Business Accounting

Xero vs. QuickBooks — Which is a Better Fit For Your Business Needs?

2021-01-18 | by Gene B. Reynolds, CPA

Business owners have many important decisions to make in 2021 after assessing how things changed during the pandemic. One of the most important decisions to make this year is which accounting software platform to utilize.

While most of you have heard about QuickBooks (and QuickBooks Online/QBO), you may not be familiar with Xero and all of the benefits of this emerging platform. Our CPA firm is certified in both platforms and we want to help answer questions you may have about Xero vs. QuickBooks. This will help you select and utilize the platform that is best-suited for your business needs.

What’s the Difference Between Xero and QuickBooks?

Both Xero and QuickBooks are reliable accounting software platforms that help businesses of different sizes and in different industries. However, the way that each platform goes about structuring and delivering the software is very different.

The key differences between Xero and QuickBooks break down into a few different categories:

• Subscription Levels
• Android vs. Apple
• Bank transaction coding and re-coding
• Month-End bank reconciliations
• Invoicing
• Reporting

Subscription Levels

Right out of the gate, you can see key differences between how Xero and QuickBooks structure their pricing and subscriptions for businesses.

– Xero offers an unlimited number of users to use the platform, they offer an unlimited number of charts of accounts, and they include HubDoc in the subscription to maintain receipts and documents. The most popular pricing level, Growing, is priced at $30/month. They offer discounted pricing at times and include the option to integrate payroll with Gusto for an added fee.

– QuickBooks allows up to 5 users, allows up to 250 chart of accounts, and includes Intuit’s new receipt capture feature. The most popular pricing level, Plus, is priced at $70/month. QuickBooks also offers discounted pricing at times.

A key difference between Xero and QuickBooks is that QuickBooks includes project tracking features in the subscription. However, Xero does not offer project tracking in its two entry-level pricing plans. You would need to select the most expensive pricing platform to utilize project tracking. Companies in construction, manufacturing, fabrication, or other project-based industries may prefer QuickBooks because project tracking is built into QBO.

Android vs. Apple

The debate between Android devices and Apple devices has extended to accounting software.

– Xero is open-sourced, following the Android model. This allows for Xero to introduce customization for each client. Plus, the wording and language used in the software matches general business knowledge.

– QuickBooks has limited customization. Plus, QuickBooks uses its own language that users have to learn in order to navigate the menus and use the software effectively. Comparatively, Xero is very straight forward and easy to navigate.

For example, QuickBooks has many different ways of doing one thing. It can be confusing from one user to the next user to ascertain how certain transactions were handled. Comparatively, Xero has one way to do one thing, which could be exactly what a business needs for simplicity’s sake, or it could be overly-simplistic if your team is accustomed to how QuickBooks functions.

Bank Transactions Coding & Re-Coding

Both Xero and QuickBooks have robust bank transaction coding and re-coding features built into their software platform. Consider these highlights of what each platform provides and some of the key differences.

Xero for Bank Transactions

• Does not have a center for bank feeds, but it is located with bank reconciliations.
• Includes auto-suggest and bank rules, but it does not include auto-add.
• Bulk-code cash transactions and save receipts using HubDoc.
• You can batch re-classify transactions.
• For bank reconciliations, you can categorize transactions, match, and split transactions.
• For bank rules, you can select accounts, filter accounts, and assign details.
• To find and re-code transactions, you can perform sophisticated searches, re-code as a new journal entry, and/or re-code the original transaction.
• You can also re-code money that was spent or received.

QuickBooks for Bank Transactions

• Includes a center for all bank feeds.
• Capable of bulk coding within the bank feeds.
• Save receipts to transactions using the QBO app.
• You can only batch re-classify transactions if you are an accountant user.
• For bank feeds, you can categorize transactions, match, and split transactions.
• For bank rules, you can apply rules by account, assign details, and batch re-classify.
• You can filter options to find transactions that you are looking for.
• You cannot re-classify invoices or sales receipts

Month-End Bank Reconciliations

Regarding month-end bank reconciliations, there is more flexibility in Xero to maintain this process throughout the month. The benefit of using QuickBooks is strict user controls over who can complete the reconciliation.

– Xero allows you to perform reconciliations throughout the month and then you can confirm at month-end. This can be assigned to anyone. From a process perspective, you receive a report rather than going through a process. Reconciliation happens in Bank Coding, a posting is made to the general ledger to reconcile against the bank line, you run a month-end report to confirm that all bank lines are in the system, and if everything matches, you receive the report and you are done with the reconciliation.

– QuickBooks only allows month-end bank reconciliations at the end of the month to verify the work performed during the month. If there were mistakes made during the reconciliations or if you need to start over, you can undo the reconciliation and try again until you end up with a match between the bank statement ending balance and the ending balance displayed in QuickBooks. Keep in mind, though, that only accountant users can undo reconciliations.

Invoicing

There are key differences between Xero and QuickBooks for how invoicing is handled in the software.

– Xero allows batch upload of invoices using the spreadsheet file format .CSV. Also, Xero does not allow for estimates, progress invoicing, or deposits unless you have Projects enabled through a third-party application. Integrated payments are also handled through a third-party. Regarding automation, you can repeat invoice and invoice reminders for common transactions.

– QuickBooks allows batch upload of invoices through third-party apps only. However, estimates are included in the software, allowing you to perform progress invoicing. Integrated payments within QuickBooks are also included. Regarding automation, you can automate recurring charges, sales receipts, invoices, and invoice reminders for common transactions.

Reporting

Xero allows for more customization and options for reporting. However, QuickBooks has added features to help manage a large number of accounts that will produce a large number of reports.

– In Xero, accounts are grouped at the report level. The reports and accounts are fully arrangeable for your specific needs. Xero also includes practice level report templates for accountants to use for each client. If you are looking for data placeholders, this is only allowed for budgets.

– Regarding the grouping of accounts in QuickBooks, this can only be done within the chart of accounts customization. However, you can arrange the accounts on financial statements according to your preferences of alphabetical, numerically, or by account number. There are also unlimited budgets that can be segmented by customer, class, or location. However, there are no practice level report templates for accountants to use.

Contact Us to Discuss Xero vs. QuickBooks

Is Xero better than QuickBooks? Or, is QuickBooks better than Xero? Every business will discover a different answer because there are many different features, capabilities, and options in both accounting software platforms. The key is finding the best match for your specific business needs.

Because we are certified on both platforms, we do not have a preference; we only want what is best for our clients. Our CPA firm has been certified in QuickBooks for years, while our associates Daniel Garcia and L’Rissa Padrezas recently became certified advisors on Xero to ensure that we provide a high level of support for clients that would like to migrate to Xero.

If you are interested in further discussing which software platform is ideal for your business, reach out to us today to discuss. We would appreciate the opportunity to keep the discussion going about whether Xero or QuickBooks is a better fit for your business.

Call us at 713-316-4560, email info@ReynoldsCPAFirm.com, or fill out our website contact form. We look forward to hearing from you!

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