Finding the right accounting software is no easy task. With so many options to choose from, it can be overwhelming to determine which solution best fits your business needs.
That's why in this post, we're going to cut through the noise with an in-depth review of Xero - one of the most popular cloud-based accounting platforms on the market.
You're going to learn all about Xero's key features, integrations, pricing, and how it compares to competitors like QuickBooks Online. By the end, you'll have a clear sense of whether Xero is the right pick for your financial management needs.
Introduction to Xero
Founded in 2006 in New Zealand by Rod Drury, Xero offers cloud-based accounting software tailored for small businesses. As one of the first solutions of its kind, Xero aimed to provide an intuitive platform to track expenses, invoice customers, reconcile bank transactions, and access real-time financial reports.
Key capabilities that set Xero apart include:
Origins and History
Xero launched in 2006 as one of the first cloud-based accounting platforms designed specifically for small businesses. Founder Rod Drury recognized the need for an affordable, user-friendly solution to help small business owners gain financial visibility and simplify accounting.
The software was initially rolled out in New Zealand and Australia before expanding to other markets like the UK, the United States, and Southeast Asia. Over the past 15+ years, Xero has focused on building tools to automate tasks like bank reconciliation, provide access to real-time data, and integrate with hundreds of business apps.
Key Capabilities
- Invoicing: Customize, send, and track invoices directly through Xero. Get paid faster with online payment links.
- Expenses: Capture receipts and track spending to simplify expense claims and reporting.
- Bank Reconciliation: Automatically import and match transactions from bank accounts.
- Reporting: Build dashboards with real-time data on cash flow, profits and losses, account balances, and more.
- Payroll: Pay employees and file taxes directly in Xero with connected payroll services.
- 800+ Integrations: Connect apps for payment processing, CRM, inventory management, and more.
Top Benefits
For small businesses, Xero provides:
- Increased productivity from digitized processes and automation
- Real-time financial visibility to aid data-driven decisions
- Scalable platform that grows alongside businesses
- Integration with hundreds of business apps through Xero's open API
With robust accounting tools tailored to small business needs, Xero stands out as an Editors' Choice cloud accounting solution.
Interface and Ease of Use
Dashboard and Navigation
Xero's dashboard provides an intuitive overview of key accounting modules and financial reports. The navigation menu uses clean icons and descriptive labels to access areas like accounts, contacts, reporting, and settings. Compared to QuickBooks, Xero's interface feels more modern with its minimalist design, making it easier for new users to get started.
The dashboard displays graphical snapshots of cash flow, account balances, upcoming bills, and invoices due. You can customize widgets to focus on the metrics you care about most. The navigation menu stays fixed on the left while working so you can quickly jump between tasks. Overall, Xero makes routine accounting work more visually appealing.
Setting Up and Customizing
When first setting up Xero, you step through sections to connect bank accounts, add contacts, configure invoices, and establish reporting groups. Helper bubbles provide tips for each section without feeling intrusive. Xero offers over 800 account and tax codes to handle scenarios from multiple countries and entities.
Under account settings, you can fine-tune options for tracking payments, managing bills, controlling access permissions, and automating reconciliations. This flexibility helps Xero adapt to a wide range of accounting needs while still maintaining ease of use. Custom invoice templates, tailored reporting groups, and dashboard widgets keep things tailored to your business.
Mobile App Experience
Xero provides iOS and Android apps so you can manage accounting on the go. The apps focus on key tasks like snapping photos of receipts, reconciling transactions, viewing reports, and sending invoices. Although not as full-featured as the web interface, the apps cover critical workflows for business owners and solo accountants.
The mobile dashboard gives quick access to bank balances, account charts, and budget overviews. Dedicated sections help you manage daily bill payments, track mileage, or check gross margins across jobs. Overall, Xero's mobile experience extends its ease of use to help keep small businesses running smoothly.
Key Accounting Modules
Xero provides robust accounting functionality to manage all critical financial operations for small businesses. Here is an overview of some of the key modules:
Invoicing and Payments
Xero makes it simple to create professional invoices, accept online payments, and track payments. Key features include:
- Customizable invoice templates
- Online payment processing with Stripe and PayPal integrations
- Automatic payment reminders and late fees
- Bank account reconciliation
With a few clicks you can generate an invoice, email it directly to a customer, and get notified when they view it or make a payment. This automation saves time over manual processes.
Expense Claims
The expense claims module enables employees to easily submit expenses, and makes managing and reimbursing those expenses simple. You can:
- Create an expense policy outlining what is reimbursable
- Employees can snap photos of receipts and submit them for approval
- Easily approve or reject claims
- Reimburse employees all at once via direct deposit
By digitizing expense reporting, finance teams can save hours typically spent on manual data entry and paperwork.
