Having a solid system to manage accounts is a necessary part of business. While Excel spreadsheets, and mathing out may be accessible to some. That isn’t the case for the majority of business owners. Cloud-based accounting software reduces manual processing. The two major accounting software subscriptions to compare are Xero vs Quickbooks Online. We are Xero Gold Partners and Quickbooks Online Platinum Pro Advisors. Here is our comparison of the two in these 5 core accounting functions:
- Accounts Receivable (AR)
- Accounts Payable (AP)
- Month End Close Procedure
Xero Vs Quickbooks Online: Plans and Integrations
Xero and QuickBooks Online are the best accounting software programs. Both offer secure cloud-based accounting for small-medium size businesses. For accounting on the go, both have free mobile applications that auto-sync to a web account. Both offer tiered plans, with varying features. Here is a comparison of Xero vs QBO plans and integrations:
Originally founded as Accounting 2.0, in 2006. It is a SaaS model that offers “Beautiful Business” accounting software. They came up fast in the last decade, making a mark with a user-friendly interface. Xero is an accounting service for small business owners. They serve 2.3 million+ subscribers in over 180 countries.
- Early $9/month
- Growing $30/month
- Established $60/month
- Free 30-Day Trial
Included in All Plans:
- Unlimited users – invite team members and accounting professionals any time
- Dashboard and reporting give a live financial snapshot, where you can create performance reports and budgets any time
- Unlimited bank reconciliations via connected bank accounts, that automatically show in Xero
- Avalara sales tax management
- Hubdoc for automated data capture
- Cash flow tools like business snapshot and short term cash flow
- Free mobile app
- Integration with 800+ third-party applications
- 24/7 online customer support
This software was developed by Intuit, founded in 1983. Their mission was to revolutionize accounting. In 2002 they released QuickBooks, with QuickBooks Online available two years later. Since initiation, they are always offering new ways to stay on top of your finances. They target businesses of all sizes.
- Simple Start $25/month
- Essentials $40/month
- Plus $70/month
- Advanced $150/month
- Free 30-Day Trial, or 50% off for the first 3 months
Included in All Plans:
- Unlimited customers and suppliers
- Unlimited invoicing and estimates
- Customized invoicing templates
- Reporting – run and export expenses, balance sheets, and profit and loss statements
- Bank account connection and reconciliation
- Turbo Tax organization tools
- Receipt capture and organization
- Access for your accountant
- Free mobile app
- Integration with other 650+ third-party applications
- Phone-based customer support
Xero vs Quickbooks Online Plan Comparison
There are notable differences between the two accounting software subscriptions. Here are notes on price, users, invoicing/ billing, and tax capabilities.
Price: Xero’s Established tier is a cost-effective option with comparative features to QBO Plus and Advanced plans.
Users: Unlimited users in all plans. Allowing the accounting team to access the account without additional fees.
Invoicing and Billing: Growing and Established have unlimited invoicing and billing. Xero Early permits 20 invoices and 5 bills monthly.
Taxes: Avalara sales tax partnership handles all local, state, and federal filing.
Price: QuickBooks Online regular pricing is more expensive, and it can get more complicated depending on your business needs.
Users: You get more account users by upgrading plans. The Simple Start plan has 1 user; Essentials has 3 users; Plus has 5 users; Advanced has 25 users.
Invoicing and Billing: There are limits to billing in the Simple Start plan, with unlimited billing in the Essentials plan and up. Unlimited invoicing for all plans.
Taxes: Turbo Tax handles prep and filing directly out of software.
Xero vs Quickbooks Online Integration Comparison
Some areas of your business finances may be monitored by outside applications. Integrating these applications into your accounting software, ensures everything is managed at a centralized site. Check to see which applications are offered by Xero vs Quickbooks Online. Integrations can be a dealbreaker, so research which cloud-based software will be the easiest to work with. Make a list of all your current banking and business platforms:
- Ecommerce/Saas Platforms
- AR/AP Tools
- Payroll Systems
- Reporting Tools
- Customer Relations Management (CRM) System
- Misc tools for your business: point-of-sale functionality, inventory management and expense tracking, time tracking, and email marketing
Offers 800+ app integrations for businesses, with a lot of free services.
Our Picks: Bill.com, WooCommerce, Shopify, Chargebee, Cledara, Saasoptics, Vend, Unleashed, Expensify, Stripe, Square, Tsheets, Harvest
Offers 650+ app integrations, some have additional fees.
Xero Vs Quickbooks Which Has A Better API, For The 5 Core Accounting Functions?
