The search for the right business accounting software can be extensive—deciding what features you need, what your budget looks like, and of course—comparing the different options on the market.
If you’re in the midst of this process, you’ve probably come across two of the most popular accounting solutions for small businesses: Xero accounting and QuickBooks Online. Xero and QuickBooks Online are similar in many ways—both are web-based accounting software platforms known for their robust feature sets, flexibility, and ease of use.
With these similarities, however, you may be wondering: what are the differences between QuickBooks Online vs. Xero? Which platform is right for your business?
This Xero vs. QuickBooks Online comparison is here to help. We’ll give an overview of each of these accounting software solutions, discussing both their features and pricing, explore how Xero and QuickBooks Online differ, and finally, highlight the areas where each of these platforms stands out.
A cloud accounting tool can be one of the most powerful contributors to the day-to-day running of your company. With a system like Xero or QuickBooks Online, you can enjoy a crystal-clear view of your accounting, stay on top of projects and time tracking, and maximize tax deductions.
In terms of the accounting features that most businesses need, Xero and QuickBooks Online are both comprehensive tools that are likely to tick your boxes. But their approaches are different, and they each have different strengths.
Xero was founded in 2006 in New Zealand and has since consolidated its reputation as one of the top accounting tools on the market. Its tagline is “Beautiful business”, which is the main thing you need to know about Xero: it manages to make accounting sleek and enjoyable. Xero is incredibly user-friendly, simple and powerful, and is designed to help their customers do better in their businesses via their accounting tools.
QuickBooks Online, the market-leading accounting software from Intuit, offers “Smarter business tools for the world’s hardest workers”. With their cloud-based system, businesses can automate much of their repetitive tasks and processes by tracking projects, managing bills, and even tracking miles automatically with a smartphone.
What’s the difference between QuickBooks and QuickBooks Online? QuickBooks is Intuit’s general accounting software, while QuickBooks Online (QBO) is specifically the cloud-based service. For QBO, you pay a monthly subscription rather than an upfront fee, and you get all the patches and software updates from Intuit. In this article, we’ll mostly refer to QuickBooks Online (which is what we think you’ll likely opt for instead of Intuit’s desktop version of QuickBooks).
Both Xero and QuickBooks Online are optimized for small to mid-sized businesses, so large enterprises with more complex requirements may struggle to tick all of their boxes. But for most businesses, agencies, retail stores, and startups, there’s a lot to love about Xero and QuickBooks.
Here’s our verdict, alongside a comparison of cost, feature sets, accountant preferences, reporting, ease of use, integrations, and user reviews.
Xero’s most basic plan (Early) comes at $9/month, but you’re very limited with the feature set. You can only send five invoices and quotes, enter five bills, and reconcile two bank transactions. For most businesses, this isn’t going to be enough.
Their mid-price plan (Growing) will fit most small businesses. You can send invoices and quotes, enter bills, and reconcile bank transactions for $30/month.
For the full feature set, you’ll need Xero’s top plan (Established). For $60/month, you get all of the Growing plan plus multi-currency functionality, expenses (to capture and manage claims), and projects (to track project time and costs).
If you want access to their Gusto full-service payroll (available across all 50 states for U.S. customers), pricing starts at $39/month base + $6/month per person.
QBO’s basic plan (Simple Start) comes at $20/month. This comes with much more functionality than Xero’s cheapest plan, including all the basics of tracking income and expenses, capturing and organizing receipts, invoicing and accepting payments. You also get access to basic reporting. The main limitation of QBO’s Simple Start plan is accessible for only one user. You also can’t track time and manage bills.
Most businesses will go for the Essentials plan at $35/month, with all of the above features plus up to 3 users, time tracking, and access to manage bills. As with other cloud accounting systems, the fancy features come in the top plan: Plus for $60/month. You can track inventory, manage up to 1099 contractors, and enjoy QBO’s newest feature, tracking project profitability.
