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What is Xero?
Xero is cloud-based accounting software designed for small and growing businesses. It offers a range of accounting tasks, including invoicing, payroll, bank reconciliation, business snapshot, expense tracking, and financial reporting.
Xero accounting software enables real-time collaboration with accountants and integrates with various third-party applications. The automation features reduce manual data entry, enhancing accuracy and saving time for small business owners.
Xero Pricing & Plans
Xero lets you test the platform risk-free for an entire month, so you get a feel for the app and see first-hand whether it’s the right tool for your business.
That said, here’s a quick breakdown of the pricing plans:
| Pricing Plan | Early | Growing | Established |
|---|---|---|---|
| Cost/Month/User | $15/month | $42/month | $78/month |
| Free Trial | ✅ – 30-days | ✅ – 30-days | ✅ – 30-days |
| Users | Unlimited | Unlimited | Unlimited |
| Bulk Reconcile Transactions | ❌ | ✅ | ✅ |
| Multiple Currencies | ❌ | ❌ | ✅ |
| Payroll | Optional add-on (Payroll with Gusto) | Optional add-on (Payroll with Gusto) | Optional add-on (Payroll with Gusto) |
| Customer Support | Email, phone | Email, phone | Email, phone |
What’s worth noting is that payroll isn’t a built-in feature of Xero but is rather provided through an optional add-on — Payroll with Gusto. This adds another $40/month plus $6/month per person to your monthly subscription bill, meaning Xero can get pretty expensive if you want to run payroll for a large team.
If you’re looking for better, more cost-effective options for handling payroll runs, read our best payroll software guide.
Xero Overview
| Starting price | $15/month |
|---|---|
| Best for | Established businesses looking for a robust, feature-rich accounting solution |
| Customer support | Email, phone |
| App integrations | Deel, Rippling, HubSpot, Stripe, Zapier, Deputy |
| Security & Compliance | ISO 27001, SOC 2 security assurance audits, multi-factor authentication (MFA), data encryption |
| Payroll | Optional add-on |
| Reporting & analytics | ✅ – Custom reporting |
| Mobile app | ✅ – iOS and Android |
| Double entry | ✅ |
| E-signatures | ✅ |
| Auto-alerts and reminders | ✅ |
Xero Key Features
Xero is a feature-rich app, provided you’re willing to pay the premium price for the most expensive tier. It can help streamline and automate every financial aspect of your business, including invoicing, expenses, data capture, tax filing, bank reconciliation, and inventory management. You can even utilize it to manage fixed assets, depreciation, and disposal, which makes it a solid option for businesses with multiple locations in various industries.
New Product Update
September 5th, 2024 Update: Xero’s app update is helping small businesses get paid faster by offering more payment options. Right now in Australia, small businesses can use tap to pay and accept payments even on their Android device. To improve cash flow and sell to more customers, Xero includes a buy now, pay later option (Klarna) available in the United States, New Zealand, United Kingdom, and Canada.
When analyzing Xero’s new features update, I see that adding new products to the inventory is easy as there are now options to duplicate and edit an existing similar item. This feature is available to all customers globally. Another one is the report code column in the chart of accounts, which helps accounting or bookkeepers easily see how accounts are mapped.
Here’s a breakdown of Xero’s key features:
Xero’s invoicing capabilities are top-notch. You can quickly create professional quotes and estimates and send them to your clients via the Xero desktop software or the mobile app. Using the app also makes it easy to track invoices and use the repeating invoices function. By using one of the templates we found this to be very quick and easy. You can also simply edit a previous quote and just change the amount, or client.
Xero also notifies you whenever a client accepts a quote and lets you convert quotes into invoices with a single click – you can also edit invoices.
Speaking of online invoicing, you can create and send fully customizable invoices, provide multiple payment options to customers, and set up automation reminders for late payments, so you don’t have to “chase” clients for outstanding invoices.
Xero’s expense management tools enable you to easily track and manage your spending, reimburse expense claims, scan receipts to add them to Xero effortlessly, and see exactly where your money is going with reports detailing each expense and individual item.
The project tracking tools available in Xero allow you to track the time and costs associated with each specific project, making it easy to plan, budget, and monitor the profitability of your projects. This also makes it easy to invoice project costs and track project financials, giving you much-needed insight into the financial health of your business and improving your cash flow.
Xero’s inventory management functionality helps you keep track of your stock levels, lets you easily populate invoices and purchase orders with the products you buy and sell, and gives you insight into your top-performing items so you can easily keep up with the demand.
