Which cloud accounting application is best for your business? We’ve tested Australia's major providers to help you decide.
Reviews in this Group Test
[Update: See our guide to 7 standalone Single Touch Payroll (STP) solutions for micro businesses.]
A lot has changed since we last reviewed the major accounting software systems in 2013 – and, without doubt, the biggest change is that cloud accounting applications have become mainstream.
There are still some conventional desktop packages available, but we’ve focused on cloud systems here because they dominate the market now.
This market domination has come about for a variety of reasons. You can, for example, access them anywhere there’s internet available – and often via a mobile app (especially important for business travellers and tradies) – and you can give your accountant or bookkeeper live access to the accounts.
Cloud accounting systems are also increasingly connected, with features such as bank feeds to automate transactions, and support for payment gateways, SuperStream payments and tax office lodgements.
In fact, connectivity is now one of the most powerful benefits of cloud accounting systems. They can be easily augmented by complementary cloud applications such as point-of-sale, ecommerce, business intelligence and debt chasing.
Because both systems are in the cloud, all you often need to do is link your accounts and the magic happens behind the scenes. This allows you to choose the best customer relationship management (CRM) system for your needs, for example. As long as it integrates with your accounting system, you can have the exactly the same contact details in both systems. In some cases, a third-party integration service such as OneSaas or Zapier provides the connection between the accounting system and the other cloud application.
The growing importance of add-ons means that cloud accounting providers usually offer a catalogue or marketplace of apps – although many require additional subscription payments to those third-party services.
The accounting providers encourage developers to become part of their app ecosystems by providing application programming interfaces (APIs) that enable third-party apps to access various types of accounting data, such as contacts, inventory items, account balances and invoices.
For a better idea of what they can do, see our Top 20 cloud accounting add-ons for the latest and most popular of these tools.
Which cloud accounting system?
While the third-party app ecosystem has become increasingly important part of choosing accounting software, its core functions still have to suit your needs, as well as being quick, convenient and easy to use. So to help you with your decision, we’ve tested and reviewed six of Australia's major small business cloud applications:
We reviewed them in 2017 but have updated them in 2018 with the latest features and prices. And over the following pages, we have a lot more advice and details, which we encourage you to read before making your decision, including:
- The cloud accounting systems' features and pricing at a glance
- How we tested the applications
- Our accounting software buyer's guide
- Our post-testing conclusions and final advice.
Remember, these six accounting applications are not the only options. If you’re looking for more features, the likes of MYOB have higher-end versions. For businesses that have outgrown their small business accounting application, an enterprise resource planning (ERP) system may be the next step. At the other end of the scale, we’ve looked at simple invoicing apps (some with useful extras) that might suit very small service businesses.
Next: six cloud accounting systems at a glance
6 cloud accounting systems at a glance
|MYOB Essentials||QuickBooks Plus Online||Reckon One||Saasu||Sage||Xero|
|Online quotes/ invoices||N||Y||N||N||N||Y|
|Time tracking||N||Y||Y (mobile app)||N||Y||N|
|Document storage (attached to transactions||Y||Y (mobile app)||N||Y||Y||Y|
|Mobile app available||Y||Y||Y||Y||Y||Y|
|Pricing/ plans||$27 (1 employee, 25 bank transactions, 5 invoices)||$15 (Simple Start)||Core system $5, plus:||$15 (1000 transactions a year, 3 bank feeds)||$20||$25 (5 invoices and quotes, 5 bills, 20 bank transactions, payroll for 1 employee)|
|$45 (unlimited transactions, 1 employee)||$25 (Essentials: adds data import and multiple currencies)||$3 for invoicing ($5 with approvals)||$40 (20,000 transactions, 5 bank feeds; adds payroll for 20 employees, inventory, multicurrency)||Additional users $3||$50 (unlimited invoices, quotes, bank transactions)|
|$55 (unlimited transaction and employees)||$35 (Plus, adds inventory)||$3 for bank feed (up to 100 transactions) or $5 (up to 250) or $7 (for up to 500)||$70 (40,000 transactions, 10 bank feeds, 40 employees; adds inventory attributes and P&L consolidation)||Bank feeds $7||$60 (up to 5 employees; adds auto- superannuation and multicurrency)|
|$3 for payroll ($5 with SuperStream output)|
|$3 for projects ($5 with enhanced features)|
|$3 for time and expenses ($5 with enhanced features)|
Next: how we tested
How we tested
We needed to set up a test company to evaluate the six cloud accounting applications, and ours was an imaginary small digital printing shop that also offered design services, and was operated by two partners with the aid of an employee.
