You know the saying, “If you can’t love yourself, how are you going to love anybody else?” Same goes for your consulting practice. If you’re not taking care of your business, how are you going to help clients take care of theirs?
No matter what kind of consultant you are, one of the most important ways to ensure your business is stable is to manage your accounting. True, this may be the least fun part of the job. But, that’s why they invented accounting software. It makes managing your books and tracking your finances so much easier. How do you choose the best accounting software to use? You let us help…
Consultant Specific Accounting Needs
When it comes to managing your own books, IT Consultants have different needs from small business consultants who have different needs than big business consultants. Naturally, their accounting software should be able to your particular consulting considerations. The three big ones are:
Time Tracking: As a consultant, your business is predicated on exchanging time for dollars. Time really is money. That’s why it’s vital for your accounting software to be able to accurately track the time you dedicate to each client. That way, you can bill them properly. It’s also important to track time so you can analyze where most of your effort and energy being spent, especially if you’re using value or package pricing. With this information, you can reconsider how you spend your time if you’re not getting back the financial return you want.
Billable Expenses: One advantage to having a consulting business is that many business expenses can be passed on to your clients. But to do that, you need accounting software that can track billable expenses and apply them to the proper client invoices. It’s even better when your software can automatically add markup charges to those expenses. Want to get really deluxe? Some accounting software lets you attach images of receipts to expenses, for those clients who require such proof.
Mileage Tracking: Being a consultant means you’re often on the go. That can put miles on your personal vehicle for business purposes. You’ll want an accounting software that makes it easy to track those miles. That way you can bill your client for them. And in some instance, you can use them for a tax deduction on your annual return.
Keeping Balanced with a Balance Sheet
Most consultants sell services, not products. Most consultants have little business debt. And few consultants prioritize building equity in the early days of their business. This reduces the need for a balance sheet that tracks product inventory or fixed assets. But, it doesn’t eliminate it.
Here’s why: If you don’t have a balance sheet, you’ll be left with an “open” accounting system. That can make your bookkeeping a little less accurate because you won’t have a separate reconciliation feature, which ensures that all your expenses and income are properly recorded.
Does this mean you should only use accounting software that provides a balance sheet? Not necessarily. In fact there is a system recommended below that doesn’t do this. However, if your accounting software isn’t reconciling your accounts, make sure you have another way to do it regularly.
The Top Consultant-Friendly Accounting Software
When it comes to accounting software, you have plenty of options. And many of those options are quite good. The best ones are easy to use, incredibly functional, and affordable. Here are our three favorites…
Our Top Pick: Xero
Xero is accounting software designed by the small business accounting experts at Xero. So naturally, it’s tailor-made for consultant-sized businesses.
• It’s easy to use. Simplicity is the key with Xero. It makes bookkeeping a breeze. And that will only encourage you to keep on top of your accounting, no matter how busy business gets.
• Xero is backed by accountants and bookkeepers. The experts at Xendoo have helped hundreds of small business owners. If you need help using the software, these folks are your lifelines. They can have you sailing smooth in not time.
• A simple, convenient mobile app. Consultants spend much of their day on the go. Xero’s handy app let’s you keep tabs, and even categorize your expenses, client invoices, and other bookkeeping tasks wherever business takes you.
• Consultant friendly features. Xero serves up the features consultants most often rely on, including billable expense tracking along with markup options, easy integrated time-tracking solutions, and precise mileage tracking. You can also use Xero’s mobile app to take pictures of receipts and connect them to your expenses listings.
Two things really push Xero to the top of the pack—customization and interface. Xero lets you customize the dashboard to prioritize your most important functions. Visually, it’s very appealing to the eyes and uses simple language for easier understanding. That makes it less intimidating. After all, you’re not an accountant. Why should you speak like one?
Runner Up: Quickbooks Online
Quickbooks Online has many of the same features as Xero, including an easy interface, a mobile app, and important features like billable expense tracking, plus time and mileage tracking. They also have a support network of accountants and bookkeepers to help you set up and manage the software.
Where Quickbooks falls short compared to Xero is its lack of customization. And visually, it’s just not as appealing to use. Powerful, but less attractive. Ultimately, it depends on your personal (and aesthetic) preference. Between Quickbooks Online and Xero, you can’t really go wrong. But, we still suggest Xero.
Honorable Mention: FreshBooks
Xero and Quickbooks Online are both accounting software powerhouses. But, if you’re looks for something a little simpler to help you manage the basics of your business accounting, consider FreshBooks.
Originally started as an invoicing and time-tracking software for self-employed people, Freshbooks has evolved into a full accounting system. However, it does not provide a balance sheet function. Therefore, it’s only for businesses willing to have an open accounting system.
There is still plenty you can do with Freshbooks, including tracking expenses and denoting which are billable, plus invoicing and payment collection. And, if you have their MileIQ integration, you can track and import mileage expenses. A big plus is the fact that FreshBooks can connect to your bank and credit card accounts, so you won’t have to spend time entering data. This is helpful since you won’t have an in-program balance sheet for reconciliation.
As with Xero and Quickbooks Online, Freshbooks is backed by a large group of bookkeepers and accountants that are certified on the program. If you’re looking for simple and reliable, Freshbooks is a great business accounting option.
Honorable Mention: Zoho Books
Quickbooks Online, Xero, and Freshbooks all rely, to some degree, on third party apps to round out their functionality. However, Zoho Books keeps everything within its software ecosystem. This is great for simplicity’s sake. And, it’s ideal if you prefer Zoho products. You can integrate Zoho’s accounting transaction modules with their other products including Mail, OfficeSuite, and CRM.
However, Zoho only receives honorable mention for three reasons:
• Reimbursed expenses: Instead of listing reimbursed expenses as income, Zoho Books reduces the expense. There’s no change to your bottom line. But, it can be helpful to have those reimbursed expenses broken out as separate items listed on your profit and loss statement.
• Cost: It’s not that it’s expensive. But, if you start adding too many of Zoho’s transaction modules, the costs can pile up higher than what you would pay for a subscription to Quickbooks Online, Xero, or Freshbooks.
• Accounting support: It’s not easy to find accountants or bookkeepers that are fluent and support Zoho Books. That means you’re on your own to figure it out. Not a big deal if you have some understanding of accounting and bookkeeping. But if you don’t, you’re going to lose valuable time getting started; time you could be using to make more money.
Selecting the Best Accounting Software for Your Business
Guess what happens when you hire out an accountant or bookkeeper—they’ll need you to have accounting software to keep track of expenses and client billing. So, knowing you’re going to need accounting software—and that you’ll sometimes have to use it yourself–it’s important to select the one you’re most comfortable with. If that’s a full-sized system, look into Xero (our favorite) or Quickbooks Online. If you want something simpler, investigate Freshbooks or Zoho Books.
Each of these accounting software makers provides a free trial period. That way, you can test drive each to see which you like best and which is most suited to your consulting business needs. When you do, just test the features you anticipate using the most rather than setting up your books exactly how you want them.
No matter which system you choose, they’re all going to help you stay on top of your bookkeeping and billing. That way, your consulting business can stay strong and always be in a position to increase profitability. Even better, with your business in tip-top shape, you’ll now be able to help your clients without worry.