complete picture of your business's financial health. That's where financial reports can help: QuickBooks Free allows users to generate profit and loss statements, balance sheets and QuickReports.

A quick report gives you a snapshot of your business's financial activity without requiring you to start from scratch. You can use it to quickly review income, expenses, profit and loss, outstanding invoices and cash flow, and identify areas that may need attention.

Before choosing a free accounting software platform, find out which reports are included and how easy they are to generate. 

Saving time is one of the biggest reasons for growing businesses to move beyond spreadsheets. Roughly two-thirds of small business owners polled in the QuickBooks Small Business Insights survey said greater efficiency was the top benefit of using digital accounting tools.

Consider which repetitive tasks take up time and lead to recordkeeping mistakes, and look for software that can handle them.

QuickBooks Free lets you take snapshots and categorize two receipts and track mileage for up to five business trips per month.

Free software isn't a good value if it's too complicated to use. QuickBooks Free is designed to help solo business owners easily stay on top of basic bookkeeping — the setup process includes a step-by-step guide, and Intuit says users can get started in about five minutes.

The streamlined dashboard provides a snapshot of income, expenses, account balances and other key information, along with shortcuts to common tasks.

The web and mobile versions sync in real time, so information entered in one automatically appears in the other.

QuickBooks Free users also get access to self-service resources, including help articles and community forums, where they can ask questions and find answers from other users and QuickBooks experts.

Accounting software contains sensitive financial information, so only consider a platform with strong security measures like encryption, secure bank connections, authentication and automatic data backups.

QuickBooks Free uses QuickBooks Online's security infrastructure, including encrypted connections, read-only bank-data connections and automatic cloud backups. 

Beyond the tools included with free accounting software, it's important to understand the plan's payment policy. Some companies offer free trials that automatically convert to paid subscriptions after a few weeks, while others tack on hidden fees for certain features.

When reviewing your options, check whether free access is only for a limited time, whether you need to provide payment information and which features have monthly limits. Pay attention to restrictions on users, bank connections, invoices and reports.

QuickBooks Free is always free and never requires a credit card. It's designed for one user and has clearly stated limits on features and connected accounts. That makes it easier to determine whether the free plan meets your needs or if you want to upgrade to a paid QuickBooks Online plan.

As your business grows, you may need to add more users or employees, track additional expenses, generate extra detailed reports or give an accountant access to your accounts. You may eventually want tools for budgeting, inventory, project profitability and other specialized tasks.

If your free accounting software isn't linked to a broader platform with more robust tools, you could soon reach its limits and need to find a completely new solution.

QuickBooks Free is designed to provide a seamless path to QuickBooks Online. If you outgrow the no-cost platform, you can upgrade within the QuickBooks ecosystem and your existing data and setup can carry over, rather than starting over with a time-consuming onboarding process.

Free accounting software can give small-business owners the basics they need to track income and expenses, send invoices, generate financial reports and keep organized records.

But free plans often come with limits on users, transactions, bank connections and other features. Before signing up, make sure you understand those restrictions and that the software is easy to use. It's also worth considering whether you can upgrade to more advanced tools as your business grows.

QuickBooks Free covers those basic bookkeeping needs while giving business owners a path to more advanced tools through QuickBooks Online as their needs evolve.

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