Xero vs QuickBooks: Which is Best for Small Business in 2023?
Finding the right accounting software for your small business can be a daunting task.
From combining invoicing software with a general ledger to a point-of-sale system with inventory management, things can get very complicated very fast. However, there is a way to make things easier by using the right software for your specific needs.
The right accounting technology is not an option – it’s a must. In fact, 91% of accountants state that this has made them more productive.
In this article, I will look at two of the most popular business accounting software in the market right now: Xero vs Quickbooks. I will compare some of the most important features and explain some of the differences between these two options as I determine which choice is best for small businesses.
By understanding how these accounting applications work, you’ll be able to quickly identify the application that is best for your needs.
Let’s start by having a look at the two different software individually.
Xero is cloud-based accounting software that combines invoicing, payments, and time tracking. It’s perfect for freelancers and small businesses who don’t need all of the features of larger accounting packages. You’ll be able to invoice clients and get paid for jobs, as well as track time, expense tracking, and project profit using one solution.
With Xero, you can also do your bookkeeping in real-time, eliminating the need for manual entries. Xero can keep track of your accounts so you know where all your money is at all times.
Simplify common business activities reducing the number of tedious, time-consuming things you have to do every day. With tools and services designed for small business accounting, ecommerce platforms, accountants, self-employed, startups, and bookkeepers, Xero has the answers for you. This also means that you can reduce the number of mistakes you make and save yourself a lot of time.
You can also set business goals to ensure that you’re moving in the right direction. You can also track your company from any place with their mobile app – all you have to do is open the app and start tracking.
Finally, Xero allows you to create an employee expense report where costs are recorded, claims are filed, authorized, and reimbursed, and money is spent. To track and pay your bills on time, it’s crucial to organize your finances and get a clear view of accounts payable and cash flow – this can all be done from one single interface.
Whatever you need to get done when it comes to your accounting, Xero can do it. With Xero, you can be confident in your numbers whether you’re on your desktop or on your phone while on the go.
QuickBooks is an accounting program that was created and marketed with small businesses and medium-sized businesses in mind. It used to provide both downloadable and cloud-based accounting applications that take business payments, manage and pay bills, and handle payroll.
As of April 20, 2021, the downloadable app is no longer being supported. While this can still be used, it’s recommended to use the web version.
Going back to Quickbook and its features, one of the most popular accounting features is the ability to take pictures of your receipts and the system will automate the matching of these with pre-defined expenses.
You can also request the help of Quickbooks experts to ensure that you’re able to maximize the value of what you’re doing in your business.
Further features include the ability to earn 1% APY interest when you open a Quickbooks cash account and the option to manage multiple currencies.
You can get paid online or even in person with no extra charges. This is great if you have several clients who prefer to pay by cash.
Quickbooks gives you the ability to track products and inventory, making it an option that is great for small businesses. Get notifications when your inventory is running low so that you can reorder and continue to provide your customers with the service they need.
Tracking invoices, bills, receipts, and payments are easy with Quickbooks. These also include those from other countries. Manage and pay bills and track accounts payable and receivable, as well as create reports using the program’s intuitive design.
The option of batch invoicing is also available and this makes it easy to invoice several clients at one time, enhancing efficiency and saving you a lot of time in the process.
Let’s now compare the features of the two products side by side.
While both software give you the ability to create functional reports, Xero only produces direct cash flow reports. QuickBooks focuses on direct and indirect methods depending on the demands of each company.
This means that Quickbook gives you the ability to create clear financial reporting and allows for improved company decisions. With real-time small business insights on your QuickBooks dashboard, you can view income statements and balance sheets to get immediate financial knowledge.
Image Credit: Quickbooks
Create a cash flow statement to track what comes in and goes out so that you can make the right moves at the right time. Managing your cash flow is even easier with real-time updates on how much money is coming in and going out of your business through its intuitive dashboard.
Since every company is different, you can adjust your Quickbook reports to display the information that is important for your business.
Both Xero and QuickBooks have simple tools that allow you to get a feel for the various operations of your business.
QuickBooks also has a fast overview of profit and loss, expenses, bank accounts, bills, sales, and other crucial data. Its interface provides a simple interface with a dashboard that is both intuitive and user-friendly. The Xero interface, on the other hand, might be difficult for some users, especially those that are just getting started with it.
