How to Choose Accounting Software for a Small Business in Canada

Accounting software is one of the first tools most new businesses pay for, and one of the hardest to replace once a year of invoices, bank transactions and tax codes sits inside it.

The right choice depends less on the brand and more on how your business earns money, which sales taxes you collect, whether you have employees and who keeps the books. Here is how to work out what you need, compare options fairly and set the system up properly.

Start with how your business runs

Before looking at products, write a one-page list of requirements so demos and free trials stay focused on your business, not a vendor's favourite features.

• How you get paid: invoices with payment terms, card payments in person, an online store, or a mix.

• Sales taxes: whether you are registered for GST/HST, and whether you also collect provincial sales tax.

• What you sell: services billed by the hour or project, products held in inventory, or both.

• People: whether you have employees now or expect to hire within a year.

• Currency: whether you bill customers or pay suppliers in US dollars or other currencies.

• Who does the work: you, a bookkeeper or both, and what your accountant needs at year-end.

Must-have features for a Canadian small business

• Sales tax tracking. The software should let you set up GST/HST codes, and PST codes where they apply, and report tax collected and paid for each period. At the time of writing, a GST-registered business in Edmonton generally charges 5% GST on taxable sales made in Alberta, while a business selling into another province may also have to collect Saskatchewan's 6% PST, which is registered and reported to the province separately. Rates can depend on where a sale is made, so the software should handle more than one.

• Invoices your customers can use. Business customers need certain details on your invoices to claim input tax credits. At the time of writing, invoices of $100 or more need your GST/HST registration number, and invoices of $500 or more need further details, such as the buyer's name and payment terms.

• Bank and credit card feeds, plus a simple way to reconcile every account each month.

• Receipt capture, ideally from a phone, with the image attached to the transaction.

• Standard reports: profit and loss, balance sheet, and lists of who owes you and whom you owe.

• An adjustable chart of accounts that matches how your accountant prepares your return.

• Separate logins and permissions, so your bookkeeper or accountant never needs your password.

• An audit trail and full data export, so you can see who changed what and download complete records in a standard format.

Features that depend on your business

• Payroll. Employers must deduct CPP contributions, EI premiums and income tax from pay, remit them to the CRA and report on T4 slips by the last day of February of the following year. Some programs include payroll; others connect to a separate service. The CRA's free Payroll Deductions Online Calculator is a handy way to check the numbers.

• Inventory. If you hold stock, check whether tracking quantities and costs is included, limited or a paid add-on.

• Projects and time. Service businesses that bill hourly may want time tracking and job-by-job profit reports.

• Integrations. Confirm that your payment processor, point-of-sale system or online store connects, then test that sales, fees and sales tax land in the right accounts.

Check records, security and privacy

• The responsibility stays with you. The CRA's electronic record-keeping guidance makes clear that gaps in your software do not reduce your duty to keep adequate records.

• Records must stay readable. The general rule is to keep records for six years from the end of the last tax year they relate to, and records kept electronically must remain in an electronically readable format even if you also keep paper copies. Ask what happens to your data if you cancel or downgrade.

• Ask where your data is stored. The CRA expects records to be kept at your place of business or residence in Canada unless it gives written permission otherwise, and it does not treat records stored outside Canada and accessed online as kept in Canada. If a provider's servers are elsewhere, review the CRA's guidance or ask your accountant.

• Check before you shred paper receipts. The same guidance sets conditions for scanning paper records and disposing of the originals, including a log of what was scanned, when and by whom.

• Protect personal information. Under Canadian privacy law, you remain responsible for customer information a provider stores for you, and the federal Privacy Commissioner expects businesses to tell people if their information may be processed outside Canada.

• Use two-step verification and give each person only the access they need.

Test before you commit

1. Shortlist two or three options that meet your must-haves.

2. Ask your accountant or bookkeeper which systems they work with and which reports they need.

3. Run a free trial with a real month of activity: connect a bank feed, send an invoice, enter bills, run a sales tax report and reconcile.

4. Add up the full monthly cost, including payroll, extra users, payment processing and add-ons.

5. Check support hours and read the terms on data ownership, export and price changes.

Set it up properly from day one

• Pick a clean start date, such as the first day of your fiscal year or of a month, and enter opening balances.

• Set up your chart of accounts, tax codes, invoice template and bank connections before entering transactions.

• Review automatic categorization rules so one mistake does not repeat for months.

• Lock each period once it is reconciled and reviewed, if the software allows it.

• Write a short weekly and monthly checklist so anyone who helps you follows the same steps.

• If you change systems later, keep your old records accessible and readable, as the CRA expects.

How First Global Citizen can help

We help founders and small-business owners put practical systems behind their numbers. For accounting software, that can mean turning your needs into a requirements list, comparing options against it, planning the setup and building a simple weekly and monthly routine. Our self-paced online courses, including one on managing money and budgets, and our mentoring help you understand and use your own financial information.

Each engagement is quoted as a fixed fee in a written proposal, so you know the scope and cost before work begins. We do not prepare tax returns or financial statements, or give tax or accounting advice; when you need that help, we coordinate with independent licensed professionals. To talk about your setup, book a free consultation.

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This article is general information only. It is not legal, tax, accounting or financial advice. Fees and requirements can change, so confirm current details with the relevant government agency or registry. For advice about your situation, consult a qualified professional.