August 19, 2023

Top Accounting Software for a Marketing Agency (2023)

Contents

Top accounting software for a marketing agency

At some point, your marketing agency will need to invest in accounting software. 

Whether it's filing the agency’s tax returns, preparing its annual budget, or some other reason, accounting software is the foundation of sound financial management. It’s the infrastructure that agency owners rely on to make informed business decisions.

When set up properly, financial information from accounting software helps agency owners be forward thinking about their agency’s finances, allowing them to shift from reactive to proactive decision-making.

Automations, such as bank integrations and receipt scanning, will save hours of time over the course of a year. Controls within the software will support accurate accounting, ensuring that you’re capturing all tax deductions and making decisions based on reliable information.

Depending on your agency’s size and complexity, the benefits of accounting software are usually worth the subscription cost.

With the abundance of options, which accounting software is the best for your agency? In this guide, I’ll summarize the key features that a marketing agency should consider and provide my thoughts on the best accounting software for a marketing agency.

FYI, this article is part of my comprehensive accounting guide for marketing agencies.

Best accounting software for a marketing agency

Here are the best accounting software options for a marketing agency, based on accounting and automation features, scope of third-party integrations, and other factors. 

  • Best Overall: QuickBooks Online
  • Best QuickBooks Alternative: Xero
  • Best All-in-One Solution: FreshBooks
  • Most Affordable: Wave
  • Honorable Mention: Zoho Books

Continue reading to learn about the pros and cons of each software and how to select the best software for your agency.

Why should a marketing agency use accounting software?

Benefits of using an accounting software

I assume, since you’re reading this article, that you’re already convinced accounting software will benefit your agency.

However, if your agency is new with few clients, you probably don’t need accounting software. You can perhaps get by with spreadsheets. Your main focus at the moment should be finding clients.

At some point, though, your agency will outgrow spreadsheets. 

Your time spent manually inputting transactions would be better spent on more valuable projects, like finding new clients or delivering for existing clients. You’ll also start forgetting things like unpaid invoices or bills, costing you money and harming relationships with contractors and other vendors.

When you’ve reached this point, it’s time to consider cloud-based accounting software.

Accounting software saves you time

Automations come standard in most accounting software. Automated bank feeds, categorization rules, recurring transactions, receipt scanning: these are a few of automation features that you’ll find in the top software options.

By implementing a cloud-based accounting software, you can take advantage of automations that will reduce the amount of time you’ll spend on keeping your agency’s books up to date. You can devote the newfound time to more valuable endeavors such as client retention and acquisition.

Furthermore, perhaps at a later point, you’ll want to hire a bookkeeper or accountant to manage your books. Bookkeeping, while crucial to making sound business decisions, isn’t going to bring in more money for your agency. 

Most bookkeepers, if not all at this point in time, require their clients to use some kind of accounting software. QuickBooks is the most popular, but Xero and FreshBooks are also popular.

By implementing accounting software now, you’d progress toward working on your business, not in it.

Accounting software provides more accurate financial information

If you can’t trust your financial numbers, you’re setting yourself up for problems down the road. 

For example, an accurate tax return requires the underlying financials to be accurate.You wouldn't want to pay more tax than you should by underreporting your deductions due to missing deductions.

Moreover, accurate financials are indispensable for tracking budget-to-actual variances, cash flow forecasts, and other advanced financial planning tasks. By implementing accounting software, you’re building a foundation for informed decision making.

Accounting software mitigates the risks of created by inaccurate financials in two ways:

  1. The account reconciliation tool; and
  2. The enforcement of balancing transactions.

The reconciliation tool, if used consistently, will ensure that bank, credit card, loan, and other account balances agree to balances reported by your bank or financial institution. 

It’s a standard feature in most accounting software and probably the most important feature for accuracy.

Furthermore, when manually entering transactions, accounting software ensures that the sum of your income, expenses, and other transactions (i.e. liability & equity transactions) sum up to the total balances of your bank account. 

In other words, the accounting software prevents data entry errors that will cause your reports to be inaccurate.

Accounting software helps marketing agencies be more profitable

By implementing accounting software, your agency can:

  • More quickly invoice and collect payments from clients.
  • Track unpaid vendor/contractor bills to monitor spending and improve relationships.
  • Track and bill project expenses to improve cash flows.
  • Track and invoice staff hours to clients to maximize revenues.
  • Allocate project-level costs and revenues to identify top clients and service lines.