Of course, it’s impossible to evaluate the applications using every business scenario – and, obviously, your requirements will differ to some extent – but we felt this company was reasonably representative of many small businesses and it enabled us to test as many core functions as possible.
So, beyond the basics such as invoicing, this business needed to be able to easily handle over-the-counter sales (so a customer might just want to buy a ream of paper or have a document copied, but there was no need for a POS system), payroll, time tracking (to make sure jobs weren't taking longer than budgeted), quotations (some of its business customers had relatively bureaucratic purchasing processes), purchase orders (a couple of its suppliers did not work on a 'cash and carry' basis but instead required written orders), and inventory (due to limited space, some stock was kept at a nearby storage facility, which meant the partners couldn't simply check stock levels by glancing at the shelves).
It wasn’t practical to test the applications’ connectivity with other services and their third-party add-ons, but we did comprehensively test the core functions above and we have provided an overview of the applications’ third-party ecosystems in our reviews.
Next: accounting software buyers' guide
Accounting software buyer's guide
While our reviews provide a useful reference when deciding which accounting application to choose, every business has different needs.
Here are six key questions that only you can answer when making the decision.
1. Manual accounting or software?
Paper-based or spreadsheet-based systems suit some simpler businesses. "Manual can be cheap, and easy to handle if the requirements are basic," says Kelvin Deer, director of PT Partners and of the Australian Bookkeepers Network. "But if you hand over a shoebox of records and expect your accountant to turn it into a pristine set of accounts, that could be an expensive exercise at $150 to $200 per hour," he warns.
Accounting software has also two big advantages over manual systems.
It can reduce the data entry load thanks to bank feeds, an approach that means transactions on your various bank accounts automatically appear in your books, so you may never have to record a phone bill or rent payment again (though things aren't quite that simple when invoices include a mix of taxable and non-taxable items), and customer payments will automatically be reconciled with your invoices.
Secondly, automated report generation makes it easy to get an up-to-date view of the state of the business and saves a lot of time when preparing the BAS.
"Some businesses simply don't want additional reports," observes Deer. "That's surprising when you consider the failure rates among small businesses – you'd think they'd want to know how they track quarter on quarter for sales, profit margins, cash flow, or whether their expenses are increasing. Working with a bookkeeper or accountant on regular reporting could bring about better outcomes."
2. When and how should I set up the software?
It's important to go about things the right way. "The [best] time to set up your accounting software is when you start a business. It's the first thing you should do after getting an ABN," says Debra Anderson, owner of Anderson Tax and Consulting.
Even if you plan to do your own bookkeeping, "make sure it's setup professionally," she advises. "It's not a big task, and once it's done properly you can mind your own business. But get it wrong and you'll be reporting the wrong figures in your BAS and income tax returns, as well has having an erroneous view of how your business is performing."
3. How complex is my business?
Accounting software becomes increasingly beneficial as the business gets more complicated. It makes it easier to track how much customers owe you, and bank feeds reduce the risk of overlooking expenses, especially when credit or debit cards are used.
"Every small business person pulls out their wallet and buys things on an almost daily basis. They can claim back the 10% GST and the expense is tax deductible, but only if it gets into their books," observes Anderson. "We small business people are time poor, and this type of automation helps ensure the accounts are up to date and increases the likelihood of everything being captured and claimed."