Financial Reports
Xero offers standard real-time financial reports as well as custom reporting. Key reports include:
- Balance sheet, profit and loss, accounts receivable, accounts payable, and cash flow statements
- Gross profit margins by product line or region
- Comparison of financial metrics month-over-month or year-over-year
- Customizable reports filtered by date, location, customer, product, etc.
These insights help managers understand their business performance and make data-driven decisions. Custom reports allow tailoring analysis to your specific business needs.
Add-ons and Integrations
Xero offers integrations with many popular third-party apps and services to extend its accounting and financial management capabilities. These add-ons streamline workflows and provide easy access to additional tools tailored for specific business needs.
Top App Integrations
Some of the most useful Xero integrations include:
-
Payment processors like Stripe, PayPal, and Square allow easy invoice payment acceptance and bank transfers. This automates accounts receivable workflows.
-
CRM platforms like Salesforce synchronize contacts, quotes, and invoices between systems. This consolidates customer data.
-
Inventory and order management tools like Dear Inventory and ShipStation connect sales channels and update stock levels in Xero. This saves manual effort.
-
Business intelligence apps like Fathom pull reports from Xero to visualize financial data. This enables data-driven decisions.
-
Payroll services like Gusto can connect directly to Xero to streamline payroll tasks and eliminate double data entry.
Industry-Specific Tools
Xero also offers various vertical-specific solutions:
-
For retail businesses, add-ons like Vend integrate point-of-sale systems with accounting.
-
Nonprofits can use CauseVox to manage fundraising campaigns directly in Xero.
-
Apps like Tradify help trades businesses track jobs, manage quotes, and invoice from the field.
-
Hospitality tools like Restaurant365 provide advanced reporting and inventory management.
Implementation Partners
Leading professional services firms that offer Xero implementation and consulting include:
-
Accenture: Global management and tech consulting firm with extensive experience in cloud ERP deployments.
-
Wolters Kluwer: Tax, accounting, and audit consulting, including specialized support for major ERP switchovers.
-
PKF: Accounting network providing advisory services to transition finance functions to Xero's platform.
These partners help manage major organizational changes to processes and systems when adopting Xero's software. Their expertise helps ensure smooth deployments.
sbb-itb-be9f1e0
Pricing Options
Xero offers three pricing tiers to meet the needs of small, growing, and enterprise businesses:
Starter
The Starter plan is Xero's basic offering for early-stage businesses. Key details include:
- Up to 5 employee logins
- Send up to 20 invoices per month
- Track bank transactions from 1 account
- Basic reporting
The Starter plan is best for solopreneurs and very small teams who need to track income and expenses. However, features are limited compared to higher tiers.
Standard
Xero's Standard pricing plan adds capabilities such as:
- Unlimited invoices
- Multi-currency support
- Approvals workflow
- Project tracking
- 50 bank transaction imports per month
The Standard tier suits the needs of most small businesses looking to manage workflows efficiently. It removes limits on core financial tools while adding more users and features.
Premium
Premium is Xero's top-level pricing package. It includes:
- Unlimited logins and bank imports
- Advanced analytics and reporting
- Automated workflows with 100+ apps
- Multi-company support
- Custom roles and permissions
The Premium plan enables large and enterprise teams to customize Xero extensively to their accounting needs. It's the best choice for complex financials across entities.
Customer Support
Xero provides robust customer support through various channels to help users get the most out of the software.
Knowledge Base
Xero offers an extensive knowledge base with helpful articles and tutorials that provide step-by-step instructions on using key features. Users can search for solutions or browse by category to find answers to common questions.
The knowledge base simplifies troubleshooting by breaking down complex tasks into easy-to-follow steps. For example, users can access guides like "How to reconcile a bank account" that walk through the entire process from start to finish.
Overall, Xero's searchable knowledge base empowers users to self-serve information and resolve issues independently.
Community Forums
Xero hosts community forums where users can post questions and engage in discussions with other customers and experts.
The forums facilitate peer-to-peer knowledge sharing. Users can search existing threads or start a new one to get input from the community. More experienced members often provide tips and advice to help troubleshoot problems.
Xero also has dedicated staff monitoring the forums to weigh in with official responses. The combination of peer and employee expertise makes the forums a useful resource.
Direct Support
For issues that require one-on-one assistance, Xero offers support via email, live chat, and phone. Users can submit tickets through the help center and expect reasonably quick responses from knowledgeable representatives.
