xero vs quickbooks

If you’re in the market for cloud-based accounting software to support your growing business, it may seem like there are an overwhelming number of options. Here at Cloudwards.net, we want to help you pick the right accounting software for your business. In this article, we’re going to compare Xero and QuickBooks Online to see what stands out about two of the industry’s best providers.

If you’ve read our individual Xero review and QuickBooks Online review, you know that they’re strong contenders and both made our list of the best accounting software programs. Xero and QuickBooks Online perform many of the same functions, including invoicing, paying bills and bank reconciliations, so the difference may be how easy they make these tasks.

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      1

      Invoicing

      One of the first areas in this Xero vs QuickBooks Online comparison that we’ll examine is invoicing. After all, invoicing customers and collecting money owed keeps you in business. Below is a chart comparing Xero and QuickBooks Online’s invoicing options.


      ServicesQuickBooks Online:Xero:
      Send recurring invoicesYesYes
      Automatically add late feesNoNo
      Send payment remindersYesYes
      Integrate with inventoryYes (costs extra)
      Yes (included)
      Bill for hours workedYes (at highest plan)
      Yes (at highest plan)
      Customize InvoicesYes (within software)Yes (by uploading templates)

      On the surface, these cloud-based accounting software programs offer similar features to their users. When you delve deeper, though, you’ll find key differences between Xero and QuickBooks Online.

      To customize an invoice in Xero, you have to upload a template through the “settings” menu. Although that is useful if you already have an invoice form in Excel that you’d like to continue using, QuickBooks Online also allows you to customize invoices in its software. It lets you choose colors, upload a logo and rearrange the invoice’s layout, too.

      Sometimes you’ll need to add notes to an invoice that references a job, terms or just to say “thanks.” QuickBooks Online provides boxes for these notes that appear when the invoice is emailed or printed, whereas Xero’s never show. Xero doesn’t have a place on its standard invoices to add terms, either. If your business frequently offers terms, that could be a deal breaker and you may want to check out our FreshBooks review, instead.

      New-Invoice-Form

      Both Xero and QuickBooks Online will send automatic payment reminders on past-due invoices. In Xero, the reminder settings apply to all customers, though. Every client who hasn’t paid their invoice will be sent a reminder at seven days past due. In QuickBooks Online, payment reminders can be selected and applied individually.

      Although Xero and QuickBooks Online integrate with your existing inventory — updating quantities on hand when you pull items into invoices — only QuickBooks Online charges extra for its inventory functions. Xero includes inventory tracking at every subscription level (check out our OneUp review for another service that does it, too).

      Not all accounting software is built for businesses that bill their customers an hourly rate. Project management in QuickBooks Online also tracks time, but it’s a process to set up and add to invoices.

      To track time with Xero, you’ll have to sign up for one of several apps available, but you can bill customers for hours worked on your invoices (read our FreeAgent review for a service that really does a stellar job when it comes to this).

      It’s not enough to send an invoice, though, you also need to collect payment. QuickBooks Online handily beats Xero in this area. QuickBooks Online has payment links and payment processing integrated into its invoicing system. Customers just have to click and enter their credit card information, but you’ll have to pay merchant processing fees if they do.

      Payment processing with Xero requires signing up for an external provider, such as Stripe or PayPal. While that gives you more options and could save you money on fees, it’s not as easy for customers to pay. That said, payments through those apps sync with activity in Xero.

      A good accounting program doesn’t just send invoices. It also helps you track your receivables. When you log in to Xero, it shows “invoices owed to you” at the top of the screen. Under the totals is a bar graph of amounts you’re owed grouped by how long they’ve been owed.

      QuickBooks Online displays detailed information on the “invoicing” screen, with the main dashboard only presenting “income.”

      It also includes the “accounts receivable aging summary” in its reports. Xero has an “aged receivables report.”

      Invoicing isn’t complicated with either accounting service, and both Xero and QuickBooks Online have many advanced capabilities. QuickBooks Online offers more than Xero in customizing your experience and often lets you accomplish tasks in fewer steps.

      Round: Invoicing Point for QuickBooks Online
      2

      Bills

      Collecting money is much more fun than paying it, but a strong accounting program will enable you to do both with ease. With most accounting software, paying bills is simpler than invoicing, but we find it to be more intuitive in Xero.

      Paying a new bill is simpler in Xero than it is in QuickBooks Online. All you have to do is navigate to “purchases” under “accounting,” select “new,” then click “bill.” QuickBooks Online involves a few more steps.

      Both expense payment forms include standard fields, such as payee and due date, and calculate the total due from quantities and price per unit. Purchase orders can be converted to bills once fulfilled, which is a nice time-saving feature the two accounting providers offer.

