The biggest news comes from companies whose cloud-based accounting applications originated outside of the U.S. Kashoo has been selected by both Paychex and Liberty Tax to provide an accounting engine for their services. And Xero has outdone its competition, introducing a number of significant new features in the last 12 months.

We looked at the six most prominent cloud-based accounting solutions for small businesses. With the exception of FreshBooks, all adhere to double-entry accounting standards. They all connect to online financial institutions and payment gateways. All provide record and transaction forms, support for sales tax collection, and reports. Some have payroll integration and time-tracking, and some let you control user access levels.

The biggest differences lie in usability and customizability, where personal preferences come into play, and the depth and breadth of their income- and expense-tracking capabilities, where personal preferences should not be an issue.

So your clients look to you to help them find a solution that will match the needs and workflow preferences of their businesses now and, hopefully, a few years down the road, either within the applications themselves or through add-ons. While everyone we reviewed offers a way to import existing data, you know that those tools aren't always comprehensive or foolproof. And you know how challenging it can be to move client's data to a new cloud-based solution.

Here's who we looked at:

FreshBooks Cloud Accounting
Kashoo
QuickBooks Online
Sage One
Wave
Xero

FreshBooks Cloud Accounting
2nd Site, Inc.
Toronto, Ontario
(866) 303-6061
www.freshbooks.com
Price: Seedling, $19.95 per month (25 clients max; no additional staff); Evergreen, $29.95 per month (unlimited clients, one additional staff member; Mighty Oak, $39.95 per month (unlimited clients, up to five additional staff).

FreshBooks
FreshBooks got its start many years ago when its founder got frustrated with his invoicing method. What began as a simple invoice-tracking website has grown considerably. Today, you can track expenses, create estimates, track time and build timesheets and generate numerous reports.

FreshBooks has added the phrase "Cloud Accounting" to its name. It is web-based, with an emphasis on sending invoices and receiving payments for services and products. Its simplicity, customizability, and usability in those areas are excellent, and it's grown significantly over the years, building connections to sites that offer related services, like payroll and CRM.

But it's not true double-entry accounting. You can't get a comprehensive view of your company's finances because it lacks elements like a General Ledger, account registers and reconciliation (you can import expenses from your bank, but not incoming funds), and the required reports (there is a Balance Sheet, but you have to enter the numbers yourself because FreshBooks doesn't track all of them).

The most relevant news for you: The Accountant Center, added in August 2014. This is an online portal that gives you read-only access to clients' reports and journal entries. You can download the latter in IIF (desktop QuickBooks 2011 forward) or CSV formats.
The company is testing a merchant account with a small number of users, so you should soon be able to accept credit card payments on your invoices. Currently, FreshBooks supports PayPal, Stripe, and a number of other payment gateways. The company also recently updated its iPhone and iPad apps (it's available for the Android, too).

Kashoo
Kashoo Cloud Accounting
Vancouver, British Columbia
(888) 520-5274
www.kashoo.com
Price: Solo, $49 per year; Business, $199 per year (adds multi-user and accountant/bookkeeper access, payroll integration, multiple business support).

Kashoo
Kashoo is the newcomer in this group, but it beat its competition to the punch by producing a native iPad app years ago. It also recently announced a partnership with Paychex, providing the accounting element of Paychex Accounting Online, and Liberty Tax. Payroll integration here isn't as smooth as what's offered by companies who produce their own integrated payroll application.

But unlike FreshBooks, Kashoo is indeed based on double-entry accounting principles. It contains the requisite Chart of Accounts, reports, audit trail ("Activity"), etc. It displays registers and has a basic account reconciliation tool.

Kashoo's dashboard is structured differently than the competition's. Its right vertical pane lists totals for commonly-used accounts, and the left displays links to the site's functional areas, but the center is divided into eight tabbed mini-screens for entering income, invoices, expenses, etc. Individual income and expense pages for each transaction type contain more details.

Kashoo's Business version lets you share data and collaborate with your clients, as do others. But you'll find some tools often found in cloud-based accounting missing. There are no fields for classes or similar conventions in transaction forms; you categorize using a second Account field, which doesn't include typical options like Salesperson or Division.

There's no merchant account support, no inventory-tracking nor multiple price levels. It offers far fewer reports and less detail in forms and transactions than the competition. And it lacks purchase orders, time-tracking, and an Android version. Customization is weak. Kashoo's most positive attributes lie in its simplicity, navigational ease, attention to accounting requirements, and collaborative abilities.

QuickBooks Online
Intuit
Mountain View, Calif.
(650) 944-6000
www.quickbooks.com
Price: Simple Start, $12.95 per month; Essentials, $26.95 per month (adds bill-pay and multi-user support); Plus, $39.95 per month (adds inventory tracking, 1099 support).

QuickBooks Online
QuickBooks Online is the oldest accounting website reviewed here, and the most mature – but not by much. Xero, which only entered the market on this continent a few years ago – is growing rapidly, finding favor with many accounting professionals and small businesses.

QuickBooks Online has deficits, of course. Its online help system is woefully inadequate for new users. Multicurrency operations are not supported in the U.S. It doesn't offer all functionality included in Intuit's desktop versions. Major improvements – beyond the interface – have been slow to come in the last few years.

But overall, QuickBooks Online still has the edge. Based on double-entry accounting and built for non-accounting professionals, the site excels in practically every financial element it incorporates, offering superior customizability, comprehensiveness, and usability.

It integrates the records and transactions needed to manage the General Ledger, Accounts Receivable and Payable, Item-Tracking (not sophisticated inventory management, but it at least tracks stock levels), and the best integrated Payroll offered by any other vendor here (all states supported, automated payroll tax remittance, W-2 printing, etc.).