Every company, big or small, has 5 core areas of accounting: Payroll, Accounts Receivable, Accounts Payable, Month End Closing, and Taxes. Having cloud-based accounting software to help manage these areas is critical. Here is how Xero vs Quickbooks Online stacks up for each of the 5 accounting functions:
1. Xero vs QBO Payroll
Calculating pay and processing checks is only half of payroll. It also means maintaining compliance with the law. This function includes: collecting and remitting income tax, recording pay for w-2’s/1099’s, keeping track of workers comp, and much more. A good payroll system will handle your payroll liabilities, provide accurate tax information, and process payments. Xero and Quickbooks Online both offer plans to help companies perform payroll:
The Xero + Gusto payroll plan is an add-on.
- Flat rate of $39/month + $6/month per person
- Auto-running payroll for each cycle
- Automatically calculate and file payroll taxes at local, state, and federal levels.
- Payroll can run whenever it is not locked into a weekly or bi-weekly cycle.
- Direct Deposit or check for pay/expenses reimbursements
- Management of compliance contracts and onboarding documents
- Provides employees with W-2’s and 1099’s
- PTO tracking, Employee Benefits, Bonuses, and Commissions
QuickBooks Payroll is an add-on. The service is optimal for up to 50 employees/contractors and capped at 150.
- Core $45/month + $4/month per person
- Premium $75/Month + $8/month per person
- Elite $125/month + $10/month per person.
- Manual payroll
- Unlimited amount of times to run Payroll.
- Pay employees using direct deposit or by paper check
- 24-hour direct deposit – you can submit payroll right up to 5 pm the day before payday.
- Automatically calculate and file payroll taxes at state and federal levels.
- QuickBooks Workforce – Platform for employees to access pay stubs, health, and benefits.
Xero vs QBO Payroll Plan Comparison
There are notable differences between the two payroll plans are price, tax filing, and extra features:
Price: The flat rate covers full automated payroll. Xero estimates that a business will spend 7 minutes running payroll on Gusto.
Tax Filing: Xero offers free payroll tax filing at the local, state, and federal level.
Extra Features: With the flat, add-on rate businesses get time tracking for employees.
Price: Core and Premium plans are considered DIY payroll, while the Elite is fully automated payroll.
Tax filing: Automated filing in the Premium and Elite packages only. One caveat at the Premium level, users must print and upload local tax forms to their respective sites. They only allow one state filing for Core and Premium packages. There is an additional fee of $12/month for each additional state.
Extra Features: Tax Penalty Protection is one big plus with the Elite package. With fully automated payroll, if QBO messes up your tax calculations or payments, they will cover the IRS fee.
2. Xero vs QBO Accounts Receivable (AR)
If you are a SaaS company AR consumes a lot of time. Onboarding clients is hard enough, without the added responsibility of making sure they pay you. So you want cloud-based accounting software to take the hassle out of tracking client dues, sending invoices, payment reminders, and recording their payments.
In both programs, you can connect to a wide range of merchant accounts to facilitate payments from your clients. Additionally, they both offer direct ACH payment processing. You can automate email reminders for payments and incoming money will transfer into the ledger seamlessly. Here are notable differences in accounts receivable for Xero vs Quickbooks Online:
Invoicing: As stated before, The Early Plan is limited to 20 invoices per month. That averages to 1 invoice per business day.
Client Risk Ratings: You can see a client’s payment risk rating, to prevent chasing payments from bad customers. Xero also allows you to purchase Experian credit reports.
Invoice Templates: The customization of automated invoice emails, can’t be matched.
Interface: When managing your business transactions in QuickBooks Online, there are a lot more specifications to choose from. This can be a pro or con depending on the size of your business. If you are looking for quick invoicing, it will take time to get into the swing of things.
3. Xero vs QBO Accounts Payable (AP)
Paying your vendors on time has an enormous effect on cash flow. Both accounting software systems allow users to manage and pay bills. As well as map expenses into different accounts for reporting. Here are notable differences in accounts payable for Xero vs Quickbooks Online:
Limits: The Early plan limits users to 5 bills per month.
Bills: A bonus feature with Xero is Short Term Cash Flow. This is the option to view how bills will affect your cash in 7 and 30-day increments. It includes accruals and deferrals to project if the business has enough cash for responsibilities and where that leaves them afterward.
Plans: the Simple Start plan does not have automated accounts payable functionality. You have to manually pay bills and input expenses. You get accounts payable with the Essentials on up.
Batching Payments: One of the best ways to automate processing. It allows businesses to make multiple payments at once. In QuickBooks Online batch payments are only offered in Advanced and Enterprise.
Users: Quickbooks Online users are limited so your chain of approval for payables will be inhibited.
4. Xero vs QBO Month End Closing Procedure
When it comes to company financial health, a good practice is a month end closing procedure. The process relies on precise bookkeeping, to produce accurate financial statements. Both Xero and QuickBooks Online will: ease data entry and record keeping; auto-generate reports and financial statements at the end of the month. Regardless of the plan, with each platform you have access to balance sheets, income statements, and cash flow statements. Here are notable differences for the month end closing procedure in Xero vs Quickbooks Online:
Customizable reports: You can drag and drop columns to create reports specific to your business. Plus Xero allows you to get equity and fixed asset reports.
