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Xero Accounting Software Review

Xero is a cloud-based accounting software program with excellent functionality that serves the needs of a wide range of small businesses. As the major competitor to the ever-popular QuickBooks Online, Xero holds its own, garnering an “excellent” rating from PC Magazine, which calls it “an exceptionally good double-entry accounting app that excels at many of the basics a small business might need.”

Small businesses from one-person shops to 100-employee companies will find a lot to like about this easy-to-use accounting product.

Xero is a solid alternative to its competitors, particularly because the company is constantly innovating to improve its product and service. This year, it added a project- and time-tracking tool, Xero Projects, which has repaired a deficit that critics of the software program had previously identified. Now users can engage in real-time project management from inside the app, an enhanced functionality that moves Xero closer to delivering on its marketing tagline, “Everything you need to run your business beautifully.”

Additionally, Xero will soon be changing the way it manages payroll by launching a partnership with a third-party vendor instead of trying to expand its in-house payroll services, which it had struggled to expand to all 50 states. Xero will be canceling its payroll service at the end of 2018, when it will start offering a payroll solution via a partnership with Gusto.

Gusto offers payroll services that include various small business-friendly options, such as health benefits, workers’ compensation insurance, FSAs, HSAs and more. This partnership will enable users to access full payroll functionality, but you have to engage with another vendor to do it, which might prove unpopular with those who prefer an integrated solution.

Xero offers many other features, including inventory management, multi-currency accounting, smart lists and bank reconciliation, among others. It even offers fixed asset management, a feature some other accounting software programs lack.

 

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Comparison chart for Xero plans
Xero Plan Type Regular

Price

Features in Addition to Basic* Best for
Starter $9 per month Send 5 invoices and quotes, enter 5 bills, reconcile 20 bank transactions Very small business with few transactions, or those just starting out
Standard $30 per month Send invoices and quotes, enter bills, reconcile bank transactions, payroll for up to 5 people Sole proprietors or small businesses with few employees
Premium 10 $70 to $180 per month Send invoices and quotes, enter bills, reconcile bank transactions, multi-currency payroll for 10 to 100 people ($70 per month for up to 10, $90 per month for up to 20, $180 per month for up to 100) Small- to mid-size businesses with sizeable payroll needs and/or international transactions

 

*Basic features include:

  • Add unlimited users.
  • Create performance reports and budgets.
  • Work on mobile via apps.
  • Access data via business dashboard.
  • Connect to bank accounts.
  • Integrate with 700-plus apps.
  • Access 24/7 support.
  • Receive regular updates.
  • Secure, SSL encryption on website.

Who Xero accounting is good for

Xero is a great choice for small- or mid-businesses with up to 100 employees. The number of employees the software will handle is limited by the payroll options for the premium subscription option. This software can easily manage the needs of humble, sole proprietors all the way up to multi-million-dollar companies.

Xero is a particularly good match for those who want an alternative to QuickBooks, as well as those looking for a robust, online support community.

How to get started

To start using Xero, sign up for the plan that fits your needs and download the app onto any devices you plan to use for business accounting. You’ll need to input data about your business and your employees and link the software to your business bank account. Xero has made it easy for QuickBooks Online users to transfer over — simply use Xero’s direct-conversion tool to move your data.

 

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The pros

Unlimited users. Unlike some accounting software, Xero allows unlimited users on each account, even at the Starter subscription level. You never have to worry that you’ll need to pay more if you want to bring more team members into your accounting process. It is, however, unlikely that a business small enough to be comfortable with the Starter subscription will have a large number of software users.

Great online support. Xero has a robust user support function that includes an ask-anything portal called Xero Central and discussion boards on the Xero Communities site. Accounting can be a confusing management task for business owners, so having help you can easily access to make sure the process is running smoothly is invaluable.

Fixed asset management. The ability to manage fixed assets isn’t standard in all accounting software; it’s helpful to some types of businesses to be able to track assets like vehicles, machinery, hardware and office equipment. This option might make Xero particularly attractive to companies such as construction and farming enterprises, which typically rely on a set of major assets for their day-to-day operations.

The cons

Payroll through third-party vendor. Xero will no longer be providing its own integrated payroll service after 2018. Although its new partnership with Gusto will enable its users to access a full-service payroll option, the bottom line is that Xero subscribers will be dealing with a third-party vendor for this portion of their accounting management, which some might feel makes the set-up unnecessarily complex.

No annual or flat-fee discounts. Xero charges monthly fees only, offering no discount to those who are interested in paying annually. Because the software is cloud-based, you also don’t have an option to buy a software package for a single, flat fee, which you can do with the local version of QuickBooks.

Best alternatives to Xero

QuickBooks Online. Intuit QuickBooks Online is Xero’s main competitor, and it’s an excellent alternative. QuickBooks Online offers integrated payroll services you can add on to your base subscription, which Xero will no longer do in 2019. The software also offers a full suite of accounting and management tools, including time and project tracking. QuickBooks, however, limits the number of users each account can have, and the starting subscription cost (at regular price) is twice that of Xero.

QuickBooks Desktop. For accounting software that isn’t cloud-based, consider Intuit QuickBooks Desktop, a local software solution you purchase via an upfront price or annual fee, instead of via monthly subscription. The option to run payroll is available only for the most expensive versions of this software, which cost more than $1,000 per year.

Zoho Books. This affordable, software-as-a-service option has fewer features than its competitors, but it’s user-friendly and excels in automatic report generation and support. Zoho Books lacks some of the things that make Xero and QuickBooks the leaders in this space, such as project tracking, a payroll option and integrations outside of Zoho apps. Its pricing, however, is comparable to Xero, with the lowest-priced subscription option starting at $9 per month, discounted at $90 per year.

Kashoo. Kashoo is another solid Xero competitor, although it’s best suited to smaller companies, such as freelancers, sole proprietors and other micro businesses. Its strengths lie in its income- and expense-management capabilities, as well as its user-friendliness and support. Unlike Zoho Books, Kashoo integrates with outside apps, such as Square. It is also more expensive than some of its competitors, with the cheapest option clocking in at $199 per year, or $16.65 per month.

 

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