Although both programs have mobile apps (Android and iOS) to keep track of your finances, the quality of their customer service when it comes to their apps may be improved. While not a regular occurrence, bugs that cause program crashes and other difficulties prevent access to certain features.
The programs are very similar when it comes to app integration. Xero and QuickBooks have similar features in the sense that both of them integrate with over hundreds of applications (650+ for Quickbooks and 1000 for Xero), allowing businesses to use the third-party software they’re used to.
When it comes to support, Quickbooks has a customer phone number that is available for one to call when there are problems. Their website also comes with live chat and email support options if you need assistance in a pinch.
Image Credit: Entrepreneurhandbook
Xero accounting software provides unlimited online support but does not have a phone number that one can call. Instead, their support can call you themselves if you need specific help.
Xero offers 3 pricing plans to choose from:
- Early: $5.50
- Growing: $16
- Established: $31
These prices are 50% off the usual prices for each package and apply for the first 3 months. After that, one pays the usual prices (double the above-mentioned prices).
There is also a free 30-day trial to test out all of the plans.
With Quickbooks online plans, there is currently a 50% discount for the first 3 months. There are three plans to choose from:
- Quickbooks Simple Start: $8 per month
- Quickbooks Online Essentials: $12.50 per month
- Quickbooks Plus: $17 per month
Xero Online offers similar features to Quickbooks. To customize an invoice you must upload a template via a settings menu. Both the Xero app and QuickBooks online offers automatic sending of reminders if the payments are late.
Once this is done, it’s simple for customers to make the required payments.
When it comes to paying invoices, paying a new invoice with Xero is simpler than in QuickBooks Online. If you pay your expenses every month using recurring bills, you will save time. In Quickbooks, the features available for creating bills are different than in Xero. You must choose a bill template from a list of standard ones before you start this process.
On the other hand, Xero expenses are handled immediately on the home page, through an easy-to-see menu. After you click on this, a selection of payment choices appears so that you can get the job done. With this in mind, Xero may be a good choice for companies that need to do more volume of payments every month.
For example, companies that need to pay employees every month, create and send invoices automatically, and pay recurring bills use external providers might find Xero better.
As with any other service that deals with payments, subscription management software is needed when it comes to such payments. As such, business owners are required to sign up for an external provider such as Stripe or PayPal.
The user interface of QuickBooks does take some time to learn how to utilize since it comes with more features and options.
Image Credit: Varstreetinc
Xero’s user interface is easier to use, with clearer processes and workflows. People tend to like Xero’s dashboards, which allow them to send invoices and bills with minimal effort.
The following are features to look for when choosing the right business accounting software. While some might come as standard with the solution you choose, some will be add-ons that are added to make the solution better suited towards your business needs.
Integration between your business and financial data is the biggest reason why you’re using such software in the first place. Ideally, it will show up in real-time to save you the trouble of dealing with data that is not current – this can lead to errors.
There is no point in preparing invoices, receipts, and reports if they aren’t accurate. By choosing software that provides for greater integration with your business and financial data, you’re assuring yourself of more accurate results.
Having the ability to integrate your accounting software with other systems also allows you to save time and streamline procedures. You should find out if the solution you’re evaluating works well with other apps, such as payroll software, CRM tools, sales tax applications, and even project management tools.
You may have heard the term “configuration hell” before. This refers to a situation where you can’t get something to work because an essential element isn’t configured right or is missing. It’s not a pleasant experience and can turn into a nightmare for some small businesses.
You can indeed get through the configuration process eventually, but it may take too much time and effort on your part. This is why it is important to choose an accounting software solution that has preconfigured features so that you don’t have to go through this hellish experience.
You need to be able to connect with your suppliers and clients in real-time through SaaS-based accounting software. For example, if you want to place orders online or check your bank balance, your software should be able to process this through their back office.
As for clients, they should also be able to log in and view invoices or purchase history so that they can pay them without any trouble. This is why the right software is the way to go since it allows for real-time communication between you, suppliers, and customers.
Besides the reports that you need personally, your accountant needs to review some as well. The best business accounting software should allow for group reports so that everyone gets their data instantly and can save time on generating them separately.
Group reports eliminate the need to generate reports one by one, saving you time and effort. You will also be able to compare this year’s reports with those of the previous one, focusing on the similarities and differences that have occurred.
Image Credit: Xero
This will allow you to spot any changes that may have been happening and assess the situation.
With multiple users and views, you don’t have to switch between user accounts every time you need specific information on your business finances because they are all in one single portal where you can access them conveniently.