All plans give you access to the following add-ons for 50% off: self service payroll ($35/month + $4/employee/month), or full service payroll ($80/month + $4/employee/month). All plans also include receipt capture, expert support, and out-of-the-box integrations.
If you need to track income, expenses, invoices and time, you’ll likely be paying $35/month for QBO or $60/month for Xero. For the top plans (both $60), you’ll get similar functionality from both providers.
Starting with the Xero accounting software, Xero gives you the ability to choose from their three plan offerings: Early, Growing, and Established. On the whole, you can expect Xero to provide you with the full range of accounting tools and functionality, including:
Now that we know what the Xero accounting plans can offer your business in terms of both features and pricing let’s continue our Xero vs. QuickBooks Online comparison by discussing QuickBooks at length.
One of the first and simplest ways that QuickBooks Online differs from Xero is that while Xero offers three different plans, QuickBooks Online offers four: Simple Start, Essentials, Plus, and Advanced. Additionally, whereas Xero’s plans are differentiated largely based on the number of invoices, bills, and bank transactions, the QuickBooks Online plans are more comparable to the differences between the Xero Growing and Xero Established plan.
As the QuickBooks Online plans increase in price, you receive additional features and capabilities with each level (that were not available in the previous level).
This being said, however, just like Xero, you can expect certain functions included with your QuickBooks Online software regardless of which plan you choose, including:
Xero places its features into five main categories: Dashboard, Business, Accounting, Projects, and Contacts. Xero’s accounting dashboard offers a nice summary of your business, including bank balances, invoices owed, and total cash in and out of your business, with the dashboard completely customizable.
The Business category is where you’ll find invoicing, bills to pay, purchase orders, and products and services. The invoices option in Xero displays a nice summary view of all invoices and their current status.
Xero’s invoice entry screen, seen above, is clean and uncluttered with easy look-up options available for most fields. Once the invoice is completed, you can send it via email with online bill payment options included in the email. Once payment is received, Xero will automatically apply for the payment if paid online, or you can process the payment during your regular bank reconciliation process.
The Accounting category in Xero is where you’ll handle all of your banking transactions, as well as manage your chart of accounts and financial statements. The Projects category lets you manage any projects and record time spent using the time tracking feature.
The Contacts category lets you manage all contacts, from customers to suppliers to contractors, from one location. Reporting in Xero is solid, with a variety of financial statements and management reports available.
A mobile app for both iOS and Android devices is available in Xero, offering the ability to handle common tasks such as receipt management, contact management, bank reconciliation, and invoice creation.
Like Xero, QuickBooks Online offers standard features like electronic banking, solid invoicing capability, bill management, and payment acceptance. Still, it breaks them down into more specific categories rather than lumping them together into one category.
User preference can play a role in which style you prefer, but generally, the more self-explanatory a central navigation screen is, the easier it is for new users to find their way around.
Entering an invoice in QuickBooks Online is simple, and it offers the ability to add a credit card or bank account number to a customer’s account. This nice feature allows you to process online payment for that customer immediately.
QuickBooks Online also gives you the option to have customer payments applied automatically once they’re deposited, or leave that option to the user. The Expense category lets you add vendor invoices and get them ready for payment. Quickbooks Online lets you manage customers, vendors, and employees in the system, with a payroll option available through Intuit.
The Report Center in QuickBooks Online offers a central location to process reports, which include all standard financial statements as well as a healthy selection of management reports.
In cloud accounting software, the two biggest names are Xero and QuickBooks. But when you have two very capable software options, with similar accounting offerings and a nearly identical feature set, how do you know which is better? That’s what we’re here to find out.
Developed in 2004, QuickBooks Online beat Xero to the accounting scene by two years. With advanced accounting features, beautiful invoicing, 550+ integrations, and a lending feature, it’s easy to see why the software is so renowned by accountants and bookkeepers.
Xero is a robust accounting solution that rivals QuickBooks in terms of capability and popularity. It’s been around since 2006 and offers strong accounting, access for unlimited users, over 700 integrations, and an impressive feature selection.