All these features help your agency be more efficient and profitable. However, not all accounting software offers these features, so you should carefully assess the software before moving forward.

How to select accounting software for a marketing agency

Whether it's for accounting or some other purpose, selecting a new software is a daunting task. It’s easy to experience analysis paralysis given the available options. Here’s my process for quickly selecting the best software.

  1. Identify necessary features: If the software doesn’t have these features, remove it from your list of options.
  2. Identify nice-to-have features: These features, while useful, wouldn’t automatically disqualify the software if they aren’t included.
  3. Review automation features: The software should have automation features that save time and maximize your value from the software.
  4. Review integration list: Confirm that the accounting software will integrate with software that you’re already using.
  5. Determine cost: For the software not crossed off your list, compare the cost of each option with its advantages relative to other options. 

Create a table or spreadsheet with a feature in each column. In the rows add each software option and evaluate the options based on each feature in the columns. Select the software that adheres to your budget while maximizing value based on its available features.

Key automation features for marketing agency accounting software

Time-savings is a key benefit of adopting accounting software for your marketing agency. Accounting software yields time-savings by automating routine tasks in your agency’s accounting process.

Key accounting software automation features

Automated transaction imports

Day-to-day bookkeeping mostly involves importing and categorizing bank activity, so automating this task is perhaps the most important automation feature. 

Most, if not all, accounting software facilitate automated imports by connecting directly with your bank and importing transactions in real-time. 

You should confirm that your agency’s bank and credit card providers integrate with your selected accounting software prior to moving forward with implementation.

Transaction categorization rules

Once a transaction is in your accounting system, it should be coded to the appropriate account so that it’s accurately reported in your financials. 

Most transactions have straightforward categorization rules. For example, software subscription costs will almost always be coded to the software account. 

That’s where categorization rules come into play. You can set logic in the accounting software that will automatically code transactions based on preset criteria. For example: “If Vendor = Adobe then Account = Software”

Recurring transactions

If you find yourself sending the same invoice to the same client each month, you can use the recurring transaction feature to automatically create that invoice on a preset schedule, eliminating time spent on data entry. 

This feature also works for other transaction types, such as bills, expenses, bank transfers, and others. 

For example, if your monthly software bill is always the same amount, you can set up a recurring bill for the same amount and populate it with information from the actual bill each month, such as the invoice number, and attach the .pdf to the bill in your accounting software.

Document scanning

Maintaining good documentation is important for taxes and retrospective research into your business finances. 

Unfortunately, it takes a lot of time to match receipts to transactions in the accounting system. You can automate the process by using document scanning software to scan documents, such as receipts and bills, and automatically create transactions.

If your software doesn’t include this feature, but you still want it, you can use a third party scanning software such as Dext to collect, scan, and push documents into your accounting software.

Required features for your marketing agency’s accounting software

Agencies have unique accounting needs. Below I’ve listed a few of the most important features for a marketing agency to consider. Feel free to add to this list based on the scale and intricacies of your agency.

Required features for a marketing agency's accounting software

Client Invoices & Payments

By using Invoices, you’ll know the income your agency has earned but hasn’t yet collected. You’ll have a snapshot of what’s owed to your agency, letting you know who to pester for payments. 

They also simplify the collections process by providing clients with a payment method directly in the invoice. You can even use recurring invoices to automatically collect payments from your clients.

Furthermore, invoices are a step toward implementing the accrual method of accounting. Mature agencies should use the accrual method because it facilitates advanced financial analyses such as cash flow forecasting and project profitability. 

Vendor Bills & Payments

The ability to track open bills in your accounting system will reveal what remains unpaid to your vendors, contractors, and employees. People like to be paid on time, so tracking bills will improve your relationships with each.

You can even pay bills directly through some software. They’ll collect a payment method (electronic or check) from the payee and pay them on your behalf with the click of a button, saving you time.

Similar to invoices, inputting bills to your accounting system is a step toward the accrual method of accounting, which unlocks proactive financial planning such as forecasting and analyses of project profitability.

Billable expense tracking

You might incur expenses that need to be billed back to clients. Billable expenses, unfortunately, are difficult to track because they are bunched together with non-billable activity on your credit card or bank statements.

Accounting software partially solves this problem by allowing a bookkeeper to to tag transactions as billable to a client when reviewing bank activity. When preparing the client’s invoice, you can push the tagged transactions to the invoice, ensuring you get reimbursed.

