Xero vs Freshbooks in 2022 – Which Cloud Accounting Solution is Better?

Cloud accounting software is becoming more and more popular as businesses move away from traditional, on-premises software. But which cloud accounting solution is the best for your business – Freshbooks or Xero? In this blog post, we’ll compare the two solutions so you can make an informed decision. Keep reading to learn more!

Which cloud accounting solution is better for your business in 2022 – Xero or Freshbooks? Of course, both solutions have pros and cons, but which one best fits your specific needs? In this blog post, we'll break down the key differences between Xero and Freshbooks so you can make an informed decision about which solution is best for you.

There are so many options on the market, and each one has its own set of pros and cons. This blog post will compare two of the most popular cloud accounting solutions: Xero and Freshbooks. We will discuss their features, pricing, and customer satisfaction to help you decide which one is better for your business.

In this blog post, we'll look at two of the most popular cloud accounting solutions – Xero and Freshbooks – and compare them head-to-head. We'll discuss the pros and cons of each solution and what they might look like in 2022. So, which cloud accounting solution is better?

Let's get started!

What is Cloud Accounting Software?

You have utilised cloud accounting software if you have ever done an online banking transaction, examined a credit card statement, documented your business cash flow, or signed onto a website to view the status of reward points. The accounting software that is hosted in the cloud gives you access to your data whenever you need it, wherever you are, and from any device that can connect to the internet.

Your server now "resides" on the cloud, just like the one shown in the photo to the right, rather than in the back room of your company's physical location. Before the development of cloud computing, the only way to get access to your accounting data was to physically go to your place of business and log in there in order to see your financial records. Through the use of the cloud, you are able to access the same accounting information while lying in bed with your tablet on a Friday night at eleven o'clock at night.

About Xero

Small to medium-sized enterprises can take use of the cloud-based accounting solutions provided by Xero. It is one of the Software as a Service (SaaS) firms that is expanding at one of the quickest rates worldwide, and it boasts over 862,000 customers all over the world. It is known for being user-friendly and having a beautiful interface.

Xero was established in New Zealand in 2006 with the goal of assisting small businesses in achieving success by providing them with improved tools, knowledge, and connections.

Xero is a web-based accounting solution that provides a set of functions that are comparable to those offered by QuickBooks and FreshBooks.

In North America, it does not have the same level of popularity as QuickBooks; but, it does hold a sizeable market share in Europe, Australia, and New Zealand.

The user interface of Xero is well-known for being both appealing and easy to use. In addition to this, it is a very scalable solution, with the most affordable plan beginning at just $9 per month. Xero is, on the other hand, more popular with enterprises of the medium-sized variety than it is with freelancers and agencies.

1. Who Xero Helps

Xero is the prefered accounting software for small businesses in many different areas, including advertising, retail, e-commerce, high technology, not-for-profit organisations, hotels, and coffee shops. Xero specialises in accounting solutions for small businesses.

2. Offerings of Xero

Xero takes care of the fundamentals, such as payments, invoices, and costs, and it also offers additional capabilities, such as tools for inventory management, purchase orders, and bank reconciliation.

Connecting Xero to your bank account makes it possible to conduct transactions, perform reconciliations, and generate reports without any interruptions. As a result, managing your company from your desktop computer is now simpler than it has ever been. Please take note that there is not yet a suitable Xero mobile integration for accounting that can be done on the move at this time.

3. Why People Enjoy Xero

Customers give Xero great marks for having an easy-to-use UI (many have stated it looks beautiful) and providing exceptional customer assistance, which is accessible by email, live chat, and on-site support around the clock and every day of the year.

They also enjoy participating in their online accounting and bookkeeping community, which includes both a blog and a community forum website. Their suggestions and comments for the enhancement of Xero's user interface have sparked online debates with representatives of the company, and some of these discussions have resulted in the development of new updates to enhance the quality of the user experience.

4. The Top 5 Features of Xero

• Comprehensive accounting features and tools that are compatible with a variety of monetary systems and tax rates.

