Xero Review

Xero is an excellent online accounting tool for most companies. Though not perfect, it offers great flexibility, though some types of companies may have to shell out extra to get the most out of it. Check out our Xero review to see why we think it's one of the best accounting programs out there.

By Dena LandonWriter
— Last Updated: 19 Nov'18
Table of ContentsRating
Very Good
Business Reporting
Financial Statements
User Reviews & Comments

Very Good
Starts from $ 900 per month

Designed by an entrepreneur and his accountant, Xero’s cloud-based accounting software focuses on small businesses. It aims to free valuable time spent accounting that owners could spend on other important work. For that reason, Xero automates many tasks, from recurring billing to sending invoice reminders.

Xero’s package has all the accounting basics: invoicing, payroll, expense payments, reporting and financial statements. There are some nice, free extras, too. Xero Projects, for example, tracks the estimates, time, money and deposits paid for a project. It’s in testing, but will be free once it’s rolled out. There’s also fixed asset management, including depreciation and disposals.

Because your data is hosted in the cloud, you can access it at any time. If you’re on-site at a job and want to know if your customer has paid their invoice, you can check the app on your phone. It’s easy to invite an accountant or bookkeeper to check out and validate your books.

If you’re a small business owner looking for the best accounting software, we urge you to consider Xero.

Strengths & Weaknesses

  • User-friendly dashboard displays bank balances, invoices & bills
  • Inventory management at all pricing levels
  • Syncs with bank accounts & has reconciliation function
  • Easy to setup recurring invoices & bills

  • Prices rise quickly at higher tiers without adding much value
  • Payment processing handled by third party
  • Minimals number of transactions available on cheapest monthly plan

Alternatives for Xero


90% - Excellent

Xero has all the core cloud-based accounting software functions that business owners would expect. Its intuitive user interface guides users to what they need to do. Employees can access invoicing, pay bills and look at general reports through the main dashboard.

While Xero syncs with your bank accounts and includes a reconciliation function, it only updates transactions once a day. You won’t have access to the real-time information about your accounts that QuickBooks Online and FreshBooks provide.

Xero has inventory management for up to 4,000 tracked stock keeping unit codes or unlimited untracked items on every paid plan. Competitors charge extra or require third-party apps to add an inventory function, so this is a huge perk if you’re running a product-based business.

The company just rolled out Xero Projects. It’s free during the trial period and will be part of the standard product after November 2018. It allows you to track the quotes on a project, deposits paid by the customer and time and money spent on it. Xero calculates the project’s profitability for you, too.

Tracking fixed assets on your balance sheet matters for tax purposes, if not for the day-to-day running of your business. With Xero’s fixed assets functionality, you can import them or add them manually. The software calculates depreciation for you automatically. Neither FreshBooks nor QuickBooks Online lets track fixed assets.

Xero offers more features than QuickBooks Online and FreshBooks, but not all businesses will need them. A company that carries a lot of inventory and has fixed assets on the books will appreciate their inclusion. Other businesses won’t need them.

On top of the regular pricing, businesses can pay to add more employees to the payroll function. You can add up to 100 employees, but the monthly fee jumps to $180 at that point.

While Xero has more features, it only offers value if you need inventory management, projects and fixed assets in your accounting software. Otherwise, its pricing plans make going with Xero versus a competitor hard to justify.


90% - Excellent

Xero offers three levels for its pricing plans; Starter, Standard and Premium. Unlike competitors, which tend to differentiate pricing levels by adding more features or users, Xero restricts the number of transactions a user can perform on the lowest plan.

  • - Send 5 invoices and quotes; - Enter 5 bills; - Reconcile 20 bank transactions.
  • Unlimited Users
  • - Send invoices and quotes; - Enter bills; - Reconcile bank transactions.
  • Unlimited Users
  • - Send invoices and quotes; - Enter bills; - Reconcile bank transactions; - Multi-currency support.
  • Unlimited Users

Starter costs $9 per month and only allows you to send five invoices and quotes, pay five bills and reconcile 20 bank transactions. Unless yours is an extremely simple business, you’ll grow out of it quickly.

