QuickBooks vs. Xero: What’s The Difference And Which To Choose?

Do you ever feel like a hamster on the wheel, trying to stay on top of managing your business's finances? It can be one of the most difficult and tedious tasks out there. But thankfully, there are a few great tools that make it much easier. 

Two of the leading accounting software solutions available today are QuickBooks and Xero. Both platforms have an extensive list of features designed to help businesses streamline their financial operations, but what should you choose for your own business needs? 

We're here to help you compare both options so that you can confidently pick the right one for your organisation. So keep reading to learn more about QuickBooks vs Xero – let's get started!

QuickBooks vs Xero: At A Glance

Both QuickBooks and Xero are widely used accounting solutions for companies ranging in size from small to medium. However, if you look at the functions side-by-side, QuickBooks comes out on top thanks to its flexibility to scale and its connectivity with accountants. 

Simply due to the fact that it is the accounting solution that is employed by most people, it is simple to involve your accountant. The reporting feature of QuickBooks is essential to acquiring insights into your organisation's accounting process as a whole.

Nevertheless, not all firms would benefit from using QuickBooks. The unlimited user subscription offered by Xero positions the company as a formidable rival, at least from a financial standpoint, especially amongst larger firms. Xero also shines thanks to its user-friendliness and its overall design.

In a nutshell, QuickBooks is the best option for companies that have the goal of expanding their operations and are searching for comprehensive reporting capabilities. Xero is best suited for enterprises that are cost-conscious and require five or more users. At the other end of the scale, it is best suited for self-employed individuals who do not feel the requirement for a full-blown system.

Introducing QuickBooks Online

The accounting software known as QuickBooks Online (QBO) is hosted in the cloud and simplifies a significant number of the mundane responsibilities associated with the management of business projects, invoices, and bills.

QBO provides an established package that can cater to the requirements of the majority of businesses thanks to its increased bookkeeping capability, which includes inventory control and the recording of expenses according to class or region.

Using QBO, you are able to:

• Keep tabs on your revenue, expenses, sales, and sales tax, as well as your mileage.
• Capture and arrange receipts
• Charge customers (including for any interim billing) and take their money.
• Send out estimates, conduct research, and make the most of your tax deductions.

Introducing Xero

Invoicing, bank reconciliations, and bookkeeping are some of the company's key tasks that are included in any Xero subscription. Xero is a flexible and user-friendly accounting software that also combines these essential company functions together.

You are able to do the following thanks to Xero's comprehensive set of accounting tools and features:

• Bills must be entered, and quotes and invoices must be sent.
• Then, perform a manual and automated reconciliation of the transactions.
• Manage numerous currencies
• Consider upgrading to Analytics Plus for access to more in-depth information.

Xero delivers real-time views of cash flow data in addition to facilitating the recording of bills and receipts through Hubdoc, the scanning of papers through email or mobile applications, and the online storage of documentation.

Feature Comparison

QuickBooks is an option to consider if you are looking for an accounting system that can keep up with the expansion of your company. On the other hand, Xero is an option worth considering if you own a larger company or are self-employed and working on your own.

Now let's take a look at some of the most important aspects of an accounting system to determine how QuickBooks and Xero stack up against one another and identify the areas in which every piece of software excels.

At first sight, QuickBooks appears to offer more capabilities than Xero does at the basic level; nevertheless, the cost of QuickBooks is significantly more. One of the most notable distinctions between the two solutions is the manner in which they manage bank reconciliation and accounting for fixed assets.

1. Overview Dashboard

The business overview dashboard of your accounting software presents a summary of your company's financial situation in a moment. Utilising this, you should be able to easily complete the overviewing chores that you do on a daily basis.

QuickBooks Online (QBO) has a homepage interface that is quite attractively built. It gives you an idea of your profits and losses, as well as your income and costs. The dashboard does an excellent job of displaying the important indicators to keep track of the development of your eCommerce website. The capability of the dashboard to provide additional information when the mouse is hovered over an element is one of its most appealing features.

When compared to that of QBO, the dashboard for Xero is rather straightforward and uncomplicated. But on the other hand, it has a tendency to put a lot of effort into making things simple and straightforward for its clients. 

The dashboard provides functions that can be accessed with a single click, allowing users to obtain entry to some essential accounting features like posting an invoice or balancing their bank accounts. Furthermore, the dashboard displays the usual balance and profit-loss information.

The 'Account Watch list' is a one-of-a-kind feature that can be found within the Xero dashboard. It makes it possible for you to maintain a close eye on the balance of important accounts derived from your Chart of Accounts.

2. Bank Reconciliation

QuickBooks emerges victorious when compared to other accounting software in terms of managing bank reconciliation. You can easily combine either option with your bank or credit card account to synchronise your actions. Still, both systems also provide you with the option to manually upload transactions if you choose. On the other hand, Xero needs a bank statement to do a bank reconciliation.