• Reporting of financial data in real time, accompanied by a dashboard that allows for the quick inspection of bank balances, invoices, bills, and expense claims.

• It features a user interface that is not only appealing but also gorgeous, and it is quite simple to use.

• Over five hundred different integrations, some of which include Square, Stripe, and PayPal.

• The proprietor of a Xero account has the ability to invite personnel such as a bookkeeper and accountants to access financial information online through the platform's integrated secure collaboration capability. The owners have the ability to invite an unlimited number of people to cooperate, and an administrator will manage each participant's access.

About FreshBooks

Invoices have been sent, received, printed, and paid for by more than 10 million users of the FreshBooks platform. FreshBooks was developed by a small business owner who was exhausted by the tiresome procedures of traditional invoicing. It features an easy-to-use interface that is structured on five areas of functionality: time tracking, reporting, expense management, and billing and payments.

1. Benefits and Drawbacks of FreshBooks

The reputation that FreshBooks has earned as an outstanding piece of accounting software for freelancers and other self-employed professionals is well deserved.

FreshBooks Benefits:

• Simple to operate
• Outstanding support for customers
• Prices that are not prohibitive
• Keeping tabs on time

FreshBooks Drawbacks:

• Limits chargeable clients
• Inadequate functions for more substantial companies

2. Who FreshBooks Helps

Because it allows users to keep track of their working hours, this cloud-based accounting solution is quite popular among companies that provide contracting, legal, consulting, personal services, and creative services.

3. Offerings of FreshBooks

People in the legal and mental health fields, in addition to other professionals who charge clients for their time and expertise, are the target demographic for FreshBooks.

Online reviews laud the book's ability to simplify difficult accounting concepts in a way that can be grasped by the average proprietor of a small business. FreshBooks was described as "a straightforward cloud accounting programme designed to help small business owners get organised and paid." This statement was made by one of the reviewers.

FreshBooks has features like as automatic updates, time and expense tracking choices, a variety of accounting report options, online payment processing, and taxes.

You may also personalise an invoice with FreshBooks, and the software gives you the ability to send payment reminders. Additionally, FreshBooks enables you to manage various pricing for each of your projects.

4. Why People Use FreshBooks

Customers who left reviews online praised how much simpler it made accounting for their businesses using FreshBooks. They appreciate the guided step-by-step wizard and assistance boxes that appear each time you execute a job like adding a new customer or creating a new invoice, for example. The simplicity of use of FreshBooks was a recurring theme in internet evaluations, with many users claiming that the software is the most advanced in its field.

5. The 5 Best Features of FreshBooks

• The FreshBooks app is highly regarded by reviewers, with many suggesting that it is the superior option available due to the app's user-friendliness, superior customer support, and comprehensive functionality when mobile.
• The time-tracking tool enables an easy management of billable hours, thereby supplying the necessary data to back up the invoices that are generated.
• Integrations and add-ons are available in a comprehensive selection through Freshbooks.
• For those who prefer it over online invoicing, there is the option of sending invoices via regular mail instead.
• Once a project has been finished, an estimate can be quickly transformed into an invoice.

Xero & FreshBooks Comparison Summary

Xero is widely regarded as one of the most effective pieces of accounting software available for small businesses. Payroll, project monitoring, and payment processing are just some of the functions that are included in this all-in-one accounting application that has a full set of capabilities. Xero also strikes a good balance between the extensive feature set it offers and the ease with which it may be used. The most basic plan is $11 a month and includes five bills and 20 invoices. As the price goes up, more advanced features are unlocked and added to each plan. For a free trial period of one month, potential consumers can use the tool.

On the other hand, compared to other accounting systems, the invoicing procedure offered by FreshBooks is among the quickest and most user-friendly. However, it has fewer capabilities than Xero and does not have advanced features for businesses that sell actual things and need to keep track of inventory. This makes it unsuitable for such businesses. Prices for FreshBooks range from $15 per month for the most basic features to $50 per month for the most advanced ones.

