The best accounting software for a small business in Canada is the one that tracks GST/HST correctly, connects to your bank, handles payroll if you have employees, and lets your accountant work in the same file. For most small businesses that means a cloud product such as QuickBooks Online, Xero, FreshBooks or Wave, chosen for how your business actually runs rather than for the brand.
This guide covers what the software needs to do for CRA purposes, how the four main cloud options differ based on what each vendor publishes on its own website, and how to set up your file so year-end is easier. One disclosure: BBA Tax keeps clients’ books in QuickBooks, so we are not neutral, which is why we have stuck to facts each vendor publishes.
Table of Contents
- What your accounting software has to handle in Canada
- QuickBooks Online, Xero, FreshBooks and Wave compared
- QuickBooks Online
- Xero, FreshBooks and Wave
- How to choose the right fit
- Set up your file properly from the start
- How BBA Tax helps
- Frequently Asked Questions
Key Takeaways
- Your software should track GST/HST, reconcile your bank accounts and keep records the CRA can read electronically, because business records generally have to be kept for six years.
- QuickBooks Online has five Canadian plans, from Lite to Advanced, and a payroll add-on that calculates CPP, EI and income tax and produces T4s and Records of Employment.
- Xero has three Canadian plans; payroll runs through connected apps such as Wagepoint, PaymentEvolution and Payworks.
- FreshBooks centres on invoicing and time tracking, with plans limited by the number of billable clients.
- Wave’s Starter plan is free, and its payroll add-on is available in every province and territory except Quebec.
What your accounting software has to handle in Canada
Before comparing brands, list what the software has to do for your business and for the CRA.
- GST/HST. If you are registered, you need to track the tax you charge and the tax you pay, so you can claim input tax credits. GST/HST returns must be filed electronically for reporting periods ending in 2024 and later, with few exceptions.
- Bank reconciliation. Matching every transaction to your bank and credit card statements is what makes the numbers reliable at year-end.
- Invoices and bills. Sales and expenses should be recorded as they happen, with receipts attached.
- Payroll. With employees, you need source deductions for CPP, EI and income tax, remittances to the CRA, and T4 slips. The 2026 T4s are due by March 1, 2027, and more than five slips must be filed electronically. Our guide to setting up small business payroll covers the steps.
- Year-end reports. An income statement and balance sheet feed your T2125 or your T2 corporate return.
- Record keeping. The CRA generally requires you to keep records and supporting documents for six years from the end of the last tax year they relate to, and electronic records must be readable by CRA software.
Not registered for GST/HST yet? Our guide to GST/HST registration explains when you must register.
QuickBooks Online, Xero, FreshBooks and Wave compared
All four are cloud-based and sold by subscription. This table uses only what each vendor states on its own Canadian pricing or product pages, checked in October 2026. Plans change often, so confirm on the vendor’s site before you buy.
| Software | Plans in Canada | Payroll in Canada | Worth knowing |
|---|---|---|---|
| QuickBooks Online | Lite, EasyStart, Essentials, Plus and Advanced (1 to 25 users) | Add-on that calculates CPP, EI and income tax, remits to the CRA, and produces T4s and ROEs | Sales tax tracking on every plan; inventory tracking on Plus and Advanced; 30-day free trial |
| Xero | Starter, Standard and Premium | Through connected apps (Wagepoint, PaymentEvolution, Payworks) | Starter is limited to 20 invoices and 5 bills; multiple currencies on Premium; 30-day free trial |
| FreshBooks | Lite, Plus, Premium and Select | PaymentEvolution payroll add-on | Lite allows 5 billable clients and Plus 50; bank reconciliation, double-entry reports and accountant access start on Plus; 30-day free trial |
| Wave | Starter (free) and Pro | Add-on in every province and territory except Quebec, with CRA remittances and T4 and T4A slips | Automatic import of bank transactions is on Pro |
QuickBooks Online
QuickBooks Online is Intuit’s cloud accounting software. Its Canadian plans run from Lite and EasyStart, for one user, up to Advanced, for up to 25 users. Intuit says sales tax is calculated and tracked so you can file with the CRA, and inventory tracking starts on the Plus plan.
QuickBooks Payroll can be bought on its own or bundled with QuickBooks Online. Intuit says it calculates CPP, EI and federal or provincial income tax, files and remits payroll taxes to the CRA or Revenu Québec, and generates T4s and Records of Employment. That keeps accounting and payroll in one system, which simplifies year-end.
Xero, FreshBooks and Wave
Xero, FreshBooks and Wave differ most in how they handle payroll and in the limits on their entry-level plans.
