The Best Accounting Software for Freelancers

Here are three top picks for freelancer accounting software, and how to choose the best option for your business.

Billie Anne GriggAug 11, 2020
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The best business accounting software for freelancers is easy to use, affordable and powerful enough to provide the functionality you need to run your business efficiently. There are numerous good options on the market for freelancers, but three stand above the rest in terms of functionality, ease of use and affordability. Here are our top picks.

As a freelancer, look out for accounting software with at least the following capabilities:

1. Billable expenses: Although freelancers do have some overhead costs, many of a freelancer’s expenses may also be billable to their clients. This means your freelance bookkeeping software must be able to not only record expenses but also easily pull them into invoices you can send to your clients. It must also allow you to markup those expenses to ensure your profitability.

2. Mileage tracking: All small businesses can benefit from keeping a mileage log if the owner uses a personal vehicle for business. But — like with billable expenses — freelancers might need to track their mileage for billing. Your freelance accounting software should have a built-in mileage tracker, or be able to easily integrate with one.

3. Customer billing: Many small, service-based businesses have moved away from billing on a per-job basis in favor of flat pricing or a subscription model. Freelancers are the exception to this rule. You want to make sure your accounting software supports customer billing, as well as an easy way for your clients to pay you.

4. Commingled bank accounts: It’s best practice to separate your business and personal finances. But if your freelance business is very small, a side hustle or if you’re just getting started with it, you might not want to open separate banking and credit card accounts right away. Regardless of its size, though, you’re still responsible for your freelance business’s taxes — so you need a way to clearly delineate between your business and personal expenses. The right accounting software for your freelance business will help you do this with ease.

Most small businesses require balance sheets and profit and loss statements to accurately track finances and project growth. The first document shows the business’s assets, liabilities and equity. The second shows the business’s income and expenses, and can be used for tax preparation purposes.

But this is where freelancers stray from the norm. Strictly speaking, freelancers don’t need to maintain a balance sheet. That’s because, in most cases, freelancers don’t have fixed assets to track, and any business debt is minimal. Freelancers typically aren’t trying to build equity in their businesses, either, choosing instead to use all of their freelance income to support their lifestyle or provide “extra” income for their household.

So, most freelancers are just fine operating their business with a profit and loss statement only, and they don’t necessarily need accounting software that tracks balance sheets.

Still, maintaining a balance sheet is one way to ensure that your books are accurate, and some software (like QuickBooks Online) will handle it automatically.

FreshBooks: The good

FreshBooks was made for freelancers. Literally. The company started out as an invoicing- and time-tracking software for self-employed individuals, and has since evolved into a powerhouse accounting software for freelancers, sole proprietors and even some larger small businesses, too.

FreshBooks lets you track your expenses and mark them as billable, invoice and collect payments from your clients. It also has an excellent customer service team that responds quickly to users’ questions by phone and email. For requests submitted via email, you can often get an answer to your question within an hour.

As for price, FreshBooks starts at $15 per month, though you may need to move up to the $25 per month plan. Any additional apps you need will increase your monthly investment. For a limited time, FreshBooks is offering 60% off for six months on Lite, Plus and Premium plans when new users skip the 30-day free trial period and opt to buy now.

FreshBooks Accounting

FreshBooks
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on FreshBooks's website

QuickBooks Self-Employed: The better

With about 4.5 million users worldwide, QuickBooks Online is the household name in small-business accounting. Intuit’s QuickBooks Self-Employed product has steadily gained momentum since it was first introduced in 2014, offering a simple accounting solution for freelancers and other very small businesses.

QuickBooks Self-Employed has many useful features, including:

  • An easy-to-use and phone app.

  • The ability to separate business and personal expenses right on the app.

  • Automatic mileage tracking.

  • Simple invoicing, including the ability to turn on online payments.

  • A receipt capture feature, so you can ditch the paper receipts.

  • Estimated quarterly tax calculations.

  • The ability to collaborate with your accountant.

QuickBooks Self Employed has three pricing options. The core option — which includes all the features listed above — costs $10 per month. For an additional charge, you can add the TurboTax bundle. This bundle allows you to pay your estimated quarterly taxes online, export your Schedule C information to TurboTax and file one state and one federal tax return through TurboTax each year. The most expensive subscription tier also includes live support from certified public accountants.

As wonderful as QuickBooks Self Employed is, it has one major shortcoming: You can’t easily upgrade to QuickBooks Online if your business outgrows the freelance business model. If you need to move to a more robust QuickBooks solution, you’ll have to start a completely new QuickBooks subscription and import your data again or move it manually.

QuickBooks Online Simple Start: The best

Earlier, it was mentioned that freelancers don’t really need a balance sheet — and this is true from a business management and tax standpoint. However, accountants and bookkeepers will disagree on this, and for a very good reason.

Although you may not have much in the way of fixed assets or liabilities, and you may not be building equity in your business, a balance sheet is still critical to staying on top of your finances. Without one, it's harder to ensure your books are accurate. But you’re covered with QuickBooks Online Simple Start, which does provide a balance sheet.

This software pick provides freelancers with the ease of use of QuickBooks Self Employed, and the power of QuickBooks Online, for the very affordable investment of $25 per month.

While QuickBooks Online Simple Start lacks the tax bundle option available in QuickBooks Self Employed, it more than makes up for this shortcoming in overall functionality and scalability. With QuickBooks Online Simple Start, freelancers get a complete bookkeeping and accounting solution with a bank reconciliation feature, which is something lacking in QuickBooks Self Employed.

Why is the reconciliation feature so important?

Reconciling your accounts monthly helps you make certain your books are accurate, potentially saving you hundreds of dollars per year in taxes and penalties. This is why a balance sheet is important for all businesses, regardless of size and structure. Without it, there is no true way to reconcile, leaving your bookkeeping open to potentially costly errors.

QuickBooks Online

QuickBooks
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on QuickBooks's website

Plus, QuickBooks Online Simple Start can evolve with your business if you outgrow the freelancer business model, since you can easily upgrade from QuickBooks Online Simple Start to QuickBooks Online Essentials or Plus. And, as is the case with QuickBooks Self Employed, you can easily collaborate with your accountant or a bookkeeper.

Bookkeeping and accounting software

QuickBooks
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on QuickBooks's website

QuickBooks Online $25 per month and up. Read Review.

FreshBooks
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on FreshBooks's website

FreshBooks Accounting $15 per month and up. Read Review.

GoDaddy Bookkeeping $4.99 per month and up.

Sage 50cloud $47.25 per month and up.

Wave Financial Free (add-ons available).

Xero $11 per month and up.

Zoho Books $0 per month and up.

A version of this article was first published on Fundera, a subsidiary of NerdWallet