      Expenses in Xero and QuickBooks Online can be automated, but the latter only offers that at its higher pricing plan. Paying regular expenses — such as rent, electricity or internet — through a recurring invoice saves you time each month.

      There are multiple ways to set up a recurring bill in Xero. Under “accounts,” “purchases” and “new,” you’ll find “repeating bill.” Xero automatically saves bills you input as recurring and lets you select the recurrence options. If you realize that a bill will recur often after inputting and saving it, there’s a box to click to make it repeat.

      Setting up recurring bills in QuickBooks Online is far more painful. It’s done through the banking register, where you find and click the last payment made to the vendor. After clicking “memorize,” you select how often to pay the same bill and how many payments remain.

      The problem is that you must have already paid a bill to the vendor and it has to have passed through the register for you to make it recurring. If you’re new to the software, you won’t be able to automate your monthly payments from the get-go like you can in Xero.

      Finally, it’s important to stay on top of bills that you owe. Xero’s main dashboard has a “bills to pay” section on the screen’s right. When you go to the “bills” screen, totals appear at the top in boxes as well as in a bar chart under that.

      QuickBooks Online’s dashboard doesn’t show upcoming bills, only expenses paid. It has more of a historical perspective than one that looks to the future.

      If your business pays many of the same expenses monthly, Xero may be the superior choice. It’s simpler to automate your payments and its dashboard is easy to use and better designed for staying on top of current and upcoming bills.

      Round: Bills Point for Xero Accounting
      3

      Reports

      The core financial statements in Xero and QuickBooks Online — profit and loss, balance sheet and cashflow — present information about different aspects of your business and they are customizable. It’s easy to add columns, change account groupings and display time periods side by side.

      Unlike QuickBooks Online, Xero also gives you an equity statement, which is useful if your business has several investors. It displays the owners’ investments and equity draws, as well as profits or losses kept in the business. If you’re concerned that one owner may be taking too much out of the business, it will quantify those concerns.

      In addition to the core financial statements, basic accounts receivable and accounts payable aging reports track who owes you and what you owe by common past due buckets. QuickBooks Online delves deeper into accounts receivable than Xero.

      QuickBooks Online offers reports on profit and loss by customer, a comparison of estimates prepared for a customer versus sales to that customer and collections reports. That is invaluable information for businesses that carry a significant amount of accounts receivable on their books.

      Even though QuickBooks Online integrates payroll processing, it only provides reports on total wages and payroll taxes, worker’s compensation and employee details. Xero has far more reports, and they have built-in human resources functions, such as time-off balances and requests, wage garnishments and more.

      Simpler businesses will find all the reports it needs in Xero. We prefer having the ability to use drag and drop to modify reports with the service over QuickBooks Online’s more involved process. That said, QuickBooks Online wins in this category because of the variety and usefulness of its reports.

      Round: Reports Point for QuickBooks Online
      4

      Pricing

      Common among software providers, tier-based pricing typically starts with lower prices for fewer features. On the surface, QuickBooks Online and Xero follow that model. Dig deeper, though, and you’ll see that Xero restricts transactions at its lowest level, while QuickBooks Online adds access to software features and users as your business grows.

      At the lowest per-month fee, there’s a big difference between Xero vs QuickBooks Online. Xero’s Early plan is $9 per month, while QuickBooks Online’s Simple Start plan costs $20 per month. The former severely limits users’ access to the accounting software. A business can only send five invoices and quotes, enter five bills and reconcile 20 bank transactions.

      In contrast, the Simple Start plan includes estimates, invoicing and expense tracking, basic reports and sales tax. While only one employee can access the accounting software, compared to unlimited users on Xero, the lack of transaction limits makes it a better deal for small businesses.

      Xero’s mid-tier plan, called Growing, costs $30 per month and removes all usage restrictions without adding features. QuickBooks Online’s Essentials plan is $30 per month. In addition to everything on the Simple Start plan, it gives you bill payment, time tracking and increases the number of users who are allowed access to three.

      The Established plan is Xero’s most expensive option at $60 per month. It adds multiple currencies and the ability to input or track expenses. The latter is an odd omission in the lower tiers. Xero’s plans are clearly structured with the idea that they’ll grow with your business, but even the smallest business has to pay bills.

      Neither QuickBooks Online nor Xero lets you track the time and costs associated with projects until you’re paying for their most expensive plan. QuickBooks Online’s Plus plan costs the same as Xero’s highest tier, $60 per month, and adds inventory tracking and up to five users.

      Small businesses often struggle with payroll processing. It’s easier to outsource it than to calculate and collect on taxes yourself. QuickBooks Online’s payroll processing functions cost an additional $19 or $49 per month, depending on what you need, plus $2 per employee.

      Xero doesn’t have built-in payroll processing. Instead, its software integrates with multiple apps that provide the accounting service. Fees vary, but they commonly charge a monthly base and per employee after that. You may want a range of choices for your payroll processor, but you’ll spend more time comparing options and fees.

