Comparison of Xero vs. QuickBooks Online 2024

Xero and QuickBooks Online are frequently discussed as the leading options for online accounting software. Often promoted as the perfect choice for small businesses, many owners and small to medium-sized businesses (SMBs) consider whether Xero vs QuickBooks Online would better suit their needs.

QuickBooks is a well-known name in small business accounting in the United States. Intuit, the creator of QuickBooks, introduced an online version to meet the demands of small business owners. As business requirements have changed, QuickBooks Online has adapted, now providing a broad range of features that cater to the needs of everything from startups to expanding businesses with more complex requirements. On the flip side, Xero is known for its straightforwardness and user-friendliness. Xero is user-friendly and simple to use, targeted at entrepreneurs and business owners. It is generally more affordable than QuickBooks. This article will compare Xero and QuickBooks Online in detail, discussing their key features, pricing structures, and

About Xero Accounting Software

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Xero, established in 2006, is cloud-based accounting software designed primarily for startups, growing businesses, and established firms. While not a complete Enterprise Resource Planning (ERP) system, Xero can integrate with third-party add-ons to enhance its capabilities and cover a broader scope of business functions. The company operates on a software-as-a-service (SaaS) pricing model and is headquartered in New Zealand.

The software streamlines various accounting tasks. Xero’s features include a chart of accounts, financial reports, general ledger, cash flow management, bill management through Hubdoc, and bank reconciliation. It also supports customer quotes, purchase orders, invoice and order management, inventory oversight, accounts receivable, accounts payable, and overall business administration.

Xero provides customizable user roles, such as Standard, Limited, or Administrator, with the option to assign specific permissions for additional functions.

The platform supports unlimited users to accommodate business growth, although users might experience transaction volume limits or processing delays as they approach the system’s capacity. Xero’s software is accessible on Mac and Windows computers, and its mobile app is available for Android and iOS devices.

Pros and Cons of Xero

About QuickBooks Online Accounting Software

Compared to Xero, QuickBooks has been on the market for a long time. It is also far more developed and is popular among accountants, especially in the US market, where it has dominated.

QuickBooks’s website states that 98% of clients feel that the software makes running their businesses easier, further highlighting QuickBooks’ excellent reputation. It promotes itself as the leading accounting software globally, boasting over 5.6 million users. Intuit, the parent company of QuickBooks, established in 1983, is renowned for its comprehensive range of online and offline accounting and tax solutions.

Like Xero, QuickBooks Online enhances its core offerings through various third-party add-ons. These make it function similarly to an ERP system but at a lower cost. This integration provides a straightforward user experience. Thanks to QuickBooks cloud-based technology, companies can automatically manage bills and invoices, track projects, and track mileage, which can automate many repetitive operations and procedures.

In addition to its general small business accounting solutions, QuickBooks Online also has a version tailored for self-employed individuals and freelancers called QuickBooks Self-Employed. The software is compatible with notebooks and mobile devices across iOS and Android platforms.

As part of Intuit, QuickBooks Online is a recognized name in the marketplace. The brand has expanded its services to include QuickBooks Time and QuickBooks Payroll, which help with project time tracking and payroll processing. Thus, they support the operational needs of expanding businesses.

Pros and Cons of QuickBooks Online

Xero vs QuickBooks Online: Features Comparison

When evaluating Xero and QuickBooks Online as accounting tools, both platforms are designed to handle the financial management needs of small businesses. Yet, they differ in their offerings to accommodate specific requirements. Here is a comparison of their primary features:

1. Invoicing

Xero offers a basic Early plan restricting users to 20 monthly invoices, targeting freelancers or small businesses with fewer transactions. Its Growing and Established plans provide unlimited invoicing.

QuickBooks provides unlimited invoicing across all plans, making it a superior option for businesses that must send numerous monthly invoices. It also features extensive customization options and supports recurring invoices.

2. Reporting

QuickBooks Online allows easy access to time-specific reports like balance sheets and monthly profit and loss statements. Xero offers more customizable reporting options, though they can be less organized. By benefiting from its longer presence in the market, QuickBooks has better adapted to meet specific customer needs and usage trends.

3. Assisted Bookkeeping

Xero partners with Bookkeeper 360 to provide virtual bookkeeping services, granting users access to tax and accounting experts who can help manage bookkeeping tasks. Bookkeeper360 offers various service levels based on the frequency of required assistance, and service plans can be customized to meet individual needs.