Chat support has the added benefit of real-time feedback, allowing users to get immediate answers while working in the software. Phone assistance is best for complex troubleshooting when screen sharing or walking through steps is necessary.
Xero's stellar customer service reputation shows their commitment to helping users maximize the value of the platform. Their multi-channel support system enables customized assistance based on individual needs and preferences.
Competitor Comparison
QuickBooks Online
QuickBooks Online (QBO) is one of the top competitors of Xero. Here is how the two solutions compare:
- Ease of use: Xero has a more intuitive and user-friendly interface compared to QBO. Its dashboard allows for easy access to key financial data. QBO can have a steeper learning curve.
- Reporting: Both platforms provide custom report building, but Xero has more flexible options with over 30 report templates available. This allows better financial insights.
- Inventory management: QBO offers more advanced inventory tracking capabilities suited for manufacturing and wholesale businesses. Xero's inventory features cater more towards retail.
- Payroll: QBO provides built-in payroll for the US, while Xero offers integrations with external payroll partners like Gusto. For international payroll needs, Xero has wider coverage.
- Mobile apps: Xero and QBO both have iOS and Android apps. However, Xero offers offline access and has Apple Watch integration. This allows for data access even without an internet connection.
- Third-party integrations: Xero has over 800+ app integrations available on its marketplace. QBO also has a large integration ecosystem, but some users have noted syncing issues.
Overall, Xero stands out with its user experience and reporting capabilities. But QBO may suit larger product-based businesses better. For small businesses and freelancers, Xero provides the edge regarding features and integrations.
FreshBooks
When compared to FreshBooks, Xero has some advantages and disadvantages:
- Invoicing: FreshBooks offers more customizable invoice templates and automated payment reminders. But Xero provides recurring invoicing and online payment options.
- Expenses and billing: Xero has dedicated modules to track expenses and billable hours. FreshBooks lacks these advanced functions.
- Reporting: Xero has powerful reporting features for actionable business insights. FreshBooks only offers basic reports.
- Inventory and POS: FreshBooks has no inventory management or point-of-sale features. Xero allows tracking inventory across multiple locations and channels.
- Payroll: Xero provides seamless integration for running payroll through partners. Payroll requires using an external service with FreshBooks.
- Scalability: Xero can handle complex business processes better as a company grows. FreshBooks is more suited for freelancers and very small businesses.
Xero is the better pick for inventory, reporting, payroll and advanced accounting needs. But FreshBooks wins for invoicing simplicity and customization.
Sage Accounting
Compared to Sage Accounting software, Xero has some notable pros and cons:
- Ease of use: Xero has an intuitive interface and simple set up process. Sage is less user-friendly for non-accountants and has a steeper learning curve.
- Mobility: Xero offers full-featured mobile apps for data access anytime, anywhere. Sage's apps have limited capabilities.
- Reporting: Xero provides custom reports, financial dashboards and performance tracking in real-time. Reporting is more rigid and less visually appealing in Sage.
- Payroll: Sage has built-in payroll features while Xero requires integration with external partners like Gusto. But Xero offers more international payroll options.
- Customer support: Xero provides 24/7 chat, email and phone assistance. Sage Accounting only offers email and phone support during business hours.
Overall, Xero delivers more simplicity, automation, transparency, and flexibility. Sage meets complex accounting needs for larger businesses but falls short regarding user experience. For growing small businesses, Xero is typically the better cloud accounting solution between the two.
Conclusion
Xero is an excellent cloud-based accounting software for small businesses looking to manage their finances digitally. Here are some key takeaways on when Xero excels and potential limitations to consider.
When Xero Excels
- Xero shines for small businesses that need real-time financial insights and want an intuitive, user-friendly accounting interface.
- It works very well for service-based businesses like marketing agencies, law firms, consultants etc. The project tracking and invoicing features cater nicely to these industries.
- The ecosystem of over 800 app integrations makes Xero highly extensible to meet needs as a business scales.
Potential Drawbacks
- Reporting functionality is not as robust as some competitors for larger or more complex business needs.
- While intuitive overall, some advanced accounting functions can have a steep learning curve.
- Lack of payroll features means an additional solution is needed for businesses that manage their own payroll.
Final Thoughts
Xero delivers exceptional value for streamlining day-to-day accounting for most small businesses. For simple financial needs of 1-100 employees, Xero provides the right blend of ease-of-use, features, and affordability. Businesses that outgrow Xero's reporting or have complex accounting needs may need to graduate to Sage, NetSuite or other enterprise-grade solutions. But for most small companies, Xero remains a recommended cloud accounting leader that should suit their needs.