The inventory management functionality also comes with built-in real-time alerts, ensuring that you never run out of stock.
The dashboards and custom reports available in Xero let you keep a finger on the pulse of your business by detailing your cash flow, allowing you to track all key financial metrics, and identify and compare trends for different timelines.
If you upgrade to Analytics Plus, you’ll also be able to leverage AI-powered predictions to further improve your cash flow, manage future business events with scenario planning, and gain even deeper insights into your financials and more customization options for your reports.
Xero Integrations
Xero integrates with a wide variety of third-party apps via its app store. You can find invoicing, time tracking, payroll, CRM, and other third-party tools and apps. Despite the name “store,” the integrations with third-party apps are free, but there are multiple paid Xero add-ons to choose from as well.
Some of the most popular integrations include apps like Deel, Invoice Away, Zapier, Stripe, Tradify, Rippling, and HubSpot CRM. There are hundreds of apps in Xero’s app store, so it’s easy to connect the accounting platform to your existing software stack. On the off-chance that an app you’re using isn’t supported, you can always leverage Zapier to build custom integrations, which is a huge plus.
Xero Alternatives
| Xero | QuickBooks | Wave | Zoho Books | |
|---|---|---|---|---|
| Best for | Established businesses looking for a robust, feature-rich accounting solution | SMBs looking to automate invoicing, payroll, tax filing, and time tracking | Small businesses with less than 10 employees | SMBs that want to streamline and automate accounting processes |
| Starting Price | From $15/month | From $18/month | Free | Free |
| Free Trial | 30 days | 30 days | Free Forever | Free Forever Plan |
| Payroll | Paid add-on | ✅ | Paid add-on | Paid add-on |
| Reporting | Custom reports | Customizable professional reports | Detailed financial reports | Custom reports |
| Mobile App | ✅ | ✅ | ✅ | ✅ |
Xero Customer Reviews
The user reviews for Xero are mostly positive, with the app averaging 4.4/5 stars on all major review sites.
Xero is often regarded by users as one of the most user-friendly accounting software solutions, and is praised for its integration capabilities. Users also appreciate how easy it is to convert quotes into invoices and store and search critical business documents, as well as how easy it is to submit and review expenses. Another aspect customers love about Xero is its fast and knowledgeable customer support.
As far as disadvantages go, users highlight that Xero has hiked up the prices in the past, the inability to attach PDF files to purchase orders, and the fact that payroll is a paid add-on that’s handled by Gusto (a separate company).
How to Set Up Xero - Quick Guide
Follow our easy-to-follow step-by-step guide on how to set up your Xero accounting system.
Create an account and Set up your organization
Sign up to Xero and choose a subscription plan that fits your business needs. Input your business details like name, address, and industry. Configure your financial settings, including your fiscal year and base currency.
Connect bank accounts
Link your business bank accounts to Xero for automatic bank feeds. This allows real-time transaction updates and simplifies reconciliation.
Customize chart of accounts
Set up your chart of accounts tailored to your business structure. Import an existing chart or use Xero’s default template and modify it as needed.Enter opening balances
Input the opening balances for your accounts as of the start date. This ensures your financial data is accurate from the beginning.
Invite users and set permissions
Add team members and accountants, assigning appropriate permissions based on their roles. Remember that you only get unlimited users in the higher price-plans.
How We Review and Test Accounting Products
To provide our readers with accurate and well-informed recommendations, we test the most popular accounting products on the market to find the best options for you. Our methodology consists of the following criteria:
- Features: We examine the features of each accounting software to determine what capabilities are offered- such as creating, editing, and deleting transactions.
- Compliance: We evaluate accounting software based on whether it offers local compliance when it comes to payroll, taxes, documentation, and more.
- Bank Reconciliation: We test the reconciliation process to ensure transactions match bank statements accurately.
- Multi-Currency Support: We verify the accuracy of currency conversions and transactions in multi-currency environments.
- User Experience: We get hands-on with each product and act as a new user, testing each platform to gain understanding if the platform is easy to use or not.
- Reporting and Documentation: We verify the accuracy of financial reports generated by the software such as balance sheets and income statements.
- Integrations: We evaluate the integrations of each piece of software to determine how well it fits in with other key pieces in a business’s software stack, and whether its functionality can be expanded as required.
- Audit Trails: We ensure the software maintains comprehensive audit trails for tracking changes made to financial data.