QuickBooks Online features an add-on service called QuickBooks Live Bookkeeping, which connects users with certified QuickBooks accountants for direct bookkeeping support. This service helps create monthly reports and reconcile bank and credit card accounts. Unlike Bookkeeper360, QuickBooks Live does not include payroll services or tax filing capabilities.

4. Billing

The Early plan of Xero allows up to five monthly bills, suitable for minimal operations. The more advanced Growing and Established plans provide unlimited billing capabilities. QuickBooks starts with the Essentials plan, which includes comprehensive billing features, the option to pay bills directly, and track expenses.

5. Expense Tracking

Xero is available exclusively on the Established plan, supporting expense claims and project tracking. While QuickBooks offers expense tracking in all plans except for the Self-Employed version. This feature includes attaching receipts and categorizing expenses, providing flexibility from the start.

6. Project and Time Tracking

Upgrading to the QuickBooks Essentials plan allows you to record employee time by client or project, which can then be directly included in invoices. For more advanced scheduling and paid time off management, you must buy the separate QuickBooks Time product and the accounting software.

QuickBooks also offers a straightforward method to track time, either for personal review or for invoice inclusion.

Xero provides basic time and project tracking capabilities. The application includes a built-in timer for recording time as you work and a location-based job tracker accessible via the mobile app. With Xero, you can set up a project or job, monitor the time spent on tasks, and easily add this information along with other details to invoices when billing clients.

Considering these points, QuickBooks generally fits better with businesses that need robust reporting capabilities and scalability. Conversely, Xero might appeal more to smaller teams looking for cost-effective options with straightforward features. The choice between Xero and QuickBooks should be based on your business’s specific requirements and how you weigh the importance of cost against functionality.

Xero vs. QuickBooks Online: Ease of Use

When compared in terms of ease of use, Xero and QuickBooks Online both offer a user-friendly experience but differ slightly in interface layout and initial setup.

Both Xero and QuickBooks Online feature dashboards that provide an overview of key business metrics, such as profit and loss, expenses, bank balances, and sales. QuickBooks offers a customizable dashboard with the flexibility to adjust panels to show the most relevant data. The interface is clean and intuitive, allowing for quick navigation through important financial information.

Xero’s dashboard is similarly designed, focusing on simplicity and minimalism. It offers easy access to your business’s financials, and you can customize the layout by moving or hiding different panels. The interface is known for being sleek and easy to navigate, which is particularly appreciated by startups and users with minimal accounting experience.

Syncing bank accounts with QuickBooks Online and Xero is straightforward. Historically, Xero’s bank integration was considered slightly more complex, but now it’s just as simple as QuickBooks Online. After the setup, both platforms allow you to pull in transactions for easier reconciliation automatically.

While QuickBooks Online provides robust functionality, its initial setup can take longer than Xero’s. QuickBooks requires users to input more detailed company information upfront, but this pays off by offering a centralized dashboard with all the tools you need accessible from a menu. Xero, on the other hand, has a slightly quicker setup process, making it easier for new users to get started with their finances.

Both platforms make it easy to process transactions, but QuickBooks has a notable feature with its “+New” button, offering quick access to create invoices, expenses, and other entries. However, for more complex tasks like printing checks, QuickBooks might require additional learning or support from online resources or customer service. Xero’s design keeps most financial operations streamlined and simple to perform from the dashboard, reducing the learning curve for new users.

Overall, both Xero and QuickBooks Online provide strong user experiences, but your choice will likely depend on personal preferences for interface layout and ease of setup. Xero tends to be favored for its minimalistic design, while QuickBooks may appeal to those who need more advanced features accessible from a customizable dashboard. Both offer free trials, allowing you to explore their features before committing to a plan.

Xero vs. QuickBooks Online: Pricing Comparison

Both Xero and QuickBooks Online include paid plans that are charged monthly. Xero offers affordable subscriptions ranging from $29 to $62 per month, complemented by a 30-day free trial, making it an excellent choice for small to medium-sized businesses seeking cost-effective solutions.

QuickBooks, on the other hand, offers a broader price spectrum from $35 to $235 per month. It features more advanced functionalities and scalability, which makes it best suited for larger enterprises or businesses with complex accounting needs.

