Choosing the accounting software your company will use may seem like a low-stakes decision. However, this choice can impact your company in many surprising ways. For many small business owners, there are two dominant providers to pick from – QuickBooks Online or Xero.
There are many reasons that a company will choose to invest in a certain accounting software. Some include including cost, time-saving, and error prevention. That being said, not all accounting software is created equal.
Accounting software is a business sector that has been growing swiftly for years. However, the Covid-19 pandemic has pushed this trend into overdrive as more small business owners invest in accounting software rather than an accountant. While large companies are often compelled to use industry-specific accounting software or ERPs, small businesses with less convoluted processes have lots of freedom when it comes to choosing their accounting software.
If you are a small business hoping to choose accounting software, you have probably begun to research different accounting software platforms. This research has probably led you to the most popular accounting software and to try to compare their services. Xero and QuickBooks Online are the most popular accounting software platforms for small business owners. People think of them as relatively similar. However, these companies have some significant differences that we will explore in this article.
Services Offered by QuickBooks Online and Xero
Although QuickBooks Online and Xero offer many of the same functionality, there are slight differences that are crucial to consider when choosing the right accounting software for your business. Let’s discuss the business, accounting, mobile, and reporting services that both of these software companies offer.
Business Services from QuickBooks Online and Xero
Both QuickBooks Online and Xero offer an impressive selection of tools to help you run your business smoothly. Both have functions to create templates for the entire purchasing process. QuickBooks and Xero both boast software that allows you to create customizable invoices and purchase orders for your suppliers. They also both offer automated bill-paying services to keep your business running smoothly. Logging sales can be a bit of a chore when you have to input all of your data manually. Fortunately, in both QuickBooks and Xero, you can preprogram the products and services that your company offers so that you can log sales quickly and easily. You can then easily compare the money your company is making through different revenue streams.
Accounting Services from QuickBooks Online and Xero
When it comes to comparing accounting services from QuickBooks Online and Xero, the biggest difference is payroll. Xero no longer offers payroll services to their clients, while QuickBooks continues to offer services. For some businesses, this is a significant issue. Essentially, it comes down to whether businesses have the personnel and desire to manage two software platforms at once. For some small businesses, this is a huge point in favor of QuickBooks.
Both companies offer a dashboard where you can look at the status of different accounting processes. But Xero is optimized to have an incredibly easy-to-use dashboard that makes it very easy to access all of your information.
When billing customers on QuickBooks, one thing that you will notice is the unique feature where you can add a credit card or bank account number to a customer’s account to make repeat purchases easier. While this might initially seem less secure, in fact, QuickBooks prides itself on its’ security.
There are just a few specific differences. An important part of choosing which software to use is coming up with your specific use case. How do you intend to work with your software? Take a second and document the three to four critical business processes and how you desire those to interact with your accounting software. From there, you can find which of these two platforms may be a better fit.
Mobile Services from QuickBooks Online and Xero
Both QuickBooks and Xero have created apps to make it easier to access them when you are out of the office. This allows you to monitor your business’s accounts from anywhere. For small businesses where there are any remote job or owners who desire mobility, this feature can be a game-changer. It allows you to essentially take an accounting department with you wherever you go.
Reporting Services from QuickBooks Online and Xero
Financial reporting is becoming increasingly essential to running a successful small business. Generating strong financial reports is essential for making sure your ship is heading in the right direction. Both QuickBooks and Xero generate financial reports to help businesspeople monitor their company. Xero offers a great suite of accounting reports and financial statements that can be quite instructive to your company. On the other hand, QuickBooks boasts a Report Center that is a central location to process financial reports, making it easy to keep track of your financial reports quarter after quarter.
Still, reporting is not a great reason to pick either option. Many of our clients desire and require reporting that is outside of the capabilities of either platform. This is where third-party reporting platforms come in. Both platforms directly integrate with a handful of reporting tools that help combine data from several disparate systems into one. This way small business owners can have a better track on not just financial metrics, but operational ones as well.
Comparing Services
Since they have such similar services, it can be useful to look at the product ratings for each. By visiting a site like GetApp, you can read reviews of the software, and compare the reviews for the services. By looking at this comparison, you can see how satisfied customers are with the services from that app.
Choosing an Accounting Software Based on Services
As you weigh the pros and cons of the different services these two accounting softwares offer, remember it is most important to choose the software that you will stick with. Especially when it comes to financial reporting, you can make your life much easier if you commit your company to one specific accounting software. Why? Because moving accounting platforms can be one of the most costly, time-intensive processes any business goes through.
Furthermore, your employees will thank you for choosing a service that you can use for years to come so that they do not have to go through the pesky retraining process. Remember, choosing your accounting software is a big decision, and it should be done in a careful, forward-thinking way.
What is the Difference Between QuickBooks Online and Xero?
Based on the laundry list of features that both of these platforms offer, it may seem there are few big differences between QuickBooks Online and Xero. That’s just not true. Not only are there significant differences between the two software suites, but the companies have different target demographics, making the companies better for different clientele. QuickBooks is oriented toward a small business owner who wants a one-stop shop for all of their accounting needs. In contrast, Xero was created to be the perfect accounting solution for a business that can afford to have more specialized, different software solutions for different tasks.
What do these different target demographics mean in terms of the services that these companies offer? Well, QuickBooks bills itself as having more features than any of its competitors. This makes it the perfect choice for someone who doesn’t want the hassle of multiple platforms. However, this diversity of services also comes with limitations. We have often found that our clients need add-ons as their requirements of QuickBooks increase. For instance, many of our clients require additional point of sale software, inventory software, and reporting platforms to make QBO work for them.
What are the Advantages of Quick Books Online?
So why might you choose QuickBooks Online? Well, as I mentioned above, QuickBooks online is the Jack of all trades when it comes to accounting software. It is designed to be customer-friendly, even for people who have no experience with accounting software. QuickBooks Online has a quick setup, that is optimized so that you can start the program without calling customer service once. Over 4 million business owners around the world use QuickBooks Online for their accounting software.
What are the Advantages of Xero?
Xero is a slightly smaller company, serving 2.7 million customers worldwide. They are also more specific in the services they offer. Xero is focused on making accounting software available to anyone who needs it, and they don’t like penalizing their customers for their success. Therefore, Xero offers an unlimited number of users on their higher pricing plans, so you don’t have to worry about growing out of your accounting software. Furthermore, Xero has focused on creating great apps for its customers. They have developed more mobile apps than QuickBooks Online, to help its customers keep track of their business on the go.
Making the Choice
Remember, although this is a big choice, you have already made the best decision for your company—the decision to give up traditional bookkeeping and switch to accounting software. When you make the switch, you will make your company sleeker, smoother, and ready for the future.
Help From Your Friends at Krieger Analytics
Getting started with accounting software can be a tough process. At this point, you might be wishing: “I wish I could talk to an accountant just for just a little while, to get the lay of the land and learn how to manage my company financially.” You might think that this kind of wish could not be fulfilled within your small business’s budget. Fortunately, you’re wrong. At Krieger Analytics, we help connect small businesses with accounting services so that they can get on their feet with accounting and start off strong. We offer free consultation calls with our accounting team to help you figure out your next steps in your business’s accounting journey.