Xero has the capability to import bank feeds automatically. Once you have established the initial connection between Xero and your bank, your information will be updated regularly on a company daily basis going forwards. You are capable of connecting any bank account that you have using QuickBooks, assuming that the bank is compliant with the Open Banking laws. A real-time picture of your cash flow and finances can be obtained through the use of bank feeds.

3. Reporting

The data speak for themselves when they are included in important company reports at the appropriate time. Think about the following ways in which the reporting functions of Xero and QuickBooks Online are distinct from one another:

When compared to other accounting software, QuickBooks Online has the largest number of pre-made reports available right out of the box. There are over 80 reports that can be accessed with just a few clicks of the mouse and are organised into sections like Business Summary, Sales, Income tax, Products and Stock, among many others. These reports can be found in the Reports section.

The reports have been significantly improved, and the customising options are very outstanding. For example, you have the option of including memo notes from invoices, including product descriptions and modifying columns by customising any one of the integrated reports for your eCommerce site. In addition, you can choose to incorporate memo notes from invoices.

At the moment, reporting isn't one of the tasks that are particularly well-established in Xero. The essential reports for your online store can be accessed at any time; nevertheless, the scope of your ability to tailor these reports is somewhat restricted. You have to rely on the pre-made layouts that are included.

However, I will tell you this, Xero is aware of this limitation and is making significant efforts to enhance the software.

4. Fixed Asset Accounting

If accounting for fixed assets is one of the most important considerations for your company, Xero is likely the superior option available to you. The only thing that QuickBooks enables you to do is document the acquisition of a fixed asset. 

You can record the asset acquisition and subsequently determine depreciation using Xero. You will also be able to construct asset classes, give an account ID to every asset, and determine gains or losses when selling assets.

5. Inventory Management

QuickBooks provides a comprehensive variety of inventory features, such as low-stock notifications, reordering, rate customisation, and reporting to keep tabs on what's in inventory and what's moving off the shelves. Nevertheless, the Plus plan is the only one that makes these stock capabilities accessible to users.

The company's most significant selling point is that inventory management is included in all of Xero's plans. This is particularly appealing to smaller companies because they don't have to spend lots of money per month that larger companies do in order to maintain a record of their goods and the resources they use.

Differentiators to Consider When Selecting the Appropriate Accounting Software

How do you go about determining which software will best serve your company? At the end of the day, it will come down to a great extent to personal choice, the size of the company and your development ambitions for the near future. While deciding what course of action to take, here are some key factors to take into account.

1. Goals for the company's size and expansion

When compared to QuickBooks, one of the most significant benefits of Xero is that all of its pricing tiers permit an infinite number of users. This characteristic makes Xero an excellent option for businesses of a medium size or larger that plan to see future expansion. 

If QuickBooks users want to add more than five active users to their account, they will have to upgrade to the most expensive software package available. On the other hand, Xero enables businesses to add as many users as they require without incurring additional costs for functionalities they either do not require or do not intend to utilise.

On the other hand, QuickBooks might be a more cost-effective solution for solo practises due to the fact that its most affordable package, Simple Start, has less constraints on annual usage than Xero's Early package does. Xero's Early plan is available at a lower monthly price.

QuickBooks also provides a wider selection of software solutions for very large businesses, such as QuickBooks Enterprise, which is intended to handle as many as one million customers, merchants, and inventory items simultaneously. 

2. Software support 

When implementing new software into your company's workflows, there are almost always going to be a few unforeseen hitches along the road. You should be capable of relying on easily available and trustworthy software assistance in the event that problems emerge with the software.

Both Xero and QuickBooks provide assistance to customers for their software on a 24-hour-a-day, seven-day-a-week basis; however, only QuickBooks provides live support for customers through the phone or online chat, which has the potential to provide a considerable advantage in several situations. 

QuickBooks is likely the best selection if the opportunity for your company to establish contact with the client support staff of the programme when problems emerge is important to your company.

Nevertheless, several of QuickBooks' most comprehensive software support services, like on-demand education and access to a special account assistance team, are only available with the Advanced payment package, which is the most expensive solution. 

In comparison, Xero makes all of its product support offerings, such as on-demand training opportunities, available to consumers at any tier level. Xero also offers a free trial version of its software.

3. Team preferences 

Because the members of your team are likely to be devoting a significant amount of time to utilising the software that you select, one of the most critical factors to take into account is whether or not the programme is simple to use. Both Xero and QuickBooks boast interface designs that are uncluttered and straightforward, which contributes to their overall user-friendliness.

Having said that, the employees on your team might find that one of the software interfaces is more familiar to them compared to the other.

Allowing the members of your company to test out both options is the greatest method to see which one would be preferred by your company. Since both Xero and QuickBooks provide a free trial period, you may offer all customers some time with both programmes and then ask for their input before making a final selection.  