Xero Pricing

Xero offers three premium subscriptions with monthly costs ranging from $29 to $62. The plans differ in terms of how many invoices and quotations you can send, how many bills you can enter each month, and whether or not advanced capabilities like project tracking and multi-currency support are offered.

Xero provides a 30-day free trial for any of its plans, allowing you to evaluate the software risk-free before committing. Also, if you purchase any Xero plan before 31st October 2024, you can get 90% off on all plans. There are three main plans available:

1.     Early Plan ($2.90 for the first 3 months, then $29 per month)

Perfect for new businesses and sole traders, the Early Plan offers:

• Invoice management (up to 20 invoices per month)
• Bill payments (up to 5 bills each month)
• Bank integration and easy setup for automatic transaction feeds
• Receipt Capture: Easily capture and manage receipts

This entry-level plan is ideal for very small businesses or freelancers with basic accounting needs.

2.     Growing Plan ($4.60 for the first 3 months, then $46 per month)

Designed for small businesses poised for expansion, the Growing Plan includes:

• Unlimited Invoicing with no cap on the number of invoices you can send
• Unlimited Bill Payments
• Bank Reconciliations

By removing the transaction limits found in the Early Plan, the Growing Plan is a solid choice for businesses experiencing increasing transaction volumes.

3.     Established Plan ($6.20 for the first 3 months, then $62 per month)

The Established Plan is tailored for businesses that require advanced financial management, featuring:

• All growing plan features, including unlimited invoicing, bill payments, and bank reconciliations
• Multi-Currency Support
• Project tracking to monitor and manage project profitability and progress
• Expense management
• Detailed analytics

This top-tier plan suits businesses that need comprehensive financial insights and sophisticated reporting capabilities.

Xero allows unlimited users on every plan, making it a flexible choice for businesses with multiple employees. Each plan includes access to Hubdoc, simplifying document management by automatically importing and organizing your financial documents.

Xero’s flexible pricing and robust feature set make it an excellent option for businesses at various stages of growth, ensuring you have the tools you need to manage your finances effectively. Furthermore, the cost to access their Gusto full-service payroll starts at $39 per month.

QuickBooks Pricing

Like Xero, you can explore QuickBooks Online with a complimentary 30-day trial. Alternatively, if you prefer to start a paid subscription immediately, QuickBooks provides a 50% discount on your first three months. The platform offers four distinct subscription plans, each tailored to meet different business requirements:

1. Simple Start ($17.50 for the first 3 months, then $35 per month)

Designed for small businesses and freelancers. It has many more features than Xero’s most affordable subscription, including the fundamentals of capturing and organizing receipts, tracking earnings and expenses, issuing invoices, and taking payments. This foundational plan allows you to:

• Track income and manage expenses
• Create invoices
• Capture receipts
• Connect to one sales channel

2. Essentials ($32.50 for the first 3 months, then $65 per month)

Building upon the Simple Start features, the Essentials plan includes:

• Bill management
• Time tracking
• Enhanced financial reports
• Support for up to three users
• Connection to three sales channels

This plan is perfect for growing businesses that need additional functionality and support for multiple users and sales channels.

3. Plus  ($49.50 for the first 3 months, then $99 per month)

The Plus plan provides more advanced features such as:

• Advanced inventory management
• Project profitability tracking
• Budgeting tools
• Support for up to five users
• Unlimited sales channels

Suitable for businesses requiring comprehensive financial planning and inventory control, Plus ensures you have the tools needed for robust financial management.

4. Advanced  ($117.50 for the first three months, then $235 per month)

Tailored for larger enterprises, the Advanced plan includes:

• Batch invoicing
• Advanced Reporting
• Customizable roles for up to 25 users
• 24/7 priority support

This premium plan is ideal for businesses that demand extensive accounting tools and dedicated support to manage complex financial operations.

All QuickBooks Online plans offer the flexibility to switch or cancel anytime without penalties. You can choose between the 30-day free trial or the discounted first three months, but these options cannot be combined.

Xero vs. QuickBooks Online: Mobile App Comparison

When compared, the mobile apps of Xero and QuickBooks Online both provide unique advantages for mobile users but differ significantly in certain functionalities and user experiences.

The QuickBooks Online app offers extensive features. Users can handle tasks such as invoicing, monitoring income and expenses, and managing receipts directly on the app. Additional features include mileage tracking that logs miles automatically while driving and allows for trip categorization for tax deductions. The app also supports capturing receipts with the phone’s camera and linking them to expenses, simplifying record-keeping. However, it does not allow bill recording or time tracking unless users subscribe to more expensive plans.

