What is Xero?
Xero is a full-service accounting software program designed for small businesses on a growth trajectory. With powerful reports and an intuitive dashboard, Xero provides each business owner an excellent accounting software alternative to QuickBooks (if not quite as easy to use).
Xero pros and cons
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Your Xero account allows small business owners to upload company logos to customize invoices. You can add on payments through Stripe, Paypal, and more to allow customers to pay with just a click. The Xero app supports sending invoices on the go, and you can even set up reminders so that you don’t have to waste time following up on outstanding invoices. Xero also supports creating and sending quotes to potential customers.
Xero’s inventory feature is simple, but effective. You can keep track of the inventory you have in stock, how well certain items are selling, and link directly with invoices and purchase orders to save time.
A small business owner will enjoy the seamless nature of linking their bank account to their Xero account, importing bank transactions, and automatic bank reconciliation. You can access your bank transactions in the Xero app, keep an eye on your cash flow, and provide access for each Xero user.
The Xero mobile app is free with every plan, which is incredibly useful. Invoices and payments on-the-go are common needs for small business owners, but Xero’s mobile app allows you to run customized reports to access your customer profiles, and to respond to quotes right away.
On Xero accounting’s highest tier you also get expense management, which can be incredibly useful as your business grows and employees have the need to submit claims and get reimbursed. Xero uses receipt capture to quickly snap photos of receipts and relevant documents, and helps you see employee spending at a glance.
Xero Bills allows you to see all of your outstanding bills and purchase orders in one place. With batching and scheduling payments, you can use Xero to manage your cash flow. There are also excellent bill organization features and the ability to run reports by importing each bank transaction.
Xero calls this feature their “online filing system.” You can trim the clutter by uploading all of your important paperwork, files, and receipts into the Xero accounting platform tool. From there you can:
- Generate reports
- Export via spreadsheets or email
- Attach files to new transactions directly
- Share files immediately with employees, clients, or accountants
With Xero’s accounting software you can quickly generate customized reports to understand exactly what’s happening in your business at any given time. Some accounting programs only allow monthly reports, but Xero’s reporting is flexible and interactive. It’s easy to share and collaborate on reports with your accountant or financial advisor so you’re well-informed to execute your business strategy.
For service and contract businesses, the project tracking feature, Xero Project, allows you to calculate estimates, track time spent on the project, update invoices, and even analyze costs and profitability. This feature is powerful, but only available in the Established tier.
Xero products and plans
One of the most compelling features of Xero’s platform is that nearly all features are available in all plans (though they may be limited). For example, many accounting software providers only provide inventory management at high-tier plans, even when it’s a core component of business management. Xero does offer some premium features for the upper tiers, but it’s more about the number of transactions.
But the best feature is probably the unlimited users for each and every plan—no more upgrading so more individuals can work on your business finances.
The Early plan is only $11/month, but unfortunately it’s not a very functional plan for anyone but the smallest of businesses. The benefits of this plan, compared to the other early tiers with competitor accounting software products, is that you get access to inventory tracking and most of the Xero features. However, if you plan to pay more than 5 bills, send more than 5 invoices, and go beyond 20 bank transactions in your linked bank account, you’ll find this tier lacking.
The Early plan is a great option for brand new businesses, sole proprietorships, and self-employed individuals. If you grow beyond the limits of the Early plan, you can easily upgrade as your business scales.
Like the Early plan, the Growing plan allows you to link your bank accounts for seamless reconciliation, and you get unlimited users. But the extra $21/month gets you unlimited invoices, unlimited bills, and unlimited transactions. Unless your business is tiny, this is usually a necessary choice.
Xero named this tier for the type of businesses it best serves—growing ones. Small businesses that are beginning to grow and looking for more support from their accounting software provider will likely find the Xero Growing plan to be a good fit.
Xero’s heftiest plan, the Established plan, is for businesses of any size that are secure, in a groove, and ready to explore international markets and currencies. The Established plan provides all of the same accounting solution features you enjoy in the Early and Growing tiers, with the added benefits of receipt and document capture, multiple currencies, project tracking, and expense claims.
This plan is a significant cost jump from the Growing plan ($32 to $62) but we’d argue that the increase in features makes this an appropriate price tag. With this plan you get inventory, unlimited users, and all the comparable features to QuickBook Plus and QuickBooks Advanced at a lower price.
Xero has an impressive library of integrations and add-ons, which is especially helpful for a business growing and innovating. You can mix, match, and customize the way you use Xero to find the sweet spot for your business.
Gusto: The most popular add-on for the Xero accounting platform is to add Gusto payroll for $39/month + $6/employee.
Payments: If your business needs to accept payments from customers you have the option to add payment services seamlessly through Stripe, Paypal, and more. Through these add-ons, you can allow customers to pay directly from your invoices in just a click. Fees can be expected around 2.9% + $0.30 per transaction.
Accounts Payable/Accounts Receivable: Bill.com is a popular choice for managing accounts payable and receivable through Xero, and starts at $39/month.
Common Xero FAQs
Is Xero better than QuickBooks?
Xero is better than QuickBooks if the inventory and unlimited users are critical for your business. QuickBooks Online doesn’t offer inventory until the QuickBooks Plus tier ($70) and never offers unlimited users. In highly collaborative and data-driven businesses, the extra access might be key. Plus, Xero is more affordable than QuickBooks.
However, Quickboks is a more developed and comprehensive accounting software, and is more popular among accountants and bookkeepers.
How does Xero compare to Sage?
Xero is better, more intuitive accounting software than Sage. While Sage is supported internationally, Xero has better resources for training and support for US users. Sage has a wider platform of varied accounting software products, and is generally used as a legacy accounting software.
Is Xero free?
No, Xero starts at $11/month. Xero does offer a free one month trial.
How user-friendly is Xero?
Xero is very user-friendly. Many reviews cite that Xero is a great accounting software for beginners and small businesses just starting to use accounting software providers.
Xero accounting software has a wide expanse of accessible features, powerful mobile applications, and a competitive price tag. We’d recommend Xero for businesses who are set to grow quickly and want access to important features like unlimited users and inventory tracking at all levels.
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