In a nutshell, the following categories of people are the ones that we recommend each tool for:

You'll favour Xero if:

• It could be things or services that you sell.
• You want very sophisticated software that is easy to use.
• You are interested in having access to more than 800 application connectors.

You'll favour FreshBooks if:

• You are a business that focuses on providing services.
• You are self-employed or have less than five people working for you.
• You have one day to put in place an accounting software tool.

Who Should Consider Buying Xero?

Xero is a product that we suggest to companies of all sizes and in all fields. This application is perfect for people that sell real things because it includes inventory management tools that FreshBooks does not have. However, businesses who want the highest level of detail may discover that it does not meet their needs.

Even though it is one of the more complicated tools available on the market, we found that Xero was fairly simple to use despite the fact that it has one of the most competitive prices for the capability that it offers.

During our evaluation, we discovered that the most significant negative is that it is sometimes challenging to get in touch with the company's customer care service. On the other hand, we did not discover any major software problems. In addition, we talked to a number of Xero clients who are really pleased with the way the accounting software functions for their company.

Who Is the Ideal Customer for FreshBooks?

FreshBooks is an excellent tool for beginners who are just getting started with accounting software, despite the fact that it has a very simple interface. The primary advantage of utilising FreshBooks is that the software can be set up and started being used for your company in a matter of few minutes.

It is relatively simple to generate and distribute invoices that have been personalised. Due to the fact that not all of our rivals offer these tools for free, the project management and time tracking capabilities are especially valuable. The fact that it is priced relatively similarly to Xero is a disadvantage, especially considering the fact that it provides fewer functionality and details.

We spoke to consumers of FreshBooks, and they emphasised that the software is user-friendly but has a restricted number of features. It does not have any features related to inventory management, which limits the kinds of companies that will find considerable benefit in using the platform. In general, FreshBooks is a good alternative for people that need to be up and running with accounting software in only a few minutes, as it can be set up and used in that amount of time.

Quick and Simple Installation

As we go through the many aspects of these programmes, you will begin to notice a pattern: FreshBooks is a solution that is pretty easy, whereas Xero offers functionality that is more complicated. And the learning curve, as you can think, is proportional to the difficulty of the task.

1. FreshBooks: Clear, friendly walkthroughs

It is simple to get everything set up in FreshBooks because of the extensive walkthroughs that are provided. They walk you through the steps of the procedure, telling you what you need to get started, asking you for the information that is pertinent, and giving you advice along the way. After you've completed a couple of quick steps, you'll be all set to begin using FreshBooks in just a few minutes.

You can import existing data into FreshBooks using spreadsheet templates to import customers, spending, goods, services, and taxes when you are importing existing data. In the event that you are already making use of another accounting service, you will initially be required to export this data and check that the required columns are present.

2. Xero: Seamlessly import your data

In Xero, there are more configuration steps to take because the programme is more difficult to use than the other two choices. The installation guide is a tremendous assistance, and it makes the whole procedure a lot simpler.

Customers and invoices are only two of the many things that may be imported into Xero using the Excel templates that are provided. Get the data from your previous clients or spreadsheets into the correct format, then reupload it when you've downloaded the templates. It doesn't get much easier.

Xero and QuickBooks are two of the most well-known names in the online accounting industry. As a result, Xero is doing everything it can to attract clients who use QuickBooks Online and turn them into Xero customers. It offers step-by-step guidance for a straightforward transition from QuickBooks to Xero. In spite of the fact that it requires some account maintenance, exporting, and importing, the process is rather straightforward, and it transfers all of your information.

Invoicing and Payments

It should be simple to prepare and send invoices using online accounting software, and the software should also provide features that can be scaled to meet the requirements of a variety of organisations. And despite the fact that you can take payments using other methods, providing your customers with the option to pay through credit card or by using another form of online payment right from their invoices is not only a convenient service for you but also a wonderful perk for them.

1. FreshBooks: Ultimate simplicity

FreshBooks offers an easy-to-use and streamlined billing solution. Because there aren't as many customisation choices as there are in QuickBooks or Xero, getting up and running quickly is much simpler.