Xero Pricing vs FreshBooks & QuickBooks

While FreshBooks’s Lite plan is $15 per month, you can process unlimited invoices and estimates. For $20 a month, QuickBooks Online’s Simple Start plan lets you do the same. Few businesses’ transactions are are predictable enough to guarantee they’ll have a set number of transactions each month. Given that, we don’t see much reason to sign up for Xero’s Starter plan.

At $30 per month, Xero’s Standard plan removes the caps on invoices and quotes, bills and reconciliation transactions. Users get access to payroll features, but only for for five employees. QuickBooks Online’s Essentials plan is $35 per month and payroll costs extra. FreshBooks’s Plus plan costs $25 per month, and payroll can only be done with an add-on to its software.

For $70 a month, the Premium level adds a multi-currency function and payroll processing for up to 10 employees. It’s a big price jump, though, and for an extra $40, it feels like users should be getting more.

For comparison, QuickBooks Online’s most expensive plan is $60 per month, but payroll is an additional $20 per month plus a $2 per employee. You don’t get inventory management or time tracking with QuickBooks Online unless you pay for its Plus plan. FreshBooks’s Premium plan is $50 per month, but payroll and inventory management cost extra because they require an app.

We feel that Xero’s Standard plan offers the most value in its lineup. The Premium level doesn’t add many features and a U.S.-based business won’t need the multi-currency function. In the same price range as the Premium Plan, competitors offer a wider range of functions. If you don’t have many employees and need inventory, though, Xero’s Standard Plan is a good option.


98% - Excellent

Setting up an account takes less than two minutes. Xero asks a few basic questions about your organization, time zone and previous accounting software, then you’re ready to start. If you last used QuickBooks Online, Xero can import your data for you.

You can navigate Xero with the drop-down menus at the top of the screen. Xero labels its functions clearly and intuitively. The main dashboard also has buttons in each section to add an invoice, bill or bank account.

Xero does well on user-friendliness for most basic accounting functions. If your business isn’t complicated, you’ll find that it’s easy to get the software up and running.


80% - Good

There are two ways to add a new invoice in Xero. The easiest method is at the top of the dashboard in the “invoices owed to you” box. Click the plus sign to add a new invoice and Xero will send you to the new invoices form. Alternatively, go to the drop-down menu under “accounts,” then follow this path: “sales” > “new” > “invoice.”

When you start typing in the “to” field, Xero matches your input to an existing customer or asks you to add a new one, which saves you time searching through a contact list. You navigate the invoice form by tabbing through the standard fields. In the “item” box, Xero lets you select from inventory and will update and track your inventory on-hand as necessary.

Another nice feature is that it calculates discounts and displays them on the subtotal line.

There are big drawbacks to Xero’s standard invoice, though.

While you can add notes to the invoice in the system, they’re not shown on the final printed or emailed version. There is also no place to add terms. If your business offers discounts for payments made within 15 days or by cash, you won’t be able to let a customer know on the invoice.

Xero Invoicing Options

Unlike QuickBooks Online, standard invoice reminders don’t show up after approving an invoice. Instead, you have to navigate back to the “sales” screen. Options include seven, 14 and 21 days past due and one custom reminder with a link to the online invoice, a .pdf or both.

Those invoice reminders apply to all customers and you can’t select different ones for different customers like you can in QuickBooks Online. We think that’s a drawback. If a customer has told you that they don’t want to be reminded before 21 days, your only option is to remove the earlier reminders for all customers.

To set up a recurring bill, go to “sales” and find “repeating invoice” in the drop-down menu. You can also check a box when first creating an invoice to mark it as recurring. Choose how often Xero should send the invoice and, if needed, an end date.

The process for customizing invoices in Xero is more involved than it is with FreshBooks or QuickBooks Online. Rather than selecting colors, layout and logos in the software, you have to create your invoice in Excel and upload it to Xero or you can find options at “settings” > “general settings” > “invoice settings.”

