The accounting industry is finally moving forward with the times, and lucky for all you folks out there, it’s bringing some interesting changes with it as well., including some pretty cool accounting apps that will save you loads of time on the drudgery of your accounting.
Cloud accounting software is no doubt on the rise. Popular cloud system, Xero, claims to be adding 200-300 new users each and every day while traditional desktop systems like Quickbooks have launched their own cloud-based version to try and keep up with the times.
As popularity for these web based systems increase however, so do the number of options available. There are so many new systems out there at the moment, that it’s almost too hard to keep up with.
But fear not fellow small business owners, for Xen Accounting is here to help steer you in the right direction. This article will outline a few of the more popular systems for Canadians on the market today.
All of you out there in the tech world already know the benefits of the cloud. But what you probably don’t know is that these cloud-based systems will save you time when it comes to your accounting and that’s really one of the main benefits. They are smarter, easier and more innovative than your traditional desktop accounting systems.
Before going any further, it is important to note that no matter how early on you are in your startup, you absolutely need to implement an accounting system. I have met startups that have been in operation for years without any system in place, while some are doing it completely on Excel. Needless to say, their accounting is a mess. Without a proper system in place, getting an accurate picture of how your startup is performing is near impossible. WIthout an accurate picture of the numbers side of your business, it’s hard to know where and when to pivot (if necessary), what adjustments need to be made to overspending, how to follow up on your receivables or payables and just overall, you are literally navigating your business blind.
And without further ado, below are a few of our recommended cloud systems for tech startups in Canada.
Their slogan is, “beautiful accounting software” and for the most part this is true. Xero is a hot commodity at the moment and with newly raised financing in October of $150 million to target the North American market, Xero is really making a splash.
Geared for small businesses, Xero gives you the features that you absolutely need in a cloud accounting software. It connects to your bank and pulls in your transactions on a daily basis to help reduce manual data entry. It does invoicing. There are plenty of reporting options. It does just about everything you need an accounting system to do.
Xero keeps things simple. You may not get every feature under the sun, but you get the features that you need. And the best part? They have a developer friendly API that allows for third party developers to integrate their apps into Xero. So if you wanted a more robust invoicing system with time tracking, you could integrate this with Xero. If you wanted a CRM, you can integrate this with Xero. Doing your own payroll? Yup, there are integrations for that too. There are hundreds of different apps that you can integrate with Xero to avoid manually entering information into 2 different systems (check out Receipt Bank!). If you’re a developer and none of the available apps suit your needs, you could literally develop your own!
One of the best features in Xero is probably the way it handles bank reconciliation. Bank reconciliation is a way to compare what you have entered in Xero versus what appears on your bank statement in order to catch any possible errors. Xero’s bank reconciliation capabilities are just plain smart. Xero will automatically match transactions downloaded from your bank to transactions you created in Xero to help ease the reconciliation process. It also learns on the go. So if, for example, on a monthly basis you have the same exact $54.50 bank fee, Xero will “learn” what you did the month before and automatically assign this transaction to bank fees going forward. You can also create bank rules whereby you tell Xero that whenever you see a specific vendor or dollar amount appear on the bank statement, to automatically assign that transaction to a particular account. This can save you tons of time.
Another great feature is that you can integrate your Paypal or Stripe account into Xero so that when you create and email invoices, there is a link for your customers to pay right away. Who doesn’t like to get paid faster?
Have an iPhone or Android? Download the Xero smartphone app. You can invoice and reconcile your accounts on the go.
Xero, although New Zealand based, works pretty well for practically any country in the world. I would like it if they could handle tax reporting a bit better (a minor quibble of mine) but there are whispers of Xero launching a Canadian version in the nearish future to better accommodate our tax system.
I personally like Xero because accountant-client collaboration has been brought to a whole new level. If clients have questions about some of their transactions, they can make notes and I’ll see these notes when I log into Xero.
Overall, Xero is an extremely solid option for practically any small business or tech startup. It’s an especially good option if you’re a real techy and want to integrate a bunch of different apps into it depending on what your needs may be.
Vancouver based Kashoo is the first cloud system I have ever used. If there is one word that could be used to describe Kashoo, it would be “simple”.
Kashoo is great for those that may not need the many reporting features or 100’s of app integrations in Xero . I’d also say the learning curve is slightly lower on Kashoo as there are less bells and whistles. You can easily enter all your income and expenses directly through the Kashoo dashboard without having to click around anywhere else, which can be a real time saver for some of you.
Probably the number one reason to use Kashoo over any other cloud accounting system out there is their iPad app. It has consistently ranked as one of the top accounting apps in the Apple App Store for quite some time now. Their focus is really on the mobile entrepreneur who has their iPad with them at all times.
Kashoo can also connect to your bank to pull in your transactions as well and they use a pretty nice bank reconciliation tool to boot. I wouldn’t say it’s as sophisticated as Xero’s, but after Xero, it’s better than any other I’ve ever used.