Time Tracking

Whether or not your agency bills on an hourly basis, tracking time spent on specific projects and clients allows you to analyze the profitability of a specific project. 

Some accounting software offers time tracking as a native feature, meaning that you don’t need to import time from another software. If you don’t like the native time tracking feature, look for an integration with a time tracking software that you like.

Project accounting

As a marketing agency, you’ll want to know which projects are your most profitable ones. To answer that question you’ll need to use project accounting.

Project accounting entails matching income and expenses with specific client projects, allowing you to see the profitability across individual projects, clients, services, employees, and other dimensions.

You’ll usually need to purchase an advanced accounting software subscription to unlock the project accounting feature.

Nice-to-have accounting software features

Although they’re important, the absence of these features aren’t dealbreakers.

Other features to consider

Accountant-access

If you work with a bookkeeper or accountant, whether internally or externally, you should confirm that the accounting software permits accountant-level access. 

Accountant access usually includes features that are available only to accountants, such as bulk categorization and tax preparation tools. By using a software that allows accountants to access your software, you’re more likely to find a professional that’s familiar with your software.

An independent tax preparer can also review your accounting at tax-time and pull the reports they need, saving you and them time.

Customer Support

At some point you’ll run into a software issue and need to contact customer support. Take a look at each software’s customer support availability to ensure that you can get help when you need it. Phone support is ideal, but 24/7 chat support is also helpful for resolving time-sensitive issues.

Cloud-Based

It goes without saying that most accounting software is now accessible through the internet. QuickBooks Desktop is an option if you want to run accounting software from your computer. However, if you’re hoping to hire an outside bookkeeper who will work remotely, most prefer to work through cloud-based accounting software.

Mobile-App

Depending on how you use the accounting software, the availability of a mobile app shouldn’t be a deal breaker. A mobile app is useful if you need to track time and mileage, capture receipts, or invoice while out and about. If you’re not already using these features, you’ll probably never need a mobile-app.

Key integrations for a marketing agency’s accounting software

If your agency uses a CRM or project management software (or both), you’ll benefit from integrating the software to your accounting software.

For example, you can automatically sync invoices and client payments from one system to another to avoid duplicating data entry. Take a look at the software you’re already using to see which accounting software it integrates with, if any.

If your agency will eventually hire employees, you should also ensure that it integrates with a payroll system that you like. 

Some accounting software offer payroll as an additional service and it’s built into the software. But if there’s another payroll software you like, such as Gusto, confirm that it integrates with your selected accounting software.

Review of Accounting Software for Marketing Agencies

Here’s my analysis of the best accounting software for marketing agencies.

QuickBooks

QuickBooks Pros & Cons

Love it or hate it, QuickBooks is the standard accounting software for small- and medium-sized businesses in the United States. It’s widely used by accountants and bookkeepers and is the premier integration partner for third-party software.

Other software your agency uses probably already integrates with QuickBooks, keeping financial information in sync between the two. For example, if you invoice clients from your project management software, the project management software can sync the invoices to QuickBooks.

QuickBooks has useful advanced accounting features for mature agencies. You can create and send invoices using time and billable expenses tracked directly in QuickBooks, or set up recurring invoices for fixed-fee projects.

Larger agencies can use the project-based accounting feature to allocate income and expenses to specific projects and analyze their profitability. By tracking profitability at the project-level, you can uncover financial insights across services and clients, allowing you to focus on optimizing the underlying cost and revenue drivers.

QuickBooks is also the leader in accounting automation features. It includes bank integrations, categorization rules, recurring transactions (e.g. invoices, bills, etc.), document scanning, and numerous other integrations that decrease the amount of time you’ll spend on accounting tasks.

QuickBooks support is available 24/7 by chat and by phone during daytime hours. This, in addition to the impressive breadth of automation features and integration partners, makes QuickBooks’ relatively high subscription price an attractive choice for larger agencies.

Xero

Xero Pros & Cons

Xero is an attractive alternative to QuickBooks. It offers a similar set of features, including all the  advanced accounting features, at a lower price point.

Unlike QuickBooks, Xero doesn’t limit the number of users on your agency’s QuickBooks subscription. This would be an advantage for larger agencies who might have project staff involved in the accounting workflows and managing project finances through the software

Xero’s main disadvantage is that support is only available by chat, whereas QuickBooks and Freshbooks include phone support. This can be frustrating when you’re trying to close the books on a monthly basis and experience a technical issue preventing you from doing so.