Users should be able to create new tasks or perform updates right away if necessary, removing the need for manual entry of data into excel spreadsheets that only cause confusion when they’re being used by more than one person at a time.
The question of having access to the right number of users (along with setting the right permissions) can also prevent data entry mistakes and save a lot of time when it comes to updating reports.
You have more important tasks than figuring out the nitty-gritty of the chosen software when you’re trying to run a business.
This is why your software provider should have made (and keep making) an effort in making their platform so user-friendly that navigating through it becomes a child’s play even for newbies who don’t know anything about business accounting tools yet.
It should allow beginners in the field of accounting or finance to understand everything at first glance and begin using it immediately, with no need for additional training sessions.
The best business software should allow for importing and exporting data in any format so that you can use the one that works for your needs.
It doesn’t matter what kind of service or product your business is offering, as long as the accounting software has features to help you successfully manage it.
This includes being able to understand its performance at a glance thanks to dynamic graphics, charts, reports, and on-demand information on the overall progress that your business is making every day, month, and year.
Your business can’t run smoothly if you don’t have enough working capital to finance it, so you need a system that will help you manage your cash flow in the best way possible.
This means being able to generate documents for suppliers so that they get paid immediately and allowing clients to pay invoices on time without delays.
The best tool should also allow users to accept online payments or create custom repayments plans with their customers if necessary.
This will ensure that everybody gets what they are due when it comes to payment, making this part of the process much easier for all parties involved.
Security measures are in place to protect data integrity and make sure information is presented accurately.
You are trusting your business data to your software provider, so you need to be sure that their security measures are up to standard.
The best tools should have 24/7 technical support in place if something goes wrong and establish a direct line of communication so that any changes required can be implemented immediately.
The system should also have several backup options available in case one of them fails, protecting your information against unexpected situations that can happen when using these digital services.
With all the complications required to set up such a system and ensure it works over the long term, the last thing you want to do is pay for an on-site server that will take up space at your workplace and require additional training sessions for your IT team who need to learn how to manage it correctly.
This is why cloud services are so convenient since they allow multiple users across different locations to access the data at any given moment without requiring anything else than an internet connection.
This means no extra hardware or employees training sessions are needed.
As your company grows, so will your requirements when it comes to the way you manage its activity.
No matter how big or small you are today, the accounting software that you use should allow for this type of change so that it can grow along with you without causing any inconvenience for users or extra expenses in the process.
There’s no point having all the bells and whistles available if the learning curve is huge and will cause things to move backward, rather than forward.
While we’ve already spoken about integration, inventory management tools deserve their own specific mention. Whether you are selling physical products or providing services, you can’t run your business properly if you don’t have a system that provides accurate information about inventory levels at all times.
This means knowing how much of an item has been sold or used up and if there’s enough stock for upcoming orders.
The best tools should allow for automatically updating these details through connected devices throughout the network so that your business never loses track of what needs to be re-ordered first.
Sometimes, it can be difficult to reconcile bank transactions. With the right software, it becomes much easier to manage your financial transactions and deal with bank statements and other relevant data while making it all line up.
To make sure that everything is fine and there are no mistakes or problems present when it comes to the way your business manages its money you need a system that can easily help bank reconciliation where transactions are involved.
In addition, the software should provide you with quick access to your financial records to ensure that no manual input is needed.
Finally, there are also some other factors to consider. One of them might be the ability to generate as many invoices as needed in a multi-currency format.
As small business owners scale up their business, their needs will change, and dealing with international clients might be something to consider. While the early plan of the software of your choice might be good enough, as you scale you should keep in mind such factors.
Accepting credit card payments for unlimited invoices directly to your company’s accounts receivable might also be a factor to look into. Another thing might be the ability to integrate directly with your bank feeds to ensure that your accounts are all in sync.
If your current software does not support these, ensure that you have an established plan to make this happen when the right time comes.
Both Xero and Quickbooks are great accounting software for small businesses. They both have functions that can help you manage your business easily and make it more profitable in the long run.
By understanding what you expect from your business software and how it needs to meet these requirements, you will be able to choose the best Xero vs Quickbooks accounting software for your businesses.
At the end of the day, the smooth running of your business is crucial, and having the right software in place can make this happen.
Further reading on AdamEnfreoy.com: If you want another perspective of Quickbooks, while allowing you to compare it with another software tool on the market, check out my post comparing Quicken to Quickbooks.