The custom options on that screen can’t be dragged and dropped, terms still don’t offer standard net and discount options and all you can do is change Xero’s default settings. To go beyond that, you have to upload a document created in another program.

Payment processing is another weakness for Xero. To process credit cards, you have to sign up for payment services with apps that integrate with Xero, such as PayPal or Stripe. Businesses can’t accept credit card payments through Xero’s software like they can with FreshBooks or QuickBooks Online.

If your business processes many credit card payments each month, we advise taking time to calculate the estimated fees from payment services versus QuickBooks Online, Wave or FreshBooks. Otherwise, you could wind up paying a lot more.


85% - Very Good

To pay bills in Xero, go to the “purchases” screen under “accounting” on the main dashboard. Xero tracks upcoming bills on the main screen in an easy-to-read bar graph. It also displays what bills are waiting for approval, waiting for payment and overdue, so you can see them at a glance.

Beneath the bar graph, Xero shows information on purchase orders in draft form, waiting for approval and approved. In a few easy steps, Xero can copy the contents of approved purchase orders to bills and sales invoices, saving you time.

Setting up a bill follows a similar process as creating an invoice. Select “bill” from the “new” drop-down menu on the right side of the screen.

Tab through the bill’s fields and assign the expenses to a customer or project if you’re tracking net income related to either. Bills calculate the total amount due from the quantity and price you input and will add taxes according to the rate and type you select. Another nice feature is the ability to code different items on the same bill to multiple accounts.

As with invoices, after saving a bill, you can set it to recur on the next screen or under the “new” drop-down menu on the “purchases” screen.

Recording an ACH, credit card or check payment is a manual process in Xero, unlike QuickBooks Online, which will sync and update payments and bills depending on the options you’ve chosen.

After saving the bill, go back to the main “bills” screen and check the box next to it. Click on the “make payment” button and a pop-up box will appear. In it, you can select “pay by check,” “batch payment” or “pay with bill.com.”

The “schedule payments” button lets you select a date to pay the bill, but it doesn’t offer the ability to select which payment option should be used at the same time. Instead, you have to sort by planned payment date and schedule batch payments for the bills scheduled to be paid that day.

Business Reporting

75% - Good

Xero organizes reports into categories that align with its business functions: sales, purchases, inventory, taxes, payroll, accounting, projects, fixed assets and financial reports. Located under the “reports” option on the main menu is a list of the most commonly used reports, which you can expand for more.

Sales reports provide the information you need about accounts receivables aging and customer invoices, both in summary and in detail. With those reports, you can keep track of your slowest paying customers, identify collection problems and zero in on your best customers.

As with competitors, you can select date ranges in the reports, but Xero also makes custom settings available. Depending on the report, you can select multiple columns to add or subtract to a standard report and modify how you want the information displayed and grouped.

In addition, filters can be applied. If you’re making collection calls, filter by contact person to make one phone call about all their outstanding invoices. Xero doesn’t just tell you how your business is doing in its reports, it help you run it.

Under the “purchases” section of reports, you’ll find aged payables, supplier invoice reports, expense claim details and more. They help business owners track their cash outflows.

Many of the purchase reports have custom options in addition to customizing the date range.

There are over 18 payroll reports available in Xero. You can view payroll activity by employee and taxable wages, track and manage time off and garnishments, and view pay history. Those reports serve more of a human resources function and go beyond what’s offered by QuickBooks Online.

You’ll find your depreciation schedule and fixed assets disposal schedule under “fixed assets.” Xero also has a fixed assets reconciliation report, saving you the trouble of reconciling all your fixed assets each quarter or at year’s end. You just select the date range and column settings, apply them and generate the reconciliation.

Because Xero Projects is a new feature, it’s not surprising that there are only three reports under that section, including detailed time, project details and project summary. Together, they let you view a project’s health quickly.

Xero makes so many reports available in its standard accounting package that it’s inevitable you won’t use them all. If you don’t have other reasons to use the software, you might be better off going with a simpler, less overwhelming suite of reports.