Cash flow statements: Auto-generated in the direct cash flow method. This type of statement is ideal for small businesses to see a clearer picture of their cash position. Xero does allow businesses to create indirect cash flow statements in the U.S., through an advisor.
Business Snapshot: Helpful tool for business owners trying to get a quick read of profitability and cash flow.
Transaction Reporting: There isn’t a separate column for Vendor names. They are bulked into the description.
Reports: The Simple Start plan is limited in reporting AR, and offers no reports for AP. They do offer refined reporting called Smart Reports when you upgrade to the Advanced plan.
Cash flow statements: Auto-generated in the indirect method. This method is ideal for large companies. You can download a manual template for a direct method cash flow statement.
Cash Flow Widget: A downloadable feature for the dashboard. It shows all cash going in and out of the business for the last 12 months. This widget only shows bank-connected transactions. It is a misleading view of cash because it excludes credit card expenses, manually entered transactions, .csv imported transactions, and any others not running through the bank account.
Transaction Reporting: You will receive an error when exporting large transaction files. You will have to select a smaller date range, which can be a hassle for account reconciliations.
5. Xero vs QBO Taxes
While tax prep and filing used to be a strain on businesses. Cloud-based accounting software offers revolutionary changes. With all the above duties automated, numbers can be easily translated to tax forms. Here are notable differences for doing taxes in Xero vs Quickbooks Online:
Tax Filing and Prep: Returns are one of the big pitfalls of Xero. They do not have quarterly/end-of-year filing. If you connect with a Xero partner, they can quickly import from your income statements and balance sheets to your tax return.
Payroll Tax: You can auto e-file 1099 forms using Track1099 or Tax1099.
Sales Tax: Xero has a partnership with Avalara Trustfile to handle sales tax. You will get up-to-date tax rates for your sales and purchases. They will automatically file, prepare and submit sales tax returns.
Tax Prep and Filing: Intuit TurboTax integrates into all of their packages. Users can file directly from the software. There are extra fees for tax forms unless you are enrolled in the Premium and Elite payroll plans. They start at $17.95, depending on what form you need and how many.
Payroll Tax: Auto filing 1099’s starts at $14.99.
Sales Tax: Will calculate your sales tax, but won’t file.
Xero Vs QBO Extra Features
Accounting doesn’t stop at the 5 functions above. Efficient e-commerce accounting software solves banking activities and inventory management. This is how Xero vs Quickbooks Online handles the extra odds and ends of finances.
Xero vs QBO Bank Feeds and Reconciliations
This is where the action happens. Having a connected bank feed will streamline reconciliation. Safeguarding your accounting from omissions and errors. Both Xero and QuickBooks Online will connect to bank thousands of popular feeds from Paypal, Square, and Stripe. Below is a comparison of bank features:
Bank Feeds: Xero works with tons of banks, to facilitate direct bank feeds. Currently it is set to work with Yodlee to connect minor banks not affiliated with Xero. Yodlee can lag a few days unless you manually refresh. For banks that don’t support direct feeds, you can import bank statements.
Bank Reconciliation: One thing to note about Xero is the bank balance. Xero is a calculated balance from when you start your account. They do this to help the bank reconciliation process. You can see if your live balance in Xero matches your bank to resolve any discrepancies.
Bank Feed: QuickBooks Online has its own direct bank feed. It does have faster bank downloads in comparison to Yodlee. The software connects with many different banks, and no additional fees are passed on to the customer.
Bank Reconciliation: To reconcile a bank account in QBO you match your bank statement in their bank reconciliation module.
Xero vs QBO Inventory
Managing inventory is a major part of e-commerce. Tracking quantities of items, prices, and cost of goods (COGS) can be a detailed endeavor. An accounting system that will take over this part of business reduces manual errors. Here are things to know about inventory management with Xero vs Quickbooks Online:
Plans: All plans offer inventory management. Xero goes above and beyond by offering reports to find the best-selling products. It gives you 4000 tracked items and unlimited untracked items.
Cost of Goods (COGS): Calculated using the Average cost method
Plans: They do not offer inventory management until you upgrade to the Plus plan.
Cost of Goods (COGS): Calculated in the First in First out Method (FIFO).
Xero Vs Quickbooks Which Is Better?
We feel Xero is better for a wide range of businesses. The pricing is hard to beat, it is user friendly, and their cloud-based accounting software enhances financial insights. The only place they are lagging for DIY accounting is taxes. That being said, your company might depend on nuanced features from QuickBooks Online. With this Xero vs Quickbooks Online comparison under your belt, your decision is made.