Xero as well as QuickBooks Online are two of the most well-known and effective accounting software options for small-scale entrepreneurs. While both are able to aid in managing complex processes such as billing, invoicing, financial reporting as well as tax management, they are more suited to various types of businesses.

In this comparison of one-to-one, we’ll explore the differences between QuickBooks and Xero so that you can determine which one is the best for your business.

Introducing QuickBooks Online

QuickBooks Online (QBO) is cloud-based accounting software that streamlines some of the tedious tasks in the management of invoices, bills, and business tasks.

With a more robust bookkeeping function that incorporates inventory management and expense tracking by location or class, QBO offers an established system that can meet the most demanding requirements of the business.

With QBO you can:

• Keep track of your expenses, income taxes on sales, sales, and mileage
• Keep receipts organized and capture them.
• Invoice (includes advance bill) and accept payment
• Send estimates or run reports to increase deductions for taxes

At Account-Ease We often suggest QBO to our non-profit clients since its class-based functions assign revenue and expenses across different programs making fund accounting easier.

Introducing Xero

Xero is user-friendly, flexible accounting software that integrates the essential business functions of each plan, like the invoicing process, reconciling bank accounts, and bookkeeping.

Xero’s full range of accounting tools and functionality lets you:

• Input bills, and then forward invoices and quotes.
• Reconcile (and bulk-reconcile) transactions
• Manage multiple currencies
• Upgrading to Analytics Plus to gain access to more advanced data

In addition, it lets you capture receipts and bills using Hubdoc or scan them by using mobile or email apps and save documents online, Xero also provides real-time overviews of reports on cash flows.

7 The key distinctions in QuickBooks and Xero

1. Pricing and plans

QBO

QBO provides four plans (EasyStart, Essentials, Plus, and Advanced) to cater to different sizes of businesses. Beginning at just $9/month, the EasyStart plan offers basic accounting functions that are appropriate for the majority of startups.

The more expensive plans, however, are priced between $19 to $60 per month. include features such as:

• Time tracking
• Multi-user access and support for multi currencies
• Budget, bill, and payment and project management

QBO also provides add-ons such as Payroll and QuickBooks Payments for payment processing.

Xero

Xero has three plans (Starter, Standard, and Premium) starting at $14/month and ranging up from the basic Starter plan up to $46/month.

• On the other hand, the Starter plan restricts the number of transactions per month you can make
• The upside is that it does not limit the number of people that you can add

Xero also provides additional paid services like expense reporting and tracking of projects for all plans.

2. Creation of transactions

Both platforms allow you to configure and map your services and products to your account chart.

QBO

Since there is no draft function you’ll require all your data on hand for recording and posting the transactions using QBO.

Xero

With Xero You can save drafts of transactions and then continue the creation or editing later. This means that different users can finish or publish each transaction.

3. Tax report

Both platforms allow you to calculate, track and control sales tax after which you can generate tax reports with amounts due.

QBO

Since QBO records different tax rates in different ledger accounts it is possible to utilize your balance sheet to determine the amounts due towards each authority.

QBO can also be configured to define the province(s) you have to monitor tax, and it displays only the tax rates for those provinces. The system automatically records the correct transactions to keep track of the tax filings.

Xero

One of the major differences that are notable between QuickBooks and Xero is the fact that Xero integrates different taxes into an account ledger. This means you’ll require separate reports to track the amount due towards each tax agency using Xero to track your tax payments.

It is also necessary to remove any tax rates you do not need from the Xero list of provincial tax rates. Then, you must manually enter the adjustments in your tax entries in order to show your tax filings.

4. Reconciliations and matching of feeds from banks

Both platforms make it simple to reconcile feeds from banks by tying them up to the accounting software you use.

QBO

Simply connect QBO to your bank account feed and check off transactions that match items in that month’s bank statement (printing out your statements makes cross-referencing easier). Note that QBO’s bank feed matching is limited when it comes to foreign currency transactions.

Xero

Select an account with a bank, go to the Reconcile tab in Xero and then review your two columns (your bank statement and your Xero transaction) and then click the OK button for the respective row, to ensure the match. You can also make comments on transactions to make them visible to other users prior to posting.

5. Report Customization

Both platforms have pre-set options for standard financial reports, such as balance sheets reports, income statements, A/P sales tax, A/R, and general ledger report.

QBO

QuickBooks Online offers more pre-set reports than Xero However, these reports tend to be not customizable.

Xero

Xero lets you personalize reports by creating formulas, grouping accounts, and altering the report’s format. You can also create drafts of your reports that you can modify later.

6. Multicurrency

In accordance with the plan depending on the plan, both platforms will instantly adjust exchange rates and make transactions using foreign currencies.

QBO

With QBO the currency is determined on the basis of contract (customer as well as supplier) level. So if you work with a single person with multiple currencies, you’ll have to configure each of them independently. Also, you must manually value currencies at the conclusion of every period of reporting.

Xero

With Xero the currency can be determined at the level of transactions, so one contact can handle transactions that involve different currencies. Xero will also automatically change the value of currencies every time the report is run by using report dates.

7. Tracking time and distance

QBO

QBO offers mileage tracking throughout its plans and time tracking in all plans except its EasyStart plan.

Xero

With Xero you’ll require the paid expenses add-on in order to track miles and an add-on for paid projects that lets you keep track of the time.

Final thoughts   

Although both are cloud-based accounting leaders, the major distinction in QuickBooks and Xero lies in their distinctive strengths and drawbacks.

While QBO is a top performer in certain areas such as tax tracking and class functionality For instance, Xero shines when it can be customized report templates and transactions that are multicurrency.

If you compare Xero and QBO for customer service it’s clear that Xero offers 24/7 online support while QBO offers chat and phone support only during certain hours (plus 24/7 support for the Advanced package).

In Account-Ease We help our clients select the most appropriate accounting software and integrate it with the most appropriate applications for the smoothest accounting processes.

If you’re in search of an accounting cloud solution for your small-sized business, Account-Ease can assist!