      After the lowest pricing plan, both Xero and QuickBooks Online have comparable pricing. However, QuickBooks Online offers payroll processing, giving it a slight edge.

      If you prefer a simpler pricing plan, maybe check out our Sage review. If you prefer to pay nothing at all, our Wave review is the way to go.

      Round: Pricing Point for QuickBooks Online
      5

      User-Friendliness

      Comparing the user-friendliness of QuickBooks Online and Xero is somewhat of an apples to oranges situation.

      Though popular, QuickBooks Online isn’t known for its ease of use. There is a learning curve to the accounting software, but this is partially because it can do so much. With more capabilities and options, it just takes longer to learn how to use it.

      Xero has the more user-friendly interface, with clearly labeled functions and a simpler workflow. If you don’t need the more advanced accounting functions of QuickBooks Online, we prefer Xero’s dashboards and taking fewer steps to send invoices and pay bills.

      Round: User-Friendliness Point for Xero Accounting
      6

      Advanced Functions

      Now that we’ve covered the core accounting features that every business needs, we’re going to look at a few advanced accounting functions that could help you choose between Xero vs QuickBooks Online.

      Fixed assets include the land, buildings or equipment that your business owns. For some businesses, they could represent significant investments. If your accounting software doesn’t track depreciation and retirements, you’ll have to maintain them in separate spreadsheets and input manual journal entries.

      Because you can import an existing spreadsheet, Xero’s fixed assets functionality saves you time setting them up. Its software calculates depreciation and lets you process disposals. Under its reports, you’ll find depreciation and disposal schedules, as well as fixed asset reconciliations.

      QuickBooks Online doesn’t have fixed assets modules built in to its accounting software, so everything has to be handled manually.

      Xero just launched a projects module that’s included in all pricing plans. With it, you can track quotes and request deposits on a project. It also lets you track time and money spent and calculates a project’s profitability.

      QuickBooks Online only tracks projects on its highest pricing plan. If you’re paying for the Plus plan, you’ll be able to associate expenses, time and invoices with a project. Reports calculate profitability, unbilled time and expenses, so you can stay on top of the project’s health.

      Xero has a slight edge on QuickBooks Online in inventory management. Inventory in QuickBooks Online is tracked by prices, images and categories. In both accounting programs, quantities on hand update when an inventory item is selected on an invoice. QuickBooks Online calculates the product’s cost using FIFO, while Xero uses an average cost method.

      Xero offers reports to find the best selling and most profitable items, too. Plus, you get up to 4,000 tracked items and unlimited untracked items on every plan. Once again, with QuickBooks Online you have pay for the most expensive plan to get inventory functions.

      Round: Advanced Functions Point for Xero Accounting
      7

      The Verdict

      If you’re new to cloud-based accounting software, we recommend Xero. With its easy, straightforward interface, you’ll be able to get started in less time than you would with QuickBooks Online. Additionally, the Xero dashboard and home screens for each function help businesses focused on day-to-day operations keep everything running smoothly.

      Overall, Xero is an excellent choice for less experienced bookkeepers and small businesses not planning on growing too large.

      However, if you need something with a bit more oomph, QuickBooks Online is the better choice, and the better choice overall, as well, making it the winner of this article, though only by a hair. 

      If you need payroll processing and integrated merchant processing, QuickBooks Online will definitely better suit your business’ needs. Customers prefer being able to click a link in an invoice and pay directly, but you’ll spend more time setting up recurring invoices. Businesses that have to make decisions about continuing relationships with customers will appreciate its in-depth reports.

      Winner: QuickBooks

      Ultimately, if forced to choose between Xero vs QuickBooks Online, we recommend Xero for a small business just starting out and QuickBooks Online for a larger one or if run by people with a bit more experience with accounting software.

      Have you tried using either accounting service? Which do you prefer? Let us know in the comments below. Thanks for reading this Xero vs QuickBooks Online comparison.

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      38 thoughts on “Xero vs QuickBooks Online: Which Is the Best Online Accounting Software?”

      1. Thanks so much for covering all these features. Was very helpful in my decision making.

        1. Cloudwards.net - Chief Editor

          QuickBooks Online has a tool that lets you convert Quicken files, no problem.

      2. Which cloud software integrates best with Salesforce? Particularly in relation to invoicing with several nominal codes per invoice.

        1. Cloudwards.net - Chief Editor

          Both play nicely with Salesforce, but you’ll need to use a third=party integration to get it to work. Check out Breadwinner for one.

      3. Interesting. However having tested out both for the last 2 months. I go with xero, as quickbooks has problems with the business credit card we have. It does not download the transactions. Quickbooks still has not sorted the problem out 2 months on.