The Xero mobile app prioritizes functional simplicity and ease of use. It supports sending invoices, tracking bank transactions, and managing expenses. Like QuickBooks, some functionalities, such as receipt scanning, are restricted to more expensive plans. Xero’s app lacks several advanced features found in QuickBooks, like detailed inventory management or project tracking, which QuickBooks handles more comprehensively in its higher-tier plans.

Xero vs. QuickBooks Online: Banking and Cash Management

QuickBooks Online typically provides greater flexibility than Xero, particularly in manual bank account handling. Both platforms enable bank or credit card account connections for automated transaction synchronization. They also offer the option to upload transaction files manually if direct connections are not preferred.

QuickBooks Online has an advantage with bank reconciliations. It allows users to manually identify transactions as cleared and enter an ending bank balance to finalize the reconciliation, offering more control over this process. On the other hand, Xero mandates uploading a bank statement for reconciliations, which can be restrictive for those who prefer a hands-on approach.

Additionally, QuickBooks Online has a superior system for managing undeposited funds. Users can view checks not yet deposited, select those included in the current deposit, and add other funds or checks not from customers. After recording the deposit, the system clears these checks from the deposit screen, which helps streamline operations.

QuickBooks outperforms Xero for managing grouped deposits of client checks and cash. Although Xero provides an account to track undeposited checks, its system is not as sophisticated as QuickBooks’s, making the letter a more suitable option for businesses handling frequent checks and cash deposits.

QuickBooks Online is the preferable choice for those seeking more comprehensive and flexible banking management tools, especially for those who value manual bank account reconciliation.

Xero vs. QuickBooks Online: Fixed Asset Management

In the area of fixed asset management, Xero significantly outperforms QuickBooks Online. While QuickBooks Online enables the recording of fixed asset purchases, it lacks features for detailed asset tracking or depreciation calculations. In contrast, Xero’s fixed asset manager is a more comprehensive tool. It allows users to monitor fixed assets, compute depreciation, and categorize assets by type, and it assigns unique account IDs to each asset. Additionally, Xero simplifies the process of selling an asset by automatically calculating any resulting profit or loss, offering a more advanced solution for businesses that handle numerous fixed assets.

Users can easily access Xero’s fixed asset manager through the Accounting menu on the dashboard. The platform allows for detailed record-keeping by enabling users to enter various asset specifics such as Asset Name, Serial Number, and Warranty Expiry. Xero further enhances organizational capabilities and reporting accuracy by allowing the creation of custom asset types, which is particularly beneficial for companies that manage equipment, machinery, or other significant fixed assets.

Overall, Xero provides superior fixed asset management capabilities that are well-suited for businesses requiring meticulous depreciation tracking and management. In contrast, QuickBooks Online offers more basic functionality.

Xero vs. QuickBooks Online: Inventory Management

Xero offers inventory management in all its plans, enabling users to handle products and services, monitor stock levels, adjust inventory, and attach documents or notes for improved organization. These features are included in Xero’s most budget-friendly plans, making it a viable option for small businesses or startups in need of basic inventory tracking capabilities.

Conversely, QuickBooks Online provides a more sophisticated inventory management system, though it is restricted to its higher-tier plans (Plus and Advanced). All QuickBooks plans allow the addition of products and services, but only the premium plans support comprehensive inventory tracking, setting reorder points, creating item bundles, and conducting detailed inventory operations. Therefore, QuickBooks is a more suitable option for businesses that need advanced inventory management tools and are prepared to pay more for these capabilities.

Xero vs. QuickBooks Online: Integration Options

Both Xero and QuickBooks Online provide strong integration capabilities, enabling businesses to connect their accounting software with a variety of third-party applications. Xero supports integration with over 1,000 apps, including prominent business tools such as MailChimp, HubSpot, Microsoft Outlook, PayPal, and Google Contacts. Xero also uses Zapier to facilitate connections with thousands of additional apps, enhancing its versatility for businesses that utilize various software tools.

