Disclaimer: Please note this article is not financial advice. The purpose of our blog is purely educational, so please consult a professional accountant or financial advisor before making any financial decision.
Are you a proud small business owner with a rapidly growing enterprise? Good for you! But unfortunately, success can get the better of you if you are not adequately prepared. A growing business needs to hire more employees, serve more clients, and deal with more transactions. Handling these on your own will surely overwhelm you in no time.
That’s why many small business owners use accounting software like Xero and QuickBooks Online. These accounting apps make your finances—including payroll and inventory management—easier and faster to settle.
How do these popular accounting software fare against each other? Read more and find out!
What Is a Cloud-Based Accounting Tool?
Did you just record your sales for the day on a spreadsheet? Manually encoding your transactions like that takes too much time. Thankfully, cloud-based accounting software can automate many of the tasks you have to accomplish.
Cloud-based accounting software is the next step in the development of accounting. You’re no longer restricted to your desktop and a single operating system; cloud-based accounting tools let you access your financial records and work on them anywhere as long as you have Internet access and a compatible device.
Xero Accounting Software Overview
Xero offers a cloud-based accounting solution specially created to help small and medium-sized businesses. Small business owners like you can enjoy a more streamlined financial workflow with Xero. For instance, bank reconciliation sometimes gets in the way of a simple transaction; Xero eliminates that hassle with its smart banking feature. You only need to ensure the accuracy of your bank details and press OK to proceed with the transaction.
You can use the accounting platform for a monthly or annual subscription fee. Their pricing plans range from $17 to $54, depending on the tier level.
QuickBooks Online Overview
Like Xero, QuickBooks Online is a cloud-based accounting solution for small to medium-sized businesses. Originally, Intuit only offered desktop-based QuickBooks applications (QuickBooks Pro and QuickBooks Desktop) that you had to install on your Windows computer. Then, to take advantage of the benefits of a cloud-based platform, Intuit released its internet-based software, QuickBooks Online.
Aside from increased flexibility, QuickBooks Online has many new features. For example, one common problem that small business owners face is organizing receipts and invoices during the tax season. QuickBooks Online solves this problem by letting you take a photo of your receipts and automatically scanning it using optical character recognition.
Xero vs. QuickBooks Online: Which Is Better?
Xero and QuickBooks Online are the go-to accounting solutions in different industries. Small business owners and accountants all over the world prefer these two platforms. But which is the better accounting app? We will answer that question and help you decide which one is for you.
Expense and Bills Management
Both platforms let you scan your receipts and bills for more efficient handling of your transactions. However, the bills and expense management features of the two accounting apps significantly differ. Thus, you need to weigh which one is better depending on the workflow you and your team are comfortable with.
On the one hand, Xero offers extra expense tracking features through an add-on called Xero Expenses. If you have team members reporting their expenses to a centralized system, this add-on can make everything faster and easier. On the other hand, QuickBooks Online offers their expenses functionality in all their plans.
Ease of Use and Dashboard
If you have to keep your books on your own, you can do so with Xero or QuickBooks Online. Even without an accounting degree, you can learn how to use the different functions of either software through videos and resources online. However, their respective dashboards have a few differences you may want to consider.
Dashboards offer you a quick overview of how your business is performing, and you may want to customize it depending on your needs. In that case, QuickBooks Online offers multiple customizability options (for example, clients with an unpaid invoice, pending bill payment, cash flow). On the other hand, Xero initially provides you with a minimalist dashboard, which you can customize later on.
Issuing invoices shouldn't be a chore. Invoices are crucial in keeping your books clean and updated, so issuing them must be fast and accurate.
Xero and QuickBooks Online handle invoices differently. The former has a simpler workflow, while the latter has a few more functions that you may appreciate. It's up to your personal tastes which one you are more comfortable with.
The invoice page on Xero is more straightforward, featuring only the most relevant fields such as invoice number, issue date, due date, and the client. Meanwhile, QuickBooks Online lets you edit customer information on the invoice page itself instead of forcing you to navigate to your customer records. This feature can be handy when you need to change the billing address.
As time goes by, your small business will grow into a medium-sized enterprise. As a result, you’ll have to process payroll for more employees, cater to more customers, and manage larger inventories. Thus, you need to ensure that your accounting solution grows with you and your business.
In this regard, Xero and QuickBooks Online differ slightly. On the one hand, Xero is the go-to choice for rapidly growing businesses and startups because it scales well with them. On the other hand, solopreneurs and small business owners will find QuickBooks Online more suitable for their needs. If you have a bigger business, QuickBooks offers enterprise-level solutions.
Both Xero and QuickBooks Online offer three-tier pricing plans. However, they widely differ in how many features their respective cheapest plans provide.
QuickBooks Online's cheapest plan costs $25, while Xero is available at a more affordable price of $9.
Don't let the single-digit price tag fool you, however. Xero's cheapest plan has very limited features. For instance, it only lets you issue five invoices and enter five bills every month. Of course, this limitation won't do unless you only have five or fewer clients. Meanwhile, the $25 Essentials plan from QuickBooks Online lets you do more, albeit at a much higher price tag. If you want to do more, consider checking out the most advanced plan.
The QuickBooks vs. Xero debate is hard to settle; both apps have their respective pros and cons. Aside from these two platforms, others such as Wave Accounting and Zoho Books may serve your needs as your business grows. If you have spare time, consider trying them on a free trial.
However, if you want to take advantage of the many features and unique functions that an accounting software offers, get started with Unloop! Our team of experts combines their experience in ecommerce accounting with industry-leading accounting software.Put your business finances on autopilot. Get in touch with us today, and let our experts do the bookkeeping for you!