If you're running a side business or you freelance, keeping accurate records is essential. When it comes to tax time, you're going to need to have an accurate statement of your income and expenses so you can properly fill out your tax return.
Furthermore, when you run a business (or even if you're side hustling by driving for Uber), you simply need to know where you stand. Are you making money or are you losing money? That's why you need to use some type of accounting software.
For many, the thought of "accounting" sounds scary, but it's actually really easy, especially if you use the right tools.
Accounting simply means keeping track of your income and expenses. When you get paid, you input that. If you have an expense, you keep track of it. Great accounting software makes it easy and painless. And if you're only doing this as a side gig, then it's even more important it doesn't take a lot of time.
What Is The Best Online Accounting Software For Side Hustlers?
In order to judge this, we need some criteria. Given that I've been running a side hustle for years, here is what I look for in my online accounting software.
- Low Price: Honestly, since this is just a side hustle, it needs to be low cost. Free is even better.
- Automatically Syncs With Bank Accounts: I need my accounting software to link up with my bank accounts to automatically import my transactions. It makes things helpful.
- Invoicing: In my business, I send out a lot of invoices, so having it done digitially is great.
- Payment Acceptance
- An App, since we're entering a mobile first world
So, now you know the criteria, let's dive into the options we look at:
We also looked at Kashoo, Sage, and Zoho Books, but none of them competed well enough for our needs to include in this list. If you have an experience with them, please share it in the comments!
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1. Quickbooks Online
Quickbooks Online is the solution we use here at The College Investor. We love it because it's robust, easy to use, has a good app, and it's pretty much the industry standard for accounting software, so there are lots of tutorials available if you need help using it.
Quickbooks offers three different pricing plans:
- Simple Start: $12.50/mo
- Plus: $35/mo
- Advanced: $75/mo
Quickbooks Online also offers a free trial to get started. Quickbooks Online also offers a 6 month discount for when you first sign up. These prices reflect the full monthly price.
For most side hustlers and freelancers, the Simple Start plan is all that you need. You can send invoices, track and manage expenses, and you get access to their great app. It also automatically syncs with your bank accounts so that you can easily import your transactions. Finally, their online platforms ensures that your information is always synced and up-to-date.
Pros:
- Invoicing is included and allows online payments
- Automatically syncs with your bank and imports transactions
- Good mobile app
- Easy to Use
Cons:
- Price
- There are a lot of features, and it can be difficult to learn
2. Xero
Xero is probably the biggest competitor to Quickbooks in terms of offering a full-fledged online accounting platform.
It has all of the same major features of Quickbooks Online, with many saying that is has better customer service. It has a great app, and it is robust for any small business.
What really holds Xero back from the top spot for us is that it's cheapest plan is very limiting in what you can do. While it's cheapest plan is cheaper than Quickbooks Online, it limits you to just 5 invoices and 5 bills per month. For some small freelancers, that might work, but the for many it won't. And the jump to the next level plan is the same price as Quickbooks Online's mid-level Essentials plan.
Here is their pricing:
- Starter: $11/mo
- Standard: $32/mo
- Premium: $62/mo
Xero doesn't offer a free trial, but does offer 50% off for the first two months so you can give it a try.
Pros:
- Invoicing is included and allows online payments
- Automatically syncs with your bank to import transactions
- Mobile App
- Easy to Use
Cons:
- Limited Start Plan makes pricing not as good as you thought
3. Wave Accounting
Wave Accounting was the accounting program that I started with several years ago for a simple reason - it's free. Seriously - all of the basic stuff is free.
Wave is a great starter accounting program because their platform is free, their invoicing is free, and it generates basic reports for you. Wave also allows you to connect your bank accounts, which syncs for expense tracking.
Wave charges for payments made via invoicing, which is similar to almost all other platforms. They also offer premium services such as bookkeeping, which you can pay for.
We ultimately switched away from Wave because we out grew it. We needed more features, which Quickbooks offered, and we found the syncing of accounts to be glitchy. And since it is free, the support is lackluster.
Pros:
- Free is a great price
- Invoicing is included, but you do pay for online payments
- Automatically syncs with your bank to import transactions
Cons:
- The user interface is okay
- It requires multiple apps, which can be a bit clunky
- There were some issues with syncing and support
4. FreshBooks
FreshBooks is one of the most popular invoicing software programs for freelancers and side hustlers, and it's really been evolving over the last few years into a full-fledged accounting platform.
FreshBooks is one of the best choices for freelancers who need to invoice a lot, and use PayPal. It also has great time tracking and project management features, which is a little different approach than the other products we mentioned above.
Why it's great for freelancers who use PayPal is that you get business pricing, which is just $0.50 per transaction, versus the normal percentage-based fee that PayPal typically charges.
FreshBooks also has one of the best mobile apps we've seen when it comes to accounting and invoicing. They have really designed a mobile-first app.
They do offer expense tracking, but it's not as robust as Quickbooks Online or Xero.
What really holds them back for us is pricing. Similar to Xero, their Lite plan limits you to just 5 active clients per month. That translates to just 5 invoices to different clients per month, and that's tough. They currently offer three plans:
- Lite: $4.50/mo
- Plus: $7.50/mo
- Premium: $15/mo
We like their Plus pricing, which includes 50 clients per month, and should be good for most freelancers and side hustlers. FreshBooks also has a 30 day free trial so you can try it out and see what you think.
Pros:
- Invoicing is the main focus, and allows online payments, including PayPal
- Automatically syncs with your bank to import transactions
Cons:
- The pricing plan of the Lite looks appealing, but the plan is limited
- It lacks a bit in the accounting features
Final Verdict: Best Accounting Software For Freelancers Is...
So, let's go back to our main criteria for what makes great accounting software for freelancers and side hustlers.
It needs to have a low price. That makes Wave Accounting a good contender.
It should automatically sync with your bank accounts. All of them do this, but we found Wave to be a bit glitchy.
It should have invoicing. FreshBooks started as an invoicing tool and still dominates this space, but it's lack of ability to do more than 5 on the cheapest pricing plan hurt it. All others do good invoicing.
Payment Acceptance is important. All of them offer this, with similar fees being charged by each. FreshBooks has PayPal business, with is a differentiator.
Finally, a good app. QuickBooks and FreshBooks both have good apps that we found easy to use.
Thinking of all of the features and considerations, we recommend:
Wave Accounting if you want a free accounting program that does invoicing. Otherwise, we recommend Quickbooks Online if you think you're outgrowing Wave or want to be prepared for the future.
Wave Accounting is free, and you can't beat free. Quickbooks has the lowest pricing for the largest feature set, and it's easy to use with a great mobile app.
What accounting program are you using to keep track of your side hustle money?
Robert Farrington is America’s Millennial Money Expert® and America’s Student Loan Debt Expert™, and the founder of The College Investor, a personal finance site dedicated to helping millennials escape student loan debt to start investing and building wealth for the future. You can learn more about him on the About Page, or on his personal site RobertFarrington.com.
He regularly writes about investing, student loan debt, and general personal finance topics geared towards anyone wanting to earn more, get out of debt, and start building wealth for the future.
He has been quoted in major publications including the New York Times, Washington Post, Fox, ABC, NBC, and more. He is also a regular contributor to Forbes.