Xero – Xero Standard

Xero excels in numerous areas as a small business accounting site. Xero’s built on a true double-entry accounting framework, and its methodology is capable enough to let you track and manage sales, purchases, inventory, and payroll. You can create records for customers, suppliers, employees, and items, and use these in standard, customizable transactions, such as invoices, purchase orders, and quotes. Xero lets you manage fixed assets, something competitors don’t do. Our Editors’ Choice, Intuit QuickBooks Online, offers a superior user experience and some features that Xero lacks, such as project- and time-tracking. But Xero is Intuit’s closest competitor.

The company offers three pricing levels that kick in after a 30-day free trial. Xero Starter ($9 per month) has monthly limits of five invoices and quotes, five bills, and reconciliation for 20 bank transactions, but payroll is not supported. Xero Standard ($30 per month) adds unlimited invoices, quotes, and transaction reconciliations, payroll for up to five people, and bills. Xero Premium ($70 per month) is the only version to offer multiple currency support. It also provides payroll for up to 10 employees.

Early Activities

Xero has made it easier for QuickBooks users to move records, transactions, and some other data into Xero using its direct-conversion tool. If you have files already set up in CSV or TXT format (contacts, inventory items, invoices, etc.), you can also import them into Xero.

If you’re starting fresh with Xero, you can take advantage of the site’s Setup Guide, which starts by telling you what information you should have on hand. It goes on to provide links to individual help pages for each of the remaining eight steps. You’ll be modifying Xero as you work through these, setting it up to match your company’s structure in areas, such as invoices, sales tax rates, and account balances.

Other sites take different approaches to the setup process. QuickBooks Online, for instance, automatically does some of the prep work by choosing options for your company based on those of businesses similar to yours. If you’re new to online accounting and don’t yet work with an accounting professional, it may be time to do so, whichever solution you’re using—especially for setup. Xero has a network of trained advisors, as do some competitors, such as Sage One Accounting and QuickBooks Online.

Some accounting websites, like Kashoo

QuickBooks Online have very different looks. Where QuickBooks Online sprawls across the entire screen and uses large fonts and graphics, Xero is more compact, taking up only the center of the screen vertically on some pages. Each presents key financial data and links to related activities in different ways on their home pages (“dashboards”), but both are effective. Xero displays account balances, numbers, and graphs representing outstanding invoices and unpaid bills, and an account “watchlist.” Almost everything on the dashboard is a link that can take you to related pages.

Xero employs the same kind of format that many competitors use. Tabs run horizontally across the top, dividing the site into logical functional groupings: Dashboard, Accounts, Payroll, Reports, Advisor, Contacts, and Settings. The Accounts area is where you’ll spend most of your day-to-day work time. This menu opens to several sub-functions, such as Bank Accounts, Sales, Purchases, and Inventory. The fixed assets tools reside here, too.

Managing Transactions

Once you drill down into Sales, for example, Xero uses standard Windows conventions for data entry and navigation. Four buttons at the top open tools for creating sales transactions, sending statements, importing sales invoices, and searching for specific invoices and quotes. Below that is information about your invoices. Big buttons show you the number and dollar total of invoices in draft form, those awaiting approval and payment, and your overdue sales transactions. Quotes work the same way: You can see at a glance which are in draft form, sent, accepted, and expired. QuickBooks Online does something similar to this.

Click on Draft under Invoices, and a new window opens displaying a table of the related transactions. You can highlight one or more entries and click buttons to submit for approval, approve, delete, print, or email. Xero does an excellent job of providing different views of your financial data and the navigational tools needed to work with them.

Who has the best, most effective user interface then? That’s a subjective call. Some users will prefer Xero’s no-nonsense, economical kind of approach. Others like more the spacious, aesthetically-pleasing look of QuickBooks Online and Zoho Books.

Making Records

The other area where you’ll do a lot of work—especially at first—is Contacts. This is where you’ll create records for your customers and suppliers. They include fields for defining numerous defaults for each contact, such as tax, account (sales or purchases), discount, currency, and invoice settings. In contrast, QuickBooks Online’s customer and vendor records contain fields for a different set of defaults: preferred payment and delivery method, terms, etc. Once you’ve created a contact, Xero displays a terrific record screen that includes historical activity and emails, pending activity, and a link to statements.

You click on the Inventory entry in Xero’s drop-down list under the Accounts tab to create records for your products. Here, you can enter and select information (price, account, description, etc.) about items you both buy and sell. Click on the box in front of the new “I track this item,” and Xero asks you to choose your Inventory Asset Account, and begin tracking inventory in the background. You can import opening inventory balances or enter them manually, though not as easily as in WorkingPoint. Inventory level adjustments are quite simple in Xero, though.

Xero Innovations

In terms of its bookkeeping features, Xero is quite robust. You can connect to bank accounts online and reconcile them using a simple matching system. Xero contains all of the record and transaction templates you need to manage accounts receivable and payable for a small business. Integrated payroll is an option, but the company is still working on providing payroll tax tools for all states (it currently supports 36 states). QuickBooks Online supports all states. Xero lacks ZipBooks‘ individual-activity time-billing tool, and it doesn’t track costs by project like Kashoo does.

Xero introduced the Find & Recode tool a couple of years ago. It’s only available for users who are assigned the Advisor role; in fact, the Xero documentation recommends that you not attempt it unless you’re an experienced professional. But it offers a powerful way to modify multiple transaction lines simultaneously.

Simpler innovations include Xero’s online sales transactions, which allow real-time communication and data sharing between you and your customers. Competitors do not offer a comparable feature. Smart Lists support very sophisticated searches. Tracking categories in Xero are similar to the Class feature in QuickBooks Online: Both let you assign categories to your accounting transactions.

Xero has also added tremendous customizability to several of its reports. QuickBooks Online offers more types of reports, but some of Xero’s can be modified in greater detail. In addition to standard report columns, Xero has unusual options that no one else offers. For example, the new Aged Receivables Detail report includes columns for Invoice Seen and Expected Date. The Inventory Items Summary report lets you view Adjustments, Profit, etc.

Help and Integrated Apps

Xero has built something of a financial ecosystem. It works closely with some of the best third-party application providers to provide integration with its own accounting tools, which can help growing companies expand on Xero’s features in specific areas. The site and its advisor network continue to grow quickly. Payroll now supports 36 states, and the new report customization tools are impressive. QuickBooks Online also has hundreds of third-party add-on apps in numerous financial and other productivity categories, which Zoho Books lacks. All three offer mobile apps. Xero’s is quite good, but not as robust as those offered by QuickBooks Online and Zoho Books.

Support is so important for accounting application users; these individuals often have little or no experience with online bookkeeping. Xero has a global network of advisors that are experts in the application and can work with small businesses. The site’s online documentation is exceptional, offering step-by-step instructions for Xero’s features. Unless you’re working with an advisor, though, your only option for getting questions answered is by email. Zoho Books offers that in addition to phone, chat, and online help files.

Xero has grown rapidly over the last few years in terms of usability, features, and extensibility. But primarily because it lacks the dedicated time- and project-tracking tools that service-based businesses need, its mobile presence isn’t quite as strong. And because its user experience isn’t quite as intuitive and streamlined, it’s still a step or two behind QuickBooks Online, this year’s Editors’ Choice winner, which excels in all those areas and more.

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