Xero and QuickBooks Online stand as leading accounting software choices for small business owners, offering robust capabilities in billing, invoicing, financial reporting, and tax management. However, each platform is optimally tailored to suit different kinds of businesses.
In this head-to-head comparison, we'll explore the differences between QuickBooks and Xero to help you determine which is the best fit for your business.
Exploring QuickBooks Online
QuickBooks Online (QBO) is a cloud-based accounting software designed to streamline the repetitive tasks involved in handling bills, invoices, and business projects.
With advanced bookkeeping features such as inventory management and expense tracking by class or location, QBO provides a comprehensive plan designed to fulfill the needs of most businesses.
With QBO, you are able to:
· Monitor income, expenses, sales, sales tax, and mileage
· Collect and categorize receipts
· Generate invoices (including progress billing) and process payments
· Dispatch estimates, generate reports, and optimize tax deductions
At Bluemount, we frequently suggest QBO to our nonprofit clients as its class functions make it easier to assign revenues and expenses to various programs, streamlining fund accounting.
Exploring Xero
Xero is adaptable, intuitive accounting software that integrates essential business functions into every plan, encompassing invoicing, bank reconciliations, and bookkeeping.
Xero offers a comprehensive suite of accounting tools and features, enabling you to:
· Input bills and dispatch quotes and invoices.
· Match (and batch-match) transactions.
· Handle various currencies.
· Elevate to Analytics Plus for enhanced insights.
Xero facilitates capturing bills and receipts through Hubdoc, scanning files via email or mobile apps, and storing documents online, offering real-time access to cash flow reports.
Seven Fundamental Contrasts Between QuickBooks and Xero
Plans and pricing
QBO
QuickBooks Online provides four subscription options (EasyStart, Essentials, Plus, and Advanced) tailored to businesses of varying sizes. With prices beginning at $11 per month, the EasyStart plan delivers fundamental accounting tools suitable for most straightforward startups.
Meanwhile, higher-tier plans are priced between $22 and $70 per month and incorporate functionalities such as:
· Tracking time
· Access for multiple users and support for multiple currencies
· Management of bills, payments, budgets, and projects
Additionally, QuickBooks Online provides supplementary features such as payroll and QuickBooks Payments for streamlined payment processing.
Xero
Xero provides three subscription options (Starter, Standard, and Premium), with prices starting at $17 per month for the entry-level Starter plan and reaching up to $54 per month.However, the Starter plan has a drawback in that it restricts the number of monthly transactions you can handle.
· One advantage is that it doesn’t impose limits on the number of users you can incorporate.
With all its plans, Xero also provides optional paid features such as expense reporting and project tracking.
2. Transaction creation
Both platforms allow you to establish and align products and services with your chart of accounts.
QBO
Without a draft feature, you must have all your information ready when recording and posting transactions in QBO.
Xero
In Xero, you have the ability to save transactions as drafts, allowing you to finalize or edit them at a later time. This enables different users to complete or post each transaction individually.
3. Tax reporting
Both platforms enable you to compute, monitor, and oversee sales tax, followed by generating reports displaying the amounts owed in taxes.
QBO
Due to QBO's tracking of various taxes in distinct ledger accounts, you can utilize your balance sheet to view the amounts owed to each tax authority.
QBO also allows you to specify the province(s) for which you need to track taxes, displaying only the relevant tax rates. Additionally, it automatically generates adjusting transactions to accurately record your tax filings.
Xero
One significant contrast between QuickBooks and Xero is that Xero consolidates various taxes into a single ledger account. Consequently, when utilizing Xero to track taxes, separate reports are required to ascertain the amounts owed to each tax authority.
Additionally, you'll need to eliminate any unnecessary rates from Xero's roster of provincial tax rates and manually input adjusting entries to accurately reflect your tax filings.
4. Matching and reconciling bank feeds
Both platforms facilitate the reconciliation of bank feed transactions by aligning them with corresponding entries in your accounting software.
QBO
Connect QBO to your bank account feed, then simply check off transactions that align with items in the monthly bank statement (printing out statements can aid in cross-referencing). Keep in mind that QBO's bank feed matching is restricted in handling foreign currency transactions.
Xero
Choose a bank account, head to Xero’s Reconcile tab, and review the two columns (your bank statement versus your Xero transactions). Confirm matches by clicking the OK button for each row. You can also attach comments to transactions to alert other users before they are posted.
5. Report customization
Both platforms feature pre-configured options for standard financial reports such as balance sheets, income statements, accounts payable, accounts receivable, sales tax, and general ledger reports.
QBO
QuickBooks Online provides a greater number of pre-set reports compared to Xero, although they offer less flexibility in customization.
Xero
Xero allows you to personalize reports by grouping accounts, incorporating formulas, and adjusting formats. Additionally, it enables you to create report drafts for future editing.
6. Multicurrency
Depending on the subscription plan, both platforms have the capability to automatically apply exchange rates and record transactions in foreign currencies.
QBO
In QBO, currency settings are configured at the contact level (customer or supplier). Therefore, if you engage with a single contact in multiple currencies, each currency needs to be set up individually. Additionally, currency revaluation must be manually performed at the conclusion of each reporting period.
Xero
In Xero, currency settings are determined at the transaction level, allowing a single contact to accommodate transactions in multiple currencies. Xero also automatically adjusts currency values whenever a report is generated, utilizing the dates specified in the report.
7. Tracking Mileage and Time
QBO
Mileage tracking is incorporated in all QBO plans, while time tracking is available in all plans except EasyStart.
Xero
To track mileage in Xero, you'll require the Expenses add-on, and for time tracking, you'll need the Projects add-on, both of which are paid features.
Conclusion
Although both are prominent in cloud accounting, the primary distinction between QuickBooks and Xero lies in their individual strengths and limitations.
While QBO stands out in features like class functionality and tax tracking, Xero particularly excels in customizable reports and handling multicurrency transactions.
When evaluating customer support between Xero and QBO, it's worth noting that Xero offers 24/7 online support exclusively, whereas QBO provides phone and chat support during designated hours only (with 24/7 support available on its Advanced plan).
At Bluemount, we assist clients in selecting the optimal accounting software and integrating suitable applications to streamline their accounting processes. If you're seeking a cloud accounting solution for your small business, Bluemount is here to provide assistance!
Our Process for Choosing and Assessing Software Recommendations
We conduct comprehensive research and testing on the apps incorporated into our standard workflow for client bookkeeping services. This involves establishing criteria for software evaluation, researching the app thoroughly, and conducting testing to identify its strengths and weaknesses. We actively engage with the app for a minimum of several weeks before determining whether it meets our standards for recommendation. Throughout this process, we utilize the software as intended for its designated tasks. For an in-depth overview of our software selection and evaluation process, please refer to the specifics outlined in our methodology.
Bluemount does not receive any form of consideration or compensation from software publishers for showcasing their software in our blog articles.