QuickBooks Online, meanwhile, offers integration with more than 750 applications. Although fewer in number compared to Xero, QuickBooks ensures smooth integration with other Intuit products like QuickBooks Payroll, QuickBooks Payments, and TurboTax. This integration is particularly beneficial for businesses already within the Intuit ecosystem. QuickBooks also connects with well-known business tools like Gusto, ADP, Veem, and Insightly CRM and, like Xero, employs Zapier to expand its integration possibilities.

Both platforms offer comprehensive integration options. Xero has a slightly wider range of third-party app integrations, making it more adaptable for companies needing diverse software connections. On the other hand, QuickBooks stands out for its seamless integration with Intuit products, providing significant benefits for those deeply integrated into the Intuit ecosystem.

Xero vs. QuickBooks Online: Customer Support Options

Both Xero and QuickBooks Online have limitations regarding customer support, but QuickBooks generally has an advantage.

A key issue with Xero is the lack of phone support. Users must rely on email, which can take up to a day for a response. Xero offers resources like Xero Central, video tutorials, and in-app help for quicker assistance. While these tools are helpful, the absence of a phone option can be a problem for businesses needing immediate support. However, Xero does provide 24/7 support through its online help center, which can be helpful for less urgent matters.

QuickBooks, in contrast, offers phone support, giving it an edge. While wait times are typically short, support quality can vary, sometimes delaying issue resolution. Although QuickBooks doesn’t provide email support, phone and chat options are available during business hours, with some subscription plans offering 24/7 chat support. Users on higher-tier plans also receive priority customer service.

QuickBooks Online stands out for its phone support, despite occasional inconsistencies. Xero relies more on slower email communication but offers a range of self-service tools to assist users.

When Should You Use Xero?

Choose Xero if you are looking for:

• A budget-friendly option: Xero’s pricing, though only $6 cheaper for the introductory plan, makes it more affordable than QuickBooks if your only concern is pricing, especially for small businesses or freelancers who don’t need a full suite of features. Remember that the entry-level plan has limitations, such as restrictions on the number of invoices and bills you can process each month.
• Unlimited users is essential for you: Xero offers unlimited users on all plans, even the basic one. This makes it a good choice for businesses that require multiple users to access the software without additional costs for each user.
• You are fine with limited advanced features: Xero’s lower-tier plans may be enough if you don’t need advanced accounting tools. However, features like expense tracking, project management, and multi-currency support are only included in the $78/month Established plan.
• You don’t want direct support: Xero does not provide direct phone support. Instead, you can reach customer service through their online portal, and they will call you if needed. This can mean longer wait times for resolving complex issues.
• You are willing to spend more for advanced features: For businesses that need more advanced features, upgrading to the Established plan provides tools like expense tracking, project management, and multi-currency support, which are useful for businesses dealing with international transactions.

Why Should You Choose QuickBooks?

Choose QuickBooks if you need:

• Familiarity with the software is essential for you: QuickBooks is widely used in the accounting world, so many accountants already know how to use it. This can make working with professionals more efficient since they are likely experienced with its features and processes.
• Scalability is your priority: QuickBooks offers various pricing plans with different features, allowing businesses to start with basic options and upgrade as needed. The plans range from simple tools for small businesses to more advanced features like project tracking, inventory management, and custom reporting for larger operations.
• You are willing to spend more: QuickBooks tends to be more expensive than some other options. Its online plans begin at $35 per month, and additional features such as payroll or time-tracking come with extra costs. However, the range of features can make it worth the price for businesses that need comprehensive accounting tools.
• User limitations are acceptable for you: One limitation is the cap on the number of users, even with higher-tier plans. For example, the most advanced plan allows a maximum of 25 users, which might not be enough for larger teams.
• You want direct customer support: QuickBooks offers direct phone and chat support, which can be helpful when technical issues arise, especially compared to competitors that may require waiting for a callback.

Conclusion

Xero and QuickBooks Online offer robust accounting solutions for small to medium-sized businesses, catering to different needs. Xero is well-suited for startups, freelancers, and businesses looking for a cost-effective, user-friendly platform that accommodates multiple users without additional fees. Its simplicity and straightforward design make it appealing for those new to accounting software, especially outside the United States.

On the other hand, QuickBooks Online is a strong choice for businesses needing more advanced features, better customer support, and scalability. Its extensive reporting capabilities, integration with Intuit products, and wide acceptance by accountants make it ideal for companies with more complex accounting needs. Ultimately, the choice between Xero and QuickBooks depends on your business size, budget, and specific accounting requirements.

Frequently Asked Questions