The invoices page gives you a clear and succinct summary of the current state of all of your outstanding invoices.

And the process of personalising your invoices is just as easy: You have your choice of colour, as well as two different typefaces and two different templates to work with. It is sufficient to enable you to insert some of your company's personality without overburdening you with intricacy.

FreshBooks will send reminder emails according to a timetable that you specify, and the content of those emails can be modified according to your preferences.

2. Xero: Extreme customisability

Xero gives you the greatest amount of control possible over the look and feel of your bills. You can create invoices by using the web-based interface, downloading a.docx template for full customization, and saving up to 15 distinct templates in your account. Alternatively, you can utilise the interface to generate invoices.

When you create an invoice, you also have access to extra choices, including the following: You can choose multiple departments for each item in Xero, which allows for more precise tracking of cash flow throughout your organisation. This is in addition to the extensive inventory management system that Xero provides.

The approval method that Xero provides is just another feature that sets it apart from its competitors. You have the option of putting an approval hold on each invoice before it is sent.

This is helpful for businesses that have several employees creating bills that need to be approved by an executive or a billing department. There is no need to fret if you do not require an approval workflow because you can simply click Approve from the invoice screen rather than Save.

Expenses and Bills

Regrettably, generating cash is only one aspect of successfully running a business; you also need to monitor and manage your outlays. On the other hand, if you go with an app that has all of the bells and whistles, you might even be able to pay those bills without leaving the software, which would streamline the process of managing your finances.

1. FreshBooks: Tracking expenses quickly and easily

Keeping track of expenses in FreshBooks is as straightforward and uncomplicated as invoicing is. Simply select the "New Expense" option, then enter the cost, the seller, and the expenses, and you will be finished.

After you have finished breaking down the specifics of your spending, you should then save the document and label it as a billable or cost of goods sold. In addition, you can designate a category in order to better monitor where your money is going.

That sums it up nicely. There will be no permission, no linking of accounts, and nothing else. Simply typing it in will result in the entry being logged.

2. Xero: Free payments in batches processed through your bank accounts

Xero, much like QuickBooks, has the ability to issue checks and handle bank transfers for your business's expenditures. Xero, on the other hand, enables you to upload a batch payment file to your bank at no additional cost (if your bank supports this functionality). In addition, there is an integrated integration for processing payments through Bill.com, in addition to a great deal of additional bill pay connections.

In the same way that there is an option for an approval workflow for invoices, there is also an option for an approval workflow for expenses, which enables managers and supervisors to monitor how employees are spending their money. In addition, the files inbox allows you to email invoices and bills directly to Xero so that you can organise them all in a single location. The more conventional upload method is required by both FreshBooks and QuickBooks.

Reporting and Dashboards

Your accounting software should be able to provide you with a comprehensive overview of the financial health of your company by way of efficient reports and informative dashboards. The likelihood that you will require complex reports, which are especially helpful for accountants, stakeholders, and funders, increases in proportion to the size of your organisation.

1. FreshBooks: Reporting that is approachable but fundamental

The FreshBooks dashboard, much like the rest of its features, is very straightforward. It consists of five graphs, including ones for unbilled time, outstanding revenue, overall profit, income streams, and spending. Even while this does not supply you with all of the information you require regarding your company, it does give you the essentials in a format that is simple to scan.

From your dashboard, you have the ability to generate seven downloadable reports, including profit and loss, tax summary, accounting ageing, invoice details, expense report, time entry data, and payment collected. The Premium and Plus plans each give an extra two reports. Even while it is nowhere near as much as what the other companies provide, it will be more than adequate for sole proprietorships and other small firms.

2. Xero: Regular reporting and thorough dashboards

The default dashboard in Xero is very much like the one in QuickBooks. It covers account balances, invoices outstanding, bills to pay, cash flow, and cost claims; this is sufficient information to provide you with an indication of the performance of your firm without having an excessive amount of data. In contrast to QuickBooks, Xero gives you the freedom to rearrange the items in the list and to choose which ones to conceal or display.