In its cheapest plan, Xero limits the number of invoices your agency can send per month. So, if your agency exceeds that limit, Xero might actually end up being more costly than QuickBooks since you’d need to upgrade to the more expensive plan.

In general, though, Xero is a formidable QuickBooks alternative for a small or large agency wanting a feature-rich accounting software that plays nicely with its existing software and apps.

FreshBooks

FreshBooks Pros & Cons

FreshBooks blends project management and accounting software by offering a CRM and client portal that integrates with its accounting features. It’s a solid choice for an agency looking to cut software costs or streamline workflows.

Like QuickBooks and Xero, FreshBooks offers useful agency accounting features such as project-based accounting, time & expense tracking, and invoicing. These features integrate with the project management features and might allow your agency to reduce the number of apps that it’s using.

Freshbooks’ automation features are less powerful than what you’d get with QuickBooks and Xero, but it still offers key automations such as bank integrations and recurring invoices. You’ll also find fewer accountants and bookkeepers who are familiar with FreshBooks and find fewer third-party software integrations in its app store.

If you’re looking at FreshBooks, consider whether you’ll like using the project management features, since that’s one of its main selling points. Like Xero, FreshBooks also limits the number of invoices your agency can send, so confirm that you won’t need to upgrade to a more expensive plan.

Zoho Books

Zoho Books Pros & Cons

Zoho Books is an attractive choice for fans of the Zoho ecosystem. Like FreshBooks, it offers an integrated system for connecting other agency workflows to the accounting process, as long as your agency uses the other Zoho apps.

Zoho Books also includes all the accounting features that would be useful to a large, growing agency. You can track time and billable expenses, allocate income and expenses to projects, and invoice clients through the software.

Zoho Books only integrates with one third-party payroll software other than the Zoho payroll service. But, if your agency already operates within the Zoho app network, Zoho Books could be a winning choice.

Wave

Wave Pros & Cons

Unlike its competitors, Wave doesn’t require a monthly subscription fee. Instead, it charges a transaction fee when collecting client payments through Wave.

Wave doesn’t include advanced accounting features such as project-based accounting that are useful to large agencies. It also lacks time-saving automation features such as categorization rules that you’ll find in competing software.

Because of its simplicity and pay-per-invoice pricing model, Wave is an attractive choice for freelancers. It’s also an attractive choice for new agency owners who don’t want to become lost in the weeds of setting up accounting software.

Accounting software migration & setup

Whether you were previously using spreadsheets, another accounting software, or nothing at all, you’ll need to import historical data into your new software. 

The migration process requires careful planning, but here’s an overview of the process.

  1. Export backup data from old software: Most software will allow you to export a backup file. If you don’t have the option, export the Trial Balance and General Ledger reports at a minimum.
  2. Select cutoff date: January 1st of the current year is usually an appropriate cutoff date for importing bank activity but you can select an earlier date if needed.
  3. Set up the chart of accounts: Review the chart of accounts in your new software prior to importing data to ensure that the level of detail is sufficient.
  4. Import clients and vendors: Import clients and vendor lists into your new software to avoid having to create new profiles for each.
  5. Import invoices and bills: Import invoices and bills from your old software to ensure that your accounts receivable and payable balances are accurate in your new software.
  6. Establish opening balances: Using the Trial balance report from your old software, post a journal entry with account totals dated the day before in your new software.
  7. Connect bank & credit card accounts: Connect your agency’s bank accounts to the accounting software, taking care not to import data prior to your selected cutoff date.
  8. Categorize bank activity: Code or match bank transactions to the appropriate account, vendor bill, or client invoice.
  9. Validation: Once imported, compare account totals in the new accounting software to the old software using the Trial Balance report. Investigate any discrepancies.

You can also use a conversion assistant software that will import data from your old software to your new software. This would be useful if you have a significant amount of historical activity to import and categorize for the current year or prior years. 

Need help selecting an accounting software?

If you’d like to talk accounting software with a CPA who understands marketing agency accounting, please get in touch using the contact form below. I’ll help you make a selection based on what makes the most sense for your agency, based on cost and features. 

This content is for informational purposes only and does not constitute legal, business, or tax advice. You should consult your own attorney, business advisor, or tax advisor regarding matters mentioned in this post. We take no responsibility for actions taken based on the information provided.

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