Choosing the right accounting software for your business is a big decision. Whichever ecosystem you enter will likely be your home for the foreseeable future.
There are many different options out there, but all are looking up to Xero Accounting and QuickBooks Online, the household names of the cloud-based accounting software world.
In reality, you can’t go wrong with either one. They both allow you to perform a wide range of accounting functions, and they are both easily integrated with the other apps and programs you use to make your business run.
Furthermore, each program is easy-to-use, and you will have access to additional services that will make it easier for you to run your business.
If you’re still trying to decide between these two programs, read on for our full review and comparison.
What are Xero and QuickBooks?
Xero and QuickBooks are two of the world’s most widely-used accounting programs. Both offer an extensive set of tools that make it easier for you to do accounting.
There are two versions of QuickBooks: QuickBooks Desktop and QuickBooks Online.
The main difference is that QuickBooks Online is a cloud-based mobile program whereas QuickBooks Desktop is a local file on your computer, meaning it can only be run from that computer.
QuickBooks Desktop boasts some additional features, such as more developed inventory management and payroll management systems, as well as the capacity to do high-volume data entry such as batch invoicing.
However, the lighter, more nimble QuickBooks Online is proving capable of handling most of what a small business needs, especially those that functioning primarily online.
Xero, on the other hand, has always been a cloud-based solution. It’s attention to being flexible can also be seen by its unlimited user policy.
However, that there is no desktop version of Xero carries no weight in our evaluation. It’s a comprehensive tool that can be quite useful to small and large businesses alike. But for the purposes of consistency, this review is going to focus on comparing QuickBooks Online with Xero.
The Main Difference
Whether or not you should choose QuickBooks Online, or Xero depends on what you need.
QuickBooks Online is good for businesses that:
- Need a comprehensive yet affordable accounting software
- Have the technical know-how to manage QuickBooks Online’s slightly more complicated user interface
- Want to use a mobile app with their accounting software
In contrast, Xero is best for businesses that:
- Prefer ease-of-use over advanced accounting features
- Require multiple users to have access to the program
- Need the ability to process transactions in multiple currencies
- Run Linux as their operating system
As a result, unless you see something on this list that applies to you, you’ll probably not find much difference between QuickBooks Online and Xero. You’d do well with either one.
How We Conducted the Review
To perform an accurate comparison of both products, we used the following criteria:
- Additional Services
The list of things you can do with both services is rather impressive. With both you can do:
- Contact Management
- Expense Tracking
- Bank Reconciliation
- Chart of Accounts
- Project Management
- Time Tracking
- Check printing
- Multiple currency transactions
- Sales tax calculations
However, with QuickBooks Online you have a few more options, such as:
- Tax support
However, it’s worth noting that exactly how many of these features you’ll have access to depends on which plan you choose. Both QuickBooks Only and Xero offer multiple plans at different price points, and each one allows you to use a different set of services.
The differences in the hardware used by both Xero and QuickBooks Online are negligible. As we’ve mentioned, both are cloud-based products, so they can be run from anywhere you have an internet connection.
They function with all major browsers, such as Chrome, Firefox, Internet Explorer, Safari.
The only slight difference is that Xero can run on Linux and QuickBooks Online cannot. This is significant, but not so much so that we are going to count it against QuickBooks Online.
Accounting software starts to become really useful when you can integrate with the other services you are using. For example, being able to plug in your bank account information, as well as your sales records from your payment processor, conveniently puts everything in the same place.
In general, both QuickBooks Online and Xero offer ample opportunities for you to do this.
Xero has over 700 available integrations, whereas QuickBooks Online only has 590.
This could be seen as a big advantage of Xero over QuickBooks Online, but the reality is you’d be hard-pressed to find a software you couldn’t integrate with either.
This is an area where the two begin to separate themselves, although the differences still remain small. Here’s a summary of the different plans available and the features you get from each.
For QuickBooks Online, the options are:
- Simple Start ($20/month)
- Track income and expenses
- Capture and organize receipts
- Maximize tax deductions
- Invoice and accept payments
- Run basic reports
- Track sales and sales tax
- Essentials ($35/month) – Everything above plus:
- Manage bills
- Three Users
- Time tracking
- Plus ($60/month) – Everything above plus:
- Track project profitability
- Track inventory
- Manage 1099 contractors
With Xero, your choices are:
- Early ($9/month)
- Send 5 invoices and quotes
- Enter 5 bills
- Reconcile 20 bank transactions
- Growing ($30/month)
- Send unlimited invoices and quotes
- Enter unlimited bills
- Reconcile an unlimited number of bank transactions
- Established ($60/month) – Everything above plus:
- Handle multi-currency transactions
- Capture and manage expenses
- Track project times and costs
From this, we can see how the two products are in fact different despite offering the same general service.
First, Xero’s “Early” plan is essentially useless. Limiting businesses to just five invoices and quotes is not helping anyone, so we can basically toss that plan out the window.
Xero’s next option is $30, but it offers less in terms of features than the $20 version of QuickBooks Online, so if this is your budget, go with QuickBooks Online.
The highest-end version offered by each one costs $60 per month, and QuickBooks Online offers much more for that price.
For example, it provides you with tools to manage inventory. To do this with Xero, you need to work with one of its partners, such as Vend.
However, this doesn’t mean Xero’s “Established” plan doesn’t have any advantages. Its edges out QuickBooks Online because it:
- Allows for unlimited users
- Handles multiple currencies
- Is easier to use
If you have a specific need for one of these features, then Xero is your choice. Otherwise, you’ll probably get more bang for your buck from QuickBooks Online.
Both QuickBooks Online and Xero allow you to add on additional services to your account that will make it easier for you to manage the books.
As mentioned, both have an impressive group of partners, such as PayPal, Square, and Shopify, whose apps you can easily integrate easily into your accounting software.
But QuickBooks Online gives you the option to add payroll services directly to your account. The pricing is as follows:
- Self-Service Payroll – $35/month + $4/employee
- Full-Service Payroll – $80/month + $4/employee
Xero doesn’t provide these services directly, but they do offer a partnership with Gusto Payroll services for $39/month that makes it easy to have all of these operations working in tandem.
Either through integrations of proprietary services, both QuickBooks Online and Xero can help you optimize how your business runs.
For example, you can integrate your payment processing system, and you can even use your sales data to help you understand your business better and build marketing campaigns.
In general, you can’t really go wrong with either QuickBooks Online or Xero. We feel QuickBooks Online has a slight edge, but there are some good reasons why Xero might work better for your business.
If you’re still on the fence, consider doing a free trial with both to see which one best meets your needs.
In the meantime, let us know if you have any questions or comments.