Xero
Xero has three Canadian plans: Starter, Standard and Premium. Starter is limited to sending 20 invoices and entering 5 bills, Standard removes those limits, and Premium adds multiple currencies. In Canada, Xero runs payroll through connected apps such as Wagepoint, PaymentEvolution and Payworks, and the results flow into Xero. Xero says it connects with more than 1,000 apps.
FreshBooks
FreshBooks centres on invoicing, estimates, proposals and time tracking. Its Canadian plans (Lite, Plus, Premium and Select) are limited by billable clients: 5 on Lite, 50 on Plus, and unlimited on Premium and Select. Double-entry accounting reports, bank reconciliation and accountant access start on Plus. Payroll is offered through a PaymentEvolution add-on.
Wave
Wave’s Starter plan is free and covers unlimited invoices, estimates, bills and bookkeeping records. The Pro plan adds automatic import of bank transactions. Wave’s payroll add-on is available in every province and territory except Quebec, handles CRA remittances, and produces T4 and T4A slips. A free plan can work for a very small business with simple books, but without bank imports you will do more data entry.
Setting up QuickBooks, or catching up on a file that’s fallen behind? BBA Tax’s bookkeepers work in QuickBooks and can set up or clean up your file. Book a free intro call.
How to choose the right fit
Start from how your business runs, not from feature lists.
- A sole proprietor with a few clients mainly needs invoicing, expense tracking and GST/HST. An entry-level or free plan may be enough, as long as it produces clean year-end reports.
- A business with employees should decide first how payroll will run: inside the accounting software, or in a connected payroll app.
- A business that holds inventory needs inventory tracking, which is only on some plans (on QuickBooks Online, Plus and Advanced).
- A business that bills in US dollars needs multi-currency support, which some products limit to higher plans (on Xero, Premium).
- Anyone working with an accountant or bookkeeper should confirm the plan allows accountant access, and ask which software they already use.
Use a free trial or free plan with real transactions from a recent month before you commit. Each of these vendors offered one when we checked.
Set up your file properly from the start
Good software only helps if it is set up correctly. Before you enter your first transaction:
- open a separate business bank account and credit card, and connect them (our guide to separating personal and business expenses explains why);
- set up GST/HST with your registration date and filing frequency, so the tax on each sale and purchase is tracked;
- build a chart of accounts that lines up with the categories on your tax return;
- enter opening balances if you are switching software partway through a year; and
- reconcile every bank and credit card account each month, attaching receipts as you go.
Our bookkeeping tips for small business owners cover the monthly routine in more detail.
How BBA Tax helps
BBA Tax is an Ottawa accounting firm led by Karim Bitar, Lead Accountant and ELITE Certified QuickBooks ProAdvisor. Our bookkeepers keep clients’ books in QuickBooks, from setup and monthly reconciliations to GST/HST filing and year-end, and we run payroll through QuickBooks, including source deductions, T4s and WSIB filings. See our bookkeeping services (from $1,225 a year) and our payroll services.
Frequently Asked Questions
What is the best accounting software for a small business in Canada?
There is no single best choice for everyone. Look for software that tracks GST/HST, connects to your bank, handles payroll if you have employees, and lets your accountant work in the same file. QuickBooks Online, Xero, FreshBooks and Wave each meet some or all of those needs, depending on the plan you choose.
Is there free accounting software in Canada?
Wave’s Starter plan is free and covers invoices, estimates, bills and bookkeeping records. Automatic bank imports are on its paid Pro plan, and payroll is a paid add-on. QuickBooks Online, Xero and FreshBooks offer 30-day free trials rather than free plans, so you can test them with real transactions.
Does QuickBooks Online handle GST/HST?
Yes. Intuit says QuickBooks Online calculates and tracks sales tax so you can file with the CRA, and sales tax features are listed on all of its Canadian plans. The results still depend on correct setup, such as your registration date, your filing frequency and the tax codes used on each transaction.
Can I run payroll in Xero in Canada?
Not inside Xero itself. In Canada, Xero says payroll runs in a connected app and the results flow into Xero. It names Wagepoint, PaymentEvolution and Payworks as payroll apps that connect. QuickBooks Online and Wave sell their own Canadian payroll add-ons, so check which setup suits your team.
How long do I need to keep my business records?
Generally six years from the end of the last tax year they relate to. You can keep them electronically, as long as the CRA can read them with its software. Cloud accounting software helps, but keep the receipts and supporting documents too, not just the transactions recorded in the software.