The Business Performance dashboard is what separates Xero from its competitors. This is a particularly helpful report that highlights debt ratio, gross profit %, current liabilities to nett worth ratio, and other metrics, all of which are graphed for ease of viewing.

Top Features: Xero

The Xero Marketplace, the products and services list, and the Xero dashboard are among the most important elements of Xero. Additionally, Xero comes standard with more than 50 financial reports, which is a big increase above what FreshBooks provides.

In order to give you an idea of how to use the tool, we are going to outline its capabilities and then show you some pictures of what the platform looks like. Read the complete review of Xero to learn everything there is to know about the software's capabilities.

1. Dashboard

Xero's dashboard offers a handy picture of your company with graphs and statistics regarding your cash flow, invoices, bills to be paid, and other aspects of your business, despite the fact that it is not the best accounting tool dashboard available. You have the ability to customise the dashboard, giving you control over which information is presented initially.

2. Products and Services

Xero has more advanced inventory management options than FreshBooks does, particularly in relation to products and services. This has already been noted. Using this area, you will first mark the unit price of the goods, then assign the items to a cost of goods sold account, then assign a tax rate, and finally use Xero's tracked inventory asset section to track the things.

Xero will work for you whether you sell physical goods or provide services to others. Even if it does not have the most sophisticated features available on the market (for instance, Zoho Books has a lot more nuances), inventory management is a reasonable option for the middle tier.

3. Xero Marketplace

Integrations with third-party programmes are available in the Xero Marketplace. These integrations cover a variety of categories, including payroll, time tracking, payments, and more. Additionally beneficial is the fact that Xero organises products according to their applicability to specific businesses like health care, hotels, and retail.

Top Features: FreshBooks

The most beneficial aspect of utilising FreshBooks is the UI, which is uncluttered, up-to-date, and straightforward. There are not nearly as many features or integrations available as there are in Xero. On the other hand, it has all of the capabilities that are necessary to manage projects, charge customers, and keep track of spending. Check out the comprehensive FreshBooks review for a more in-depth analysis of the features that are made available by FreshBooks.

1. Invoicing

When it comes to invoicing, FreshBooks is highly user-friendly and efficient. You are able to make some minor modifications to each invoice, such as adding your company logo, assigning issue dates and the frequency of invoicing, and including all of the items in the invoice. When we produced and emailed invoices to our customers, we discovered that the invoices were delivered immediately after they were sent.

2. Project Control & Timekeeping

It is essential to ensure that appropriate billing is done in order to keep track of projects as well as the amount of time spent working on those projects. You have the option of timing a project live if you are completing a project for a client in the here and now, or you can time a project retroactively after the fact.

This section is especially important because it allows you to immediately generate an invoice directly from this section. The invoice will pull the project information as well as the time that was spent on it.

3. Accounting Tools

FreshBooks comes with roughly 20 different accounting reports that can assist you in maintaining control of your organisation. You will need to send an invitation to your accountant so that they can access the FreshBooks dashboard. Once they are logged in, they will be able to manage your Chart of Accounts and view additional data.

We discovered that even though there aren't as many reports as Xero provides, there are still important reports such as the Balance Sheet, Accounts Payable, Accounts Receivable, and many others. This section ought to be sufficient for the needs of small firms, provided that you do not need to develop particularly complicated accounting reports.

Bottom Line

Xero is a more robust accounting software programme than its competitor, FreshBooks, and it is expected to be an improvement for the majority of firms. It provides more capabilities than FreshBooks does at a pricing that is quite comparable to FreshBooks, and a large number of bookkeepers and accountants have been taught to use Xero.

On the other hand, FreshBooks is a cutting-edge platform that is geared towards those who are self-employed or run service-based enterprises and will work for them. FreshBooks is a great alternative for getting started with software if your ultimate objective is to have entry-level software.

• With a comprehensive feature set and interfaces with more than 800 different third-party programmes, Xero is widely regarded as one of the most effective accounting systems for small businesses.

• FreshBooks is useful for businesses who are looking for an entry-level accounting programme that also has features for receipt capture.