Financial Statements

75% - Good

All the main financial statements are under “financial” on the “reports” screen. Xero also offers a statement of owners’ equity, which QuickBooks Online and FreshBooks don’t have.

Owners’ equity is the portion of the business that represents owner contributions and retained earnings. Your contributions might be buying a printer or contributing start-up capital. Retained earnings is profit or loss not taken out of the business.

Typically, a balance sheet presents your asset and liability accounts in a standard order, but Xero goes beyond the norm and allows you to customize it to show comparisons. If you want a long-term view of your business, you can compare up to 11 periods of information to your current period. You can also sort by the account name or account code and select a currency.

At the bottom of the balance sheet’s main screen is a small “layout options” button that leads to powerful tools. Selecting “edit this layout” takes you to a screen where you can move accounts in the balance sheet and group them how you prefer. Xero lets you save and name the layout and make it the default presentation going forward so you don’t have to edit it every time.

It’s also easy to add options on the income statement.

On its standard income statement, which is starred in the report list, you can move accounts and add groups, but on the other, you can show percentages of income and select a cash or accrual basis presentation. Those are useful features if you have to prepare a discussion of revenue trends for upper management or a bank.

<Income Statement Settings>

Xero’s reporting options include a cash summary and a statement of direct cash flows, as well. The cash summary presents net cash movement, which is more useful for a quick gauge of your business’s health. The other statement of direct cash flows shows a traditional cashflow statement like you would find in a filing with a bank or government agency.

Xero lets you select how you want taxes handled, gross or net on operating activities and add debit or credit rules to line items on the statement.

The owners’ equity statement will be more useful for businesses with multiple owners and investors. It presents each owner’s investment and draws on equity at a glance. If you’ve grown concerned that a partner might be taking more out of the business than they’re putting in, the statement will quantify your concerns and give you talking points to address them.

Xero’s financial statements impressively align with a business’s data and decision-making needs.


95% - Excellent

Xero’s support is all online, as it doesn’t offer phone support. You can live chat with representatives or enter questions and search for answers in its library, though.

You can find step-by-step videos on Xero’s basic functions in its video library, called Xero TV. Most last between a minute and three minutes. “Xero 101” videos feature getting started and how-to’s for set up, while the videos in the “how-to” section dive deeper into various topics.

Xero hosts live webinars on a regular basis, which you can find under “Xero U” on its website and occasionally offers accounting updates that are eligible for continuing education credits.

In addition, Xero publishes small business guides under the “resources” section of its website. They cover the basics of setting up and running a business, from payroll to invoicing to business management, and should get you started in no time.

Xero has put a lot of effort into building a support database that goes beyond step-by-step instructions on how to use its software to build business owners’ overall skill set.

The Verdict

Xero will be an excellent cloud-based software accounting choice for specific kinds of businesses and well worth the higher monthly fees.

Product-based businesses will appreciate the ability to track inventory, both by adding SKU codes and with invoices that automatically recalculate inventory on hand. Inventory tracking reports guide purchasing decisions and help you decide when to cut a product that doesn’t turn quickly. A service-based business won’t need these features.

Manufacturing businesses with significant investments in equipment need the fixed assets features and reports and they will be glad to not have to sign up for another app or pay for add-ons to get them. Integrated functions save time you’d spend tracking fixed assets in a separate spreadsheet otherwise.

If you need any of the above, Xero can save you money and hassle in the long run. Its many accounting features empower a full-charge bookkeeper or accountant on staff to do almost everything in-house.

In general, the variety of integrated functions, from payroll to projects to fixed assets, make Xero the ideal cloud-based accounting software for more complex businesses, which is why its monthly payment plans, with their limits on transactions, don’t quite make sense.

Have you used Xero? What did or didn’t you like about it? Let us know in the comments below. Thanks for reading.

Xero Review

A great solution for small businesses.

Xero is an excellent online accounting tool for most companies. Though not perfect, it offers great flexibility, though some types of companies may have to shell out extra to get the most out of it. Check out our Xero review to see why we think it's one of the best accounting programs out there.
Starts from$ 900per month
Visit Xero
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