Accounting Software Selection Guide
Quickbooks Online (QBO) vs. Xero
The search for the right accounting software for your business can be challenging, especially for startups. It requires deciding on features to prioritize, knowing what your budget should look like, and of course, comparing the various options available on the market.
If you've already begun your search, you've presumably come across the two most popular accounting solutions for startups and small businesses - namely, Xero Accounting and QuickBooks Online (QBO). Both are web-based platforms known for their solid feature sets, flexibility, and popularity.
So... which platform should you use for your startup? This guide aims to help you decide. We include a comprehensive review of the two, their features, pros vs. cons, as well as what makes one stand out over the other.
Feature Overview
QBO
Xero
Price
Simple Start: $25 per month
Essentials: $50 per month
Plus: $80 per month
Advanced: $180 per month
Early: $12 per month
Growing: $34 per month
Established: $65 per month
Users
Simple Start: 1 user; 2 accounting firms
Essentials: 3 users; 2 accounting firms
Plus: 5 users; 2 accounting firms
Advanced: 25 users; 3 accounting firms
Unlimited
Support
Phone Support: Yes
Live Chat Support: Yes
Email Support: No
Product Training: Yes
In-product help: Yes
Phone Support: No
Live Chat Support: No
Email Support: Yes
Product Training: Yes
In-product help: Yes
Compatible Platforms
Web Browser, Mobile (iOS and Android)
Web Browser, Mobile (iOS and Android)
Key Features
Invoicing
Expense Tracking
Bank Feeds
Taxation
Capture & Organize Receipts
Inventory
Insights and Reports
Multi-Currency Support
Easy-Switch from Other Platforms
Estimates
Contact Management
Bank Reconciliation
Accounts Payable
Time Tracking
Project Management
Pay Bills
Claim Expenses
Bank Connections
Accept Payments
Track Projects
Pay Runs
Bank Reconciliation
Contact Management
Online Filing System
Reporting
Inventory
Invoicing
Multi-Currency Support
Purchase Orders
Quotes
Sales Tax
Analytics
Important Aspects to Consider While Evaluating
Here are the things to think about while looking for accounting software for your startup.
General and Niche Functions
List the features you need to fulfill your startup's accounting needs before beginning your research. Also, consider the nature of your business and software integrations you require. Shopify and Stripe are good examples.
Pricing
As self-explanatory and straightforward as this can be, there is the risk of choosing a less expensive (aka basic package) option without knowing that the most critical features are only available with pricy upgrades. Check for hidden fees, the upgrade cost, and any package deals available.
Cloud-Based Accounting Functionality
Cloud-based accounting software is becoming standard. As a startup founder, it is often essential to have easy access to your accounting data on the go.
Offering the ability for your team to access data via the browser encourages teamwork and collaboration among your accounting personnel.
Availability of Multi-Currency Functions
If your business involves transactions in multiple currencies, the availability of multi-currency functions is imperative.
Some small business accounting systems do not have this feature available, so always check if this is offered and how much it will cost you if it's an add-on.
Upgrade Capabilities as You Scale
As your startup grows, the list of required features also grows. Choose a platform that includes upgrades and feature add-ons to accommodate future expansion.
The ideal accounting software should work for the business and grow with the business.
Compatibility with Your Banks
Check if your accounting software supports your bank's software for integration.
User Security Options
As with any other software you will be using for your startup, you need to consider the security regulations and protocols for the accounting software you're considering. If you have multiple people using the platform, it is good to have customizable security functionality based on the roles of the users, especially on the accounting side of things.
Ease of Use
While most modern small business accounting tools are easy to use, some require more technical skills than others. Accounting is already a complicated function, so it would be unnecessarily brutal to use complex and non-user-friendly tools. Attending a demo, watching videos, and reading reviews covering the platform's user-friendliness are necessary.
Availability of Reporting Templates
Most accounting software includes report-writing features. Using report templates will save you time versus wiring custom reports from scratch.
Check what standard report templates are available in the system and make sure custom reports are supported if necessary.
Customer/User Support
Customer support is another key factor to consider when choosing any software for your business. Sometimes, this aspect can become a tie-breaker when torn between two equally great accounting platforms. This is not only limited to customer service in general but also the presence of knowledge bases, tutorials, new user guides, manuals, and FAQ sections.
Recommendations from Your Accounting Team
Suppose your accountants are comfortable with the software they use. In that case, they will give you advice on how to optimize it and aid you in maximizing its features and benefits—no need to start over if your team is happy with and knowledgeable in a specific tool.
Pros and Cons
QBO
Xero
Pros
- 30-day free trial
- Comprehensive list of features
- Easy-to-use
- Advanced invoicing features
- 650+ integrations. App Integrations Boost Compatibility
- Tax support
- Helpful mobile apps
- Built-in lending
- Allows users to manage sales and income by creating invoices to track sales
- Handy Automation Features
- Can automatically track and update amounts and unit costs of inventory
- 30-day free trial
- Offers a capable estimating/quoting/order process that ties into AR invoices smoothly
- Provides you with unlimited users
- Can manage personal expenses with mobile review and approval of each receipt
- Easy access to the same files as your clients
- Can be accessed from any device with an active Internet connection
- Automatic Currency Conversion
- Can pull cash reports for accrual-based businesses
- Bank accounts and credit cards automatically reconcile and provide reconciliation report
-Multi-entity reporting
Cons
- Occasionally unintuitive
- Expensive to Maintain and Add Features
- Fair customer support
- Limited reports
- Difficult to learn
- Limited inventory management
- Occasional Wrong/Missing entries
- Syncing problems.
- Payment Processing Is More Difficult Than It Should Be
- Accounts payable invoicing and payroll functions are sub-par
- Accrual and cash reporting can sometimes be difficult to toggle between
- Inventory management is clunky
- Cash vs. Accrual financials are not accurate
- Although easy to install, it takes some time to learn how to use it.
- Recent increase in its prices and no longer includes built-in payroll with its plans.
- The requisition/purchase/inventory side is very, very basic.
- Limited expense claims, projects, and multi-currency support to the most expensive plan.
- No built-in ‘Debtor Chasing’ function so businesses will need to manually follow up on unpaid invoices.
- Doesn’t support Exchange Trade Products (ETPs).
- Can be very slow if your company is running online or if it makes a high volume of sales through PayPal.
- Fair customer service (takes time and can be met with unhelpful advisors).
- For small businesses, there are a limited number of transactions included (scalability is limited)
- Search function is not great (clunky)
- Creating sub accounts in the chart of accounts is not possible
-There is not a direct conversion from QBO to Xero
Situational Recommendations
As mentioned above, both Xero and QBO are jam-packed with features and benefits. However, there are instances where one tends to be a better choice than the other.
When to Choose QBO
When to Choose Xero
Conclusion
With QBO and Xero, there is no such thing as a “more superior” software - there is only “which software would be the best fit for my startup business?”
Purchasing accounting software should never be rushed. Take time to conduct research, contact different providers and ask questions, read online reviews and recommendations, or better, get advice from existing users of these platforms. Systems may look alike and pricing may be similar, but they don’t have the same functionality.
It is difficult to say one solution is more superior to the other. Instead, the winner between QBO and Xero depends on your startup - what your budget looks like, what features you need, and what functionalities are most valuable to you.
The good thing is, both Xero and QBO offer a 30-day free trial period. Take advantage to experience the software firsthand. Testing the software should help you determine how either may or may not fulfill your startup's accounting functions and needs.
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