Freelancing can be quite the fun, not least because your hobby or whatever it is you’re best at can be turned into a full-time job. Despite that, the life of a freelancer isn’t always rainbows and butterflies, since they also need to spend time marketing themselves, hunting for clients, negotiating the right price, and even doing their finances. However, modern bookkeeping isn’t as terrible as it may seem, especially if you have access to online accounting software.
With such a solution on board – which is available for computers and mobile devices alike – managing invoices, estimates, bills, taxes and the like is a breeze. And if the app is upgraded via the wide variety of third-party solutions available, then the software can become an almost fully automated powerhouse, meaning that your focus can be shifted to the only thing that really matters: advancing your career as a freelancer.
There are plenty of good online accounting solutions, each providing the most essential features for freelancers. But as is the case with any online app, accounting programs aren’t all equal. In fact, some of them may offer more than you would expect:
Xero is a progressive and innovative online accounting solution that enables you to manage your accounts more effectively and make your accounting hassle-free. Some of its features include invoicing and quotes, bank reconciliation, inventory, mobile capability, third-party apps, purchase orders and payroll. The mobile version of the software, Xero Touch, makes it possible to access all your accounting data instantly from wherever you may be. Xero integrates and works well with many other third-party applications (such as advanced solutions for CRM, point-of-sale, e-commerce and more). You have a choice of three pricing plans – Starter, Standard and Premium – all of which have slightly different features and a reduced price for the first six months. Xero also provides a 30-day free trial. Customers enjoy efficient and reliable support from Xero online teams. Xero’s US headquarters is in San Francisco, but this publicly listed company’s products are used in over 180 countries. The company has garnered impressive experience in the area of cloud computing and accounting and has continued to innovate and create new products for the market.
FreshBooks was founded in 2003 in Canada as an invoicing, billing and time tracking software, but over the past years it became a full-fledged online accounting solution ideal for sole proprietors and smaller businesses. With this neat cloud-based software, which underwent a thorough overhaul in 2016, you can easily and quickly create and customize invoices (whether using the desktop account or the Android/iPhone apps), record expenses, plan and realize projects, and track your time. You can integrate a decent amount of third party applications and services, and check reports FreshBooks automatically creates for you. You also have the option to enable fast online payments, set up recurring invoices, and even customize your account. Regardless of your chosen plan, almost all features remain available during and after the 30-day trial period. Furthermore, you also get unlimited customer support with your subscription, which can be as low as $15 per month. So if you need an accounting solution that includes all major functions and you work with a small number of clients and employees/contractors, then FreshBooks is your choice.
At first glance, Canada-based online accounting solution Wave is nothing special: you can do invoicing, create estimates, bills, add your clients, vendors, products, upload receipts, and check some reports. Upon further examination you will see that the user interface is rather blank; you have to pay for certain additional features, even for live chat and phone support, no profit & loss reports are created, and you are mostly unable to access your account from a mobile device. These all should be warning signs to avoid the software. But Wave has a huge advantage over its competitors: it provides all the major features for every single user free of charge. Furthermore, you can cancel your account any time you want. Therefore, if you are not satisfied with Wave’s services, you lose nothing. If you are a sole proprietor or an owner of a small business and you want to get accounting software that knows the basics without spending a fortune, then Wave may be worth a try.
Even though the following features are usually present in online accounting software, sometimes they are not advanced enough to satisfy a user’s needs. However, due to the fact that APIs are often offered and supported by the vast majority of online accounting solutions, replacing built-in features with something more advanced is a piece of cake – and integral to making a freelancer’s life simpler.
No online accounting solution lacks an invoicing feature, and in fact this is usually the feature that accounting software providers put most of their effort into. However, there may be instances where invoicing is limited, for example most of the time the appearance cannot be tailored further. A bigger issue is when the built-in invoicing solution is not capable of creating invoices in other currencies beyond USD or when they cannot be sent to clients on a recurring basis. But since accounting programs can integrate with various online invoicing solutions, all of these problems can be eliminated to further boost your professional performance.
Unfortunately not many accounting solutions contain this feature by default even though it is a must for freelancers, particularly those who do contract work that either cannot be specified by quantity or doesn’t require special equipment. Thankfully, professional accounting solutions support integration with the market’s best time tracking app with which freelancers can properly manage their time and start billing by the hour or minute. But there is greater benefit than even this: if a time tracking solution is combined with accounting software, not only does time management become much easier but all that extra time spent on the project with additional activities can be easily added to the client’s invoices.
Despite being another feature that less advanced online accounting apps often lack, it can be added in with solutions provided by third-party developers. However, most of the time integrating an online invoicing solution will be enough to enable this feature. This may seem like overkill, but the advantage of being able to create quotes and/or estimates is that it becomes possible to provide clients with an estimated price for which you’d take the commission. Doing that not only does suggests professionalism and care but it is also a huge step towards simplifying the invoicing process since quotes or estimates approved by the client can be turned into full-fledged invoices that can be sent when the job is finished.
Aside from standard invoicing, real-time expense management is always present in modern accounting solutions. In fact, by leveraging the software’s app it becomes possible to automatically process expenses taken from a receipt by capturing it with the camera of a smart device.
However, expense management software developed by third-party companies can add even more advanced features into the mix, like automated expense categorization or the recording of travel mileages and work time. Additionally, these solutions also let you automatically send reimbursement requests or – as in the case of quotes and estimates – turn expenses into full-fledged invoices to send to the clients.
Businesses and sole proprietors have been aided by bespoke online solutions for quite a long time, but in many cases they still can’t avoid the tedious task of manual data entry. However, utilizing online accounting software is already a huge step towards simplifying the tax preparation process for various reasons.
Accounting apps can calculate and implement different tax rates for use on invoices, bills, quotes, or even in the software’s database, but as a result are then automatically imported into your monthly or annual sales tax reports each time the account is updated with an income or an expense. Additionally there is the option to separate personal and business incomes and expenses to maximize tax deductions as well as to prepare Schedule C reports either within the program itself or by copying the necessary data over into a tax preparation solution.
However, while preparing the necessary tax documents this way is a great asset for saving time, remember that in the vast majority of cases tax-related data has to be added manually to your business tax return unless the accounting program can cooperate with a tax prep solution by default, like how QuickBooks Online Self-Employed does with TurboTax Online Self-Employed.
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