QuickBooks Online supports merchant accounts. It offers numerous ways to view data, and it shares financial information with hundreds of financial institutions, facilitating online banking and bill-pay. Report templates are plentiful and exceptionally customizable.

Its user interface is – arguably – the best offered by this group. The dashboard display key financial numbers (like account balances and overdue invoices), reminders of activities that need attention, and a vertical pane containing links to the site's primary functions.

Navigation within each area is clear and understandable. If your client needs more than QBO offers, its App Center probably has an add-on for it. And both iOS and Android apps are available.

Sage One
Sage Software
Irvine, Calif.
(866) 996-7243
www.sageone.com
Price: Sage One Invoicing, $9 per month; Sage One Standard, $14 per month (adds income/expense management, bank integration, unlimited collaborators, financial dashboard)

Sage One
Sage, of course, is well-known for its powerhouse accounting software and websites. At the bottom of its food chain, though, is Sage One. Using Sage One Invoicing, you're limited to creating and emailing estimates and invoices using the simple database of contacts, products, and services that you build. You can send reminders, track the status of invoices, and receive payments through Sage Payment Solutions or PayPal.

The Standard version may be the most bare-bones double-entry accounting system that you'll find. It's missing an integrated Payroll application, but it does contain a small subset of most of the features you'll find in sites like QuickBooks Online (in addition to what's found in Sage One Invoicing). There's a General Ledger, Chart of Accounts (accounts are called "categories"), and the core financial reports required. You can create Journal entries and set up a connection to your financial institution to download transactions.

Some forms are missing, like purchase orders and sales orders, and item and contact records are fairly slim. Your clients can create unlimited invoices and quotes, connect to a financial institution online, and collaborate with you. The site's dashboard isn't exceptional, but you can instantly see income and expenses, and profit to date, as well as a bank account balance and the top five unpaid invoices and open quotes.

Sage One Standard has a couple of features not typically found in online accounting: simple project and task management, and integration with Google Drive for backing up forms. No mobile apps have yet been developed.

Wave
Wave Accounting Inc.
Toronto, Ontario
(416) 521-9141
www.waveapps.com
Price: Free (fees for payments, payroll)

Wave
Wave has been around for roughly five years. It came out of the gate rather slowly, but in the last couple of years, it's bulked up to the point where it comes close to competing with the best paid cloud-based solutions in terms of the accounting territory it covers.

It's the real deal – double-entry accounting – and it's still free (except for payroll and payments). With the glaring exception of a lack of purchase order support, Wave almost matches the breadth, though not the depth and customization capabilities, of its most formidable competitors.

Wave's usability and navigational tools have improved significantly over the years. Its dashboard displays recent activity and a financial snapshot, presenting quick visuals (tables and charts) that highlight what you owe and what's due to you, as well as a two-year comparison of your income and expenses, and a breakdown of your business expenses. If you've connected Wave to your financial institution, those balances will appear here, too. A tabbed vertical pane on the left links you to the site's primary functions, and a tiny icon in the upper right opens your settings pages (sales taxes, customer/vendor/product records, guest collaborators, etc.).

There are 11 reports available at this writing, the critical financial reports required for double-entry accounting and a few others. Customization options are minimal. This pattern is evident throughout the site. Wave does an admirable job of including the accounting elements it does for free, but you won't get the level of detail and customizing that Xero and QBO offer.

Recent news: Wave now automates the process of submitting payroll taxes. This was a serious omission, and it completes the site's payroll app.

Xero
Xero Limited
San Francisco, Calif.
Phone number not available
www.xero.com
Price: Starter, $9 per month; Standard, $30 per month (adds payroll for up to five employees, 5GB file storage, unlimited bank transactions reconciled and unlimited invoices, bills); Premium 10 $70 per month (adds payroll direct deposit, 10GB file storage, multiple currency)

Xero
Xero represents probably the most interesting development in small business accounting in the last few years. The site was born in New Zealand several years ago, but in the last few years, it's been rapidly gaining acceptance in the U.S. And it's growing fast. In the last year, it has introduced purchase orders, launched payroll in a handful of states, integrated with Square, added reports and Smart Lists and additional bank feeds, and upgraded numerous features.

The site has probably incorporated more improvements in the last 12 months than the other five solutions reviewed here combined.
Xero looks like an accounting application, adding graphics and other visual touches only where necessary. The dashboard's user interface, navigational tools, and content set the tone for the entire site: All use space economically, are easily understood, and lead you to related screens where appropriate. Customer and vendor records are quite thorough, as are transaction forms.

There are some deficits. There are fewer reports than in QuickBooks Online, and they aren't nearly as customizable. No custom fields, either. You can't track the number of items in stock, and payroll is only available for seven states.

But this relative newcomer (in the U.S., at least) facilitates by-the-book double-entry accounting, adding an approval level for transactions, something no one else in this group does. It supports multiple currencies and multiple payment gateways. iOS and Android apps are available, and you can assign access levels to collaborative users.

Xero's site-based help goes beyond what the other applications reviewed here provide. The site is complex enough, though, that the application allows – and encourages – accountant support.

Kathy Yakal

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Kathy Yakal has been writing about personal and business technology since 1983, as an editor and writer at COMPUTE! Publications. She writes frequently for The Progressive Accountant on technology topics.She began freelancing and specializing in financial applications in 1988. Her columns, features, and reviews have appeared in publications including Barron’s, Kiplinger’s Personal Finance Magazine, and PC Magazine.