      4. Great article, thank you. I was lookign for information as I have just started using software for interrior deisfgners, Ivy. In the USA it inks to Quickbooks but here they are looking at QB and Xero for integration. Your article really helped me, thank you.

      5. Can quickbooks handle different currencies, since we have suppliers and customers worldwide. I read that Xero can handle it but how about QB?

      6. I’m considering a simpler system then MYOB for my now quite simple business model. Would I start from scratch or convert the MYOB data.
        Is the quick books app recommended as an add on or included.

      7. Thank you for this…we are in the process of setting up a new POS system, using VEND. I have heard that Xero works well with them, however if there’s a problem, there is no customer service phone…which seems like it might be an issue. Do you have any thoughts on QB online vs Xero specifically for VEND?

      8. I hate QBO so much I would rather just use Excel, its that bad…

        Dont think QBSE or any other QB program will transfer easily to QBO, it actually will not at all you will start again from scratch.

        QBO is also extremely slow, and if your internet is slow forget about it, you mine as well summon a carrier pigeon, they have a better chance of getting a invoice to you customer and a check back faster!

      9. Thanks for the article, I also just realized that Xero cannot allow you to create multiple control accounts for vendors and receivable which is easily done by QBs. Most times you need to track your receivables by foreign, intercompany or third parties but it seems not designed for that.

      10. Can anyone please tell me which one is better for reporting , contractor payments and creating purchase orders

      11. I need to track expenses and small amounts of inventory every month. Which would be the best for me/

        1. Cloudwards.net - Chief Editor

          Probably Xero, but give both a try. Trial is free.

      12. Hi thanks for this great article! My business will have a high employee turnover as quite a few casual workers join and leave each month – which is best for cheap and easy payroll?

        1. Cloudwards.net - Chief Editor

          You may want to pick the solution you’d like to work with most, and then get a payrolling app you can plug in. If turnover is that high, you may want to get something dedicated to that.

      13. I want to be able to take a photo of receipts paid by cash eg taxi. Which is best and how do I do it?

      14. I’m looking for a package to use for a property development business – would either of these be suitable?

        1. Cloudwards.net - Chief Editor

          Yes, probably, though QuickBooks Online’s advanced functions may be interesting to you as well. I suggest you trying out both.

      15. Which of the two is better for Accounting for a Real Estate business that collects rents from tenants, pays maintenance invoices to contractors and pays landlords at the end of the month. The system needs to show the monthly balance of income and outgoings for each landlord.

        We are currently a small business with 10 landlords and 30 rental properties

      16. We are a small Nursery School for 40 children (ages 0 to 5); most of our invoices are charged hourly and some parent also pay by vouchers or grant. We have 12 staff on our payroll. Which of the two systems can handle or meet our requirements?

        1. Cloudwards.net - Chief Editor

          My first guess would be Xero, it has a bit more flexibility than QB Online. That said, both offer free trials, so I’d try them both before settling for one or the other.

      17. I have small dealer ship but using morthen 7 credit card to by and collect the money on prioed of time which one is good .

      18. So I am basically selling dungeons and dragons miniatures on ebay – presently running an excel spreadsheet and making approximately 150 transactions a month. I’m looking to simplify my accounting and inventory control which do you think will handle this better? Its important to me to be able to define sets of products so that I can track how specific ranges are doing.

        1. Cloudwards.net - Chief Editor

          Probably Xero, it has an easier inventory tracking system. Wave or FreshBooks might also be worth a look. Alternatively, you can use any accounting program you like, then find an inventory plugin for it, there are dozens to choose from.

      19. Hi, It was a very interesting and useful post that I was looking for. I will soon be importing clothes abroad and selling them on Ebay/Depop Etc. Which one would you use If you were in my shoes ?

        1. Cloudwards.net - Chief Editor

          My bet is Xero, because it has better inventory management, but feel free to try them both out; they each come with a free trial.

      20. I don’t know how xero made its way so high up in “accounting software” search returns. The crappy outdated 2004 QB pro has classes, xero has none.
        What is the big deal about it, a flat chart of accounts and few non-customizable statements attached to them.

      21. I use QBonline and I find that is very limiting vs the desktop version. They also are starting to make changes to the software and don’t give you the choice to either use or not use the updates. As well, QBonline requires you to have multiple chart of accounts if you need multi currency whereas Xero allows you to invoice the customer in their currency and it is linked to Xchange and updates the invoice to reflect this when you run reporting. I do like QB and if you don’t deal with other countries/currencies, it’s great but we are now leaning towards Xero. I find their interface much easier to use compared to most of the accounting programs I’ve used over the last 20+ years

      22. my company is a tech start up providing platform service. is xero/qb more suitable? what size of company is this suitable for? can they support consolidation?

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