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Pros
- All Xero plans allow unlimited users
- Offers integration with hundreds of third-party apps
- User-friendly interface with a simple layout
- Comprehensive accounting capabilities
Cons
- Lacks a direct customer support phone line but provides callbacks when needed
- Entry-level plan imposes restrictions on the number of bills and invoices
Overview – Xero
Xero is a user-friendly, cloud-based accounting software that seamlessly integrates with over 1,000 apps. Compared to competitors like QuickBooks Online, it offers a more budget-friendly solution, particularly for growing businesses, as it does not impose additional charges for extra users.
One of Xero’s standout features is its support for unlimited users at no extra cost, making it an appealing choice for small businesses with multiple team members. It covers all essential aspects of financial management for both emerging and expanding companies, leveraging AI for tasks such as bank reconciliation and providing robust reporting capabilities.
How it works?
Once you create an account, Xero provides a list of suggested accounting tasks to help you get familiar with the platform. A demo company with sample data is available, making it an ideal way to practice before working in your actual account.
When you begin Xero’s free 30-day trial, you’ll activate your account and enter your business details. Next, you can link your bank accounts and choose whether to accept electronic payments for online invoices. During the reconciliation process, Xero automatically suggests potential matches between bank statement entries and recorded transactions. For instance, if there is a $1,000 invoice in Xero and a corresponding $1,000 deposit in your bank account, the software may recommend linking them. You can confirm the match by clicking the “OK” icon.
When you’re ready to use your live account, it’s important to customize settings such as user permissions, currency preferences, invoicing options, and online payment methods. Xero’s onboarding process is enhanced by an improved user interface and a new invoice preview feature.
Plans and Pricing
Xero provides three pricing tiers along with a 30-day free trial. Xero offers new users a 30-day free trial to explore its features. Payroll services through Gusto can be added to any plan for an additional $40 per month, plus $6 per employee per month.
Early
Price: $20 per month
Xero allows users to send quotes and up to 20 invoices while managing up to five bills. It includes automated bill and receipt capture through Hubdoc, along with features for reconciling bank transactions and setting up online bank feeds. The platform offers basic inventory management, reporting capabilities, and the ability to send purchase orders. Additionally, users can streamline financial tasks with bulk transaction reconciliation.
Growing
Price: $47 per month
The Growing plan includes all the features of the Early plan while removing limitations on invoicing, quotes, and bill entries, allowing users to create and manage these without restrictions.
Established
Price: $80 per month
The Established plan builds upon the features of the Growing plan, adding support for multiple currencies, project tracking tools to log time and analyze job costs, and an expense management system. It also includes advanced analytics tools that provide cash flow predictions up to 90 days in advance.
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Tools and Features
Xero’s dashboard serves as a useful starting point, presenting key financial data at a glance. It highlights essential details such as account balances, invoice and bill statuses, and overall cash flow. Users can dive deeper into specific transactions or initiate new ones directly from this view.
Xero offers extensive import options, allowing users to upload customer data in CSV or TXT format. It also provides downloadable templates for various data types, including bank statements, budgets, Charts of Accounts, fixed assets, inventory, and invoices. While its record templates efficiently handle basic contact details for manual entry, they lack some advanced features found in Zoho Books, such as portal language, price lists, and reporting tags.
Invoice Templates
Xero provides templates for both one-time and recurring invoices and quotes, along with the ability to batch print or email multiple statements. While detailed step-by-step support articles are available, the platform lacks direct chat, email, or phone support—features offered by Patriot Software Accounting. Advanced customizations must be made using Microsoft Word. The forms include all essential details but lack the polished, modern design found in FreshBooks.
Xero features a dedicated sales overview page that tracks the status of invoices and quotes, allowing users to see where they stand in the creation, approval (a step many competitors lack), payment, and overdue process. Automated late payment reminders can be set up, and online payments are supported through Stripe and GoCardless. However, Xero does not offer its own built-in payment processing service.
1099 and Bills Management
Xero uses the same record templates for suppliers and contractors as it does for customers, whereas some competitors customize these based on contact type. For contractors, Xero allows you to generate reports that integrate with its apps to facilitate 1099 creation during tax season. Additionally, you can send contractors links to W-9 forms they need to complete.
Xero allows users to email or upload bills directly into the platform, a feature that is becoming more standard but is not yet available in all accounting software. The system extracts key details from uploaded bills and populates the corresponding forms. Users can also enter bills manually and record payments, though Xero does not offer an online bill pay feature like QuickBooks Online. Additionally, the software includes support for purchase orders.
Inventory Tracker
Xero includes inventory tracking but lacks certain flexibility. For instance, it does not allow users to set reorder points, requiring manual inventory adjustments to establish opening stock levels—a process QuickBooks Online simplifies by incorporating it into item creation. Additionally, Xero does not support bundling items into assemblies.
Xero’s latest add-on, Inventory Plus, is designed to address these limitations. It’s particularly suited for online retailers and brick-and-mortar businesses that require advanced tools to track sales, inventory, and profitability. Available for Growing and Established plan subscribers, this integrated feature comes at an additional cost of $39 per month.
Monitor Project Profitability
Xero offers features for creating, tracking, and analyzing project profitability. Each project’s dashboard displays assigned transactions, including quotes, invoices, time entries (which must be linked to a project since standalone timed activities aren’t supported), as well as tasks and expenses. However, its project management setup is not as intuitive, flexible, or user-friendly as FreshBooks.
Reporting
Xero’s reporting tools align well with its overall feature set, offering templates that highlight unique data points not commonly found in small business accounting platforms. These include reports on Foreign Currency Gains and Losses and Duplicate Statement Lines. It also provides innovative filtering options, such as Profit Per Item and Outstanding Tax. Users can customize reports and save their modifications for future use.
Additionally, Xero offers two advanced reports that deliver valuable financial insights. One provides short-term (30-day) cash flow projections with actionable recommendations to improve financial health. The other, Business Snapshot, presents key financial ratios and metrics through detailed tables and graphs—an analysis tool not typically seen in other accounting software.
Mobile App
Xero has integrated the features of its retired Xero Expenses app into the updated Xero Me app, which now includes some payroll functionalities. Xero Projects allows users without full access to the primary Xero platform to participate in project-related tasks. While the main Xero accounting app provides some of the key tools and data found in the web version, certain features remain unavailable. All Xero apps are accessible on both Android and iOS devices.
The primary app features a streamlined dashboard that highlights key financial metrics. Sales and purchase summaries provide transaction details across all accounts, while users can create new transactions and reconcile existing ones. Customer and vendor profiles include contact details along with lists of outstanding invoices and bills. These apps stand out for their ease of use and intuitive design, and future updates are anticipated to bring even more improvements.
Security
Xero employs multiple security measures to safeguard your personal and financial data. It utilizes encryption for both data transfer and storage, ensuring protection against unauthorized access. Multi-factor authentication provides an added layer of security. The company also enforces strict physical security controls at its servers and data centers, complemented by continuous 24/7 monitoring and surveillance. To maintain high security standards, Xero conducts independent audits regularly and actively monitors its systems to detect and mitigate potential threats.
Conclusion
Xero provides a comprehensive solution for small and expanding businesses, offering unlimited user access for managing financial tasks. Key features include integration with Gusto for payroll, a valuable inventory management add-on, and a robust suite of mobile apps. Future updates, such as complete bank account reconciliation and integration with Bill for handling accounts receivable and payable, are expected to further enhance its competitiveness.