4. Software integrations 

Both QuickBooks and Xero are highly effective pieces of software that can manage the day-to-day accounting requirements of your company; however, the vast majority of businesses will still depend on a complete package of other software tools in order to run their business operations. These software tools include the following:

• Software for tracking time and expenses
• Office 365 and other document editing programmes
• Software for managing one's email and calendar
• Accounting software
• And more

Because of this, it is essential to be certain that the software you select will be able to interface with the software that you already have assistance for. 

Robust software integrations can save you a significant amount of time being spent entering and re-entering information, reduce the number of mistakes that occur from repeated entering data, and make it simpler to verify that your accounting data is accurate and routinely maintained.

You might very well discover that both Xero and QuickBooks will incorporate well with the programmes that your team favours. Still, before you take the leap and put the money in either of them, it is good to check to ensure that all of your existing software assistance will incorporate with the digital platform. 

Both Xero and QuickBooks provide a variety of software integrations, and you might discover that both will incorporate well with the programmes that your team chooses.

Distinct Capabilities

Despite the fact that Xero and QuickBooks Online have similar functionality, there are still some aspects that are unique to each:

1. Inventory management in QuickBooks Online

QuickBooks Online features a fully-fledged inventory management application in its suite of features. For example, it gives you the ability to type in the stock count of all of your items on your eCommerce site and gives you the ability to check the sales against the figure. In a similar vein, you might key in the 'Cost Price' of each item, which would enable for more accurate reporting of the 'Cost of Products Sold.'

Similarly, Xero comes with its own stock control system, which can provide you with information regarding the product line that generates the most profit for your business or is the most popular among customers. In addition, it does an able job of monitoring inventory levels and even their values on a daily basis.

2. The excellent mobile app for smartphones developed by Xero

We live in a time of unprecedented mobility. The Xero mobile application, which is available for both Android and iOS, gives you simple access while you're on the road so that you can carry out company chores without any problems.

And although QuickBooks Online has a mobile application for smartphones, the software has a limited set of functions to offer users. For example, the application allows you to view the current balances in your bank accounts and important data; moreover, you need the ability to carry out certain key operations, like banking or adding expenditures to invoices.

When It Is Appropriate To Use QuickBooks

The scalability of QuickBooks and the widespread use of the software are among its most compelling selling factors. Moreover, its extensive capabilities can expand in tandem with the expansion of your company. In addition, it is compatible with a wide variety of other Intuit tools, like QuickBooks Point-of-Sale, so that it may manage additional aspects of your company.

The disadvantage is the price. QuickBooks is not an inexpensive programme, particularly as the number of users in your company increases; sole proprietors, in particular, may discover that the most fundamental subscription is too expensive for their needs. Having said that, the Xero package with the fewest functionalities is not suitable for use by even the tiniest of enterprises because it is too limited.

Because of its long history, QuickBooks is the accounting industry's go-to answer for most problems. Therefore, QuickBooks can be the best option for you if you want to maintain open communication with your accountant and manage bank feeds and integrations with third-party applications.

Additionally, QuickBooks includes a robust reporting suite, particularly at the Pro level, with expanded reporting and project profitability. This feature is only available in the Pro version. In terms of the degree of flexibility available for dashboards, it outperforms Xero.

When It Is Appropriate To Use Xero

Xero is the winner because of its streamlined appearance, its ease of use, and its pricing, with a few exceptions. In addition, Xero offers a superior entry option than QuickBooks, even at its lowest pricing point, with solid core features for processing invoices and payments. 

QuickBooks is the market leader in this space. Basic inventory control is included in each and every Xero package, however, QuickBooks does not include this feature until the $80 per month level is reached.

When it comes to the overall design, Xero is clearly the winner. Of course, QuickBooks has made significant strides over the years to enhance its look and feel as well as its user-friendliness; nevertheless, Xero has truly taken the lead here. Incredible success, to say the least.

While Xero has made considerable efforts to penetrate markets around the world, the New Zealand-based corporation is most well-recognised and utilised in countries other than the United States. 

The ability to handle taxes and automated feeds are two major advantages that this software has over QuickBooks. In addition, audit procedures and safety tests are already integrated, and a Statement of Cash Flows that complies with GAAP is also included.

In a nutshell, Xero is the superior option to consider if your company is interested in robust international features, out-of-the-box stock control, and an unrestricted number of users.

The Bottom Line 

In conclusion, both QuickBooks and Xero are excellent accounting software options that are capable of satisfying the requirements of the majority of businesses. However, if you are a mid-sized company that expects the requirement to scale quickly in the future, Xero might be a better choice than QuickBooks for your accounting software demands. 

QuickBooks might be more suitable for the demands of solo businesses and very big businesses. However, before making a final decision, you must put both pieces of software through their paces and find out which one your staff likes. And besides, they are indeed the ones who are going to put it to use on a daily basis.