At EWM, our goal is to help you to find the best software for your small business needs. To make your decision easier, we’ve carefully researched and tested both products. We’ll compare Xero and QuickBooks Online (QBO) based on features, pricing, customer experience, reputation, and more, so you don’t have to.
Accountants praise Xero’s automatic bank feeds, usability, and simplified payroll. When it comes to doing your tax return at the end of the year, they have everything they need to get going. It’s also easy for accountants to fix user errors in Xero, and there are built-in proper audit trails and safety checks. If you’re based in the U.S., your accountant’s main complaint might be lack of experience with Xero. QuickBooks is the market leader in the U.S., so they will likely be used to working with that. Xero is more common outside of the U.S., and U.K. and New Zealand accountants, in particular, will likely recommend it.
QuickBooks Online is rated 4 out of 5 on Capterra by 2808 users, while Xero has an average of 4.5 from 1570 users.
QuickBooks claim on their website that 98% of customers say that their solution helps them run their business more easily, and we can see why: there’s a reason that QBO has built such a solid reputation.
QuickBooks Online has been in the market for longer than Xero, is very well-developed, and is generally loved by accountants – especially in the AUS market, which QBO has dominated. In 2015, QBO had an estimated 80% market share. QBO claim that customers find on average, $3,534 in tax savings per year.
Xero has a strong value proposition to compete with QuickBooks Online: its customers love it. Xero consistently gets stronger average reviews then QBO despite a lower quantity of them.
With its younger brand image and focus on clean usability, Xero is also much more popular in the startup world than QuickBooks.
The core financial statements in Xero and QuickBooks Online — profit and loss, balance sheet and cashflow — present information about different aspects of your business and they are customizable. It’s easy to add columns, change account groupings and display time periods side by side.
Unlike QuickBooks Online, Xero also gives you an equity statement, which is useful if your business has several investors. It displays the owners’ investments and equity draws, as well as profits or losses kept in the business. If you’re concerned that one owner may be taking too much out of business, it will quantify those concerns.
In addition to the core financial statements, basic accounts receivable and accounts payable aging reports track who owes you and what you owe by common past due to buckets. QuickBooks Online delves deeper into accounts receivable than Xero.
QuickBooks Online offers reports on profit and loss by the customer, a comparison of estimates prepared for a customer versus sales to that customer and collections reports. That is invaluable information for businesses that carry a significant amount of accounts receivable on their books.
Even though QuickBooks Online integrates payroll processing, it only provides reports on total wages and payroll taxes, worker’s compensation and employee details. Xero has far more reports, and they have built-in human resources functions, such as time-off balances and requests, wage garnishments and more.
Simpler businesses will find all the reports it needs in Xero. We prefer having the ability to use drag and drop to modify reports with the service over QuickBooks Online’s more involved process. That said, QuickBooks Online wins in this category because of the variety and usefulness of its reports.
At the end of the day, whether you choose Xero or QuickBooks Online, you’ll be using a top accounting software platform that will allow you to manage and streamline your accounting processes efficiently.
This being said, if you’re looking for the ultimate winner between QuickBooks Online vs. Xero, it’s difficult to say one solution is objectively better than the other. Instead, the Xero vs. QuickBooks Online winner ultimately depends on your business—what features you need, what your budget looks like, and what capabilities are most important to you.
As we’ve mentioned, the similarities between Xero and QuickBooks Online—their overall functionality, reasonable pricing, usability, mobile access, and more—mean these platforms have the ability to serve a variety of small businesses well. It will be up to you, therefore, to decide how their differences will affect your business and which option will work best for you.
However, it’s also worth noting that with comparison as complex as that of Xero accounting vs. QuickBooks, you might decide to test each platform for yourself before making any final decisions. Luckily, both Xero and QuickBooks Online offer 30 day free trials—so that you can explore their software firsthand to determine how either may or may not fulfil your business’s needs.
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