Kashoo integrates with invoicing giant Freshbooks (short review later in the blog) as well as 2 Canadian payroll companies, which is quite useful for the majority of small businesses..
The good thing about Kashoo being Canadian is that they understand our tax system. This really shows in the software.
If you’re on the go and love your iPad, Kashoo might be for you.
Wave, from Toronto, is a cloud accounting system that is completely free, yes I said it, free! When I’m at some tech meetups and I’m explaining my business, a popular question I tend to get is, “So are you like Wave?”. This goes to show how popular Wave really is.
Wave will connect to your bank like the others mentioned above so that you can categorize your transactions. It’s a fairly simple system to use. The learning curve is quite low.
Have a ton of receipts that you’re keeping in your shoebox only to enter them all at the end of the year? Don’t fret. Download Receipts by Wave on your smartphone. You can snap pictures of your receipts and they’ll upload into the receipts tab in Wave. Wave will attempt to categorize them on its own and extract the key data needed. You can overwrite that data that Wave has extracted from the receipt or choose to accept it. It’s just that easy to get this your rceipts into Wave. No more shoeboxes of receipts or messy spreadsheets.
Like Xero, you can integrate Paypal or Stripe into their invoicing feature so that you can get paid faster. Sweet!
Wave is continually pushing out new and innovative features. Be on the lookout for some of the changes they’ll be making to their software in the near future.
Wave also has some premium paid services that you can add to your account, such as payroll. The fact that they have developed a payroll add on themselves means that it will integrate seamlessly. Unfortunately for those in La Belle Province of Quebec, Wave’s payroll add-on is not supported.
At the moment, Wave does not offer a bank reconciliation feature, which may or may not be an issue for some of you. As far as I know, this is the number one feature requested with Wave at the moment and I know that they are working hard to get this feature out soon.
A lot of startups I meet are using Wave and they’re quite happy with it. If you need an accounting system (every business does!), that’s relatively simple, with a good list of features and you’re looking to cut some costs, check out Wave.
Last on the list is Freshbooks, another Canadian business from Toronto. Canada, represent! I had a chance to meet up with the group at the Socialight Conference in Toronto at the end of November and they are really a great team.
There is a debate as to whether Freshbooks is an accounting system or not. Well, the definition of accounting can be pretty broad. Some would disagree, but I would call Freshbooks an invoicing software over anything else, depending on how you define accounting of course.
If you are a consultant, freelancer or a service-based small business and you invoice your clients according to time, then Freshbooks is probably for you. None of the other options above give you as robust of an invoicing solution as Freshbooks. It is dead simple to use and you can be creating invoices in a flash with little to no training. The real goal is Freshbooks is to make the system as simple as possible.
One of their main selling features is that it has an excellent time tracking feature. There are various ways for you to record time. You can start a counter or you can log the hours manually according to day, week or month.
Freshbooks also supports project based invoicing. So if you have a large project, you can assign several employees or subcontractors to the project, track their hours and rates, track the costs associated with the project and then send out invoices based on that.
Many like Freshbooks’ quoting feature, which is better than any of the above system mentioned.
Like the others above, Freshbooks connects to your bank to download your transactions. You can categorize all your expenses from this.
They also has a nice smartphone app for invoicing on the go. Connect your Paypal account to Freshbooks and you can literally send out invoices from your smartphone and get paid.
You may be asking why I call Freshbooks an invoicing software and not a full accounting system. The fact that a system can track your income and expenses does not mean it’s an accounting software. Your income statement is only a part of your financial statements. Freshbooks does not track assets (like computers, furniture, etc.), liabilities (such as loans) or equity (ie. accumulated profits to base dividend decisions). These are important things to track for any business.
Freshbooks is amazing for what it does. It you need an easy yet robust invoicing system, check out Freshbooks and consider integrating it with Xero or Kashoo in order to get the full
What about the others?
Of course there are more than 4 cloud accounting systems, but it just so happens that I find these ones are the best for those in the tech space. Quickbooks Online and Sage One (formally Simply Accounting) also have cloud based systems that might be worth checking out, but I just don’t find them as intuitive and I feel like they are playing catch up. The systems above were built for the cloud from the ground up and they serve their purpose extremely well. Again, this is all personal preference, I know many that swear by Quickbooks Online, but it seems that there is a trend (at least among the businesses that I’m exposed to) of people switching away from Quickbooks and Simply to some of the systems mentioned above.
The bottom line
Every business is unique and as such every business needs to evaluate their needs and what’s most important for them. The above is an extremely brief guide of what these systems can do and how they can benefit your small business. Whatever system you choose, your tech startup will definitely benefit from a cloud-based solution rather than the traditional desktop-based one, so get with the times and get into the cloud.
About Xen Accounting
Xen Accounting is a virtual accounting firm designed for modern day small business owners with one goal in mind: to create a truly pain-free accounting experience. Through technology and a forward-thinking approach, Xen Accounting is focusing on delivering professional accounting services for businesses in the digital age. To contact Xen Accounting, please email firstname.lastname@example.org.