4. Desktop or cloud-based software?
Cloud-based accounting systems make it easy to work anywhere there's an internet connection, your accountant or bookkeeper has instant access to your records, and they're easier to integrate with other cloud applications such as point-of-sale, employee scheduling and advanced inventory systems.
"Cloud products are especially handy," says Ben Vojtisek, a partner at BJV Accountants. "If a client keeps their books up to date on a regular basis, we can log in, print out a set of reports, work on them quickly to get a good idea of how the client is going at that point in time, and then project to the end of the financial year to advise them of their likely tax outcome."
And if a client has trouble tracking down a bookkeeping error, "we can log in and fix it without delay," he says.
5. What features should I get (and pay for)?
Don't think you have to use a system that includes all the bells and whistles. Payroll is only necessary if you have employees; if you don't charge for your or your employees' time, you don't need time tracking and billing; and you don't need inventory if you don't keep stocks of goods (and if you do, it may not be an essential feature).
Indeed, if you run a strictly cash business, cashbook software may be all you need. It's simple and relatively cheap, but usually provides a limited range of reports and lacks capabilities such as budgeting.
A problem with accounting systems is that you may need to pay for features you don't need just to get those you do. For example, to get payroll for more than one person with Xero you need the plan that also includes multi-currency support and an unlimited number of transactions.
6. Do I need specialised software?
Whatever features you do require, don't choose a product on the basis of ticking the boxes. Take time to check that the system really does suit your business. And don't restrict your search to the big names – small businesses in industries such as manufacturing, retail, hospitality or construction may be better served by industry-specific software.
"I have a client that manufactures forklift components," says Deer. "They have 4,000 stock lines, so they've worked with a software developer to evolve its software to cater for that many lines."
"And where a property developer's needs are almost always met by generic software, a company in the construction industry has far more specialised needs and therefore may require more specialised software."
Next: our conclusions.
– Additional reporting by William Maher
Which cloud accounting system? Our conclusions
So you've read our reviews of MYOB Essentials, QuickBooks Online Plus, Reckon One, Saasu, Sage One and Xero – which one is right for you? All are solid products that would (and do) service many businesses very well – and that’s reflected by the closeness of our ratings for them.
We rated each product based on a number of criteria, including its core capabilities, ease of use, ecosystem of add-ons and value – and while none of them are perfect, each has its strengths.
MYOB Essentials and QuickBooks, for example, provide relatively easy to use payroll. QuickBooks' bundles would be very convenient if you offer combinations of products and/or services. Reckon One's modular pricing can make it a bargain.
Saasu seemed particularly convenient for processing sales while the customer is waiting, and its tagging system provides great flexibility. Sage One's workspace interface saves hunting through menus in order to perform everyday tasks.
Xero's huge number of add-ons can be a plus, and we were impressed by its slick processes, such as its online quote/accept/invoice/pay workflow.
Yet, as we’ve seen in the reviews, each product has its weaknesses too. For example, Reckon One and Sage One currently offer only a handful of third-party add-ons. MYOB Essentials lacks some features such as the ability to raise purchase orders, while Saasu has some useability quirks and Xero can be comparatively pricey unless your business has a limited number transactions.
Some of them – including MYOB Essentials and Reckon One – would be ruled out by our hypothetical business as they lack features such as inventory. However, that won’t be an issue if you are a service-based business, or if there’s a third-party inventory app that you like and integrates with the accounting system.
So, overall, our advice is to think about the way your business works and don't assume these products will all accommodate every single thing your business needs.
Take advantage of the free trial periods to check that your shortlisted applications work the way you and your business do – and ideally, try key third-party apps at the same time, to see how well they integrate with the accounting system.
Talk to your bookkeeper or accountant too – their advice can be valuable and using their preferred systems can help keep their bills down. But don't be afraid to investigate other firms if they try to push you into a product that's over-featured and over-priced for your needs, or that makes your working life harder than necessary.