Updated March 15, 2017. This post has been updated with additional information.
QuickBooks is the BAND-AID of accounting software. Massively popular in all its iterations – online and installed – it’s the product people are most likely to turn to based on brand recognition alone.
However, it’s not the only small business accounting software out there, and Xero is certainly a contender in the cloud accounting space.
The online version of QuickBooks – cleverly named QuickBooks Online – is a great product for a specific customer. The market is expanding, though, and there are alternatives. Recently, antipodean challenger Xero has been making waves in North America.
Xero is now the seventh most popular accounting software overall and the third most popular online-only option, according to Capterra’s Top 20 rankings. If you’re torn between the standby success of QuickBooks Online and the rising star that is Xero, you’re in luck.
We’ll compare the software based on features, the support available, and their pricing systems. By the end of this article, you should know which option works best for you.
QuickBooks Online and Xero versions
Normally, I’d hold off on price comparison until the very end of things. However, QuickBooks Online and Xero both come in a range of flavors, which affect both feature sets and pricing. We’ll do a slightly more detailed price comparison at the end of the article, but let’s set the stage here.
Xero comes in three price tiers, with different features and limits set for each. For this comparison, we’ll look at the “Standard” version of the software, which is the mid-tier option. It offers an unlimited number of invoices, bills, and bank statement. This version comes in at $30 per month.
On the QuickBooks Online side, we’ll use the “Essentials” option. If offers the same limitless invoicing and billing options that Xero features. It is also $30 per month. We’re also going to call this QBO, most of the time, because I like brevity. I also like spelling out my love of brevity in non-brief notes.
Feature set comparison
There’s a lot of overlap in the feature sets of QuickBooks Online and Xero. Backing up data, security measures, importing bank feeds, mobile apps, invoicing, and other basic accounting software features come standard. If your business just needs a fill-in-the-blank accounting package, these will both work equally fine, as far as features go.
The first distinction between them is the number of users that have access to the service. QBO comes with three users, not counting two accountant access points, which can be used in conjunction with your accountant’s version of QuickBooks. Xero offers unlimited users and accountant logins – this is true at every pricing tier.
If you have more than, let’s say, 100 employees, you might need more than three users. That’s not a given, though. Unlimited users can be incredibly useful for businesses that have multiple part-time support staff that need access to accounting software or companies with lots of owners who all want access to the numbers at any time.
Xero also gives you the ability to create purchase orders, which isn’t included in this level of QBO. You’ll also have the ability to generate 1099s and W-2s with Xero. You can also run your own payroll for up to five employees in 29 states with Xero. Finally, Xero comes with some inventory tools built-in, with add-ons available for more technical inventory management.
On the other hand, QBO comes with multicurrency support, while Xero only offers that feature at its highest pricing tier.
Both systems offer plenty of apps and integrations to expand your financial universe. You can manage payroll, inventory, budgeting, reporting, and all the rest. As Xero becomes more popular, there are more and more companies catering to both systems.
Xero and QuickBooks Online support systems
In a rundown from the Accountex Report last year Greg Lam saw support moving in opposite directions. While Xero’s used to be tight and well-ordered, it was starting to get big enough that it was sprawling. On the other hand, QuickBooks’ help, which had been too big to navigate successfully, was getting clearer due to some better search tools and categorization.
With QuickBooks Online, you get free phone support and access to the online support forums. Xero offers support through its forums and through an email ticketing system. Merchant Maverick’s review of the systems aligned with Accountex saying, “Intuit seems to be trying to turn over a new leaf here,” but that “Xero’s 24/7/365 service is also a major advantage.”
In short, it’s a bit of a tossup. If you like voice, QuickBooks is going to make you happier – assuming hold times are killing you. If you need support on Sunday night, Xero might be the way to go.
Pricing for Xero and QuickBooks Online
Both of the versions we’ve been talking about here are the middle options in a three-option set and both come in at $30 per month.
QuickBooks offers a cheaper $15 per month option with Simple Start and a more expensive $40 per month option in Plus. The striped down Simple Start allows just one user, though you still get the two accountant users. You’ll also be losing recurring invoicing, bill payment tools, and some reporting features.
At the $40 level, QBO Plus gives you five users, more reports, purchase orders, light inventory management, 1099s, billable hours tracking, and some budgeting and forecasting tools.
Xero has a $9 per month Starter version and a $70 per month Premium version. The Starter version limits you to five invoices, five bills, and 20 bank transactions per month. You also won’t have the purchase order or payroll check cutting options that come with the Standard plan.
For $70 per month, you get multi-currency support and payroll for ten employees. If employee payroll is driving your purchase, there are also Premium upgrades that give you access to more employee payments – up to 100 employees for $180 per month.
Running a small business on QuickBooks Online or Xero
Individual features may be the key to making a software decision for your small business, but thinking about how everything comes together can be helpful.
If you’re relying on either QuickBooks Online or Xero to run your business, you need to think through the possible scenarios that you could come across. Finding a software with feature X is only meaningful if you have a problem that’s solved by having access to that feature.
If your business needs five people to have access to your accounting software, wants to use receipt capture through a mobile app, and doesn’t own any fixed assets of note, then you find the option that solves those problems. Having multicurrency support doesn’t matter to your business, so you can ignore it.
The key to getting the best accounting software it to understand how the software solves the problems you face.
I like both of these offerings. I’m on a bit of a Xero kick, right now, having been impressed by the company’s CEO when I saw him speak at Xerocon last August. That said, the number of financial software systems that don’t integrate with QuickBooks is almost countable on one hand, and I really like that flexibility.
A lot of the choice is going to depend on your company’s workflow and the need of your accountant. Both Xero and QuickBooks offer accountant-specific releases, which give accountants specialized tools and client management options.
One of the nice things about the world we live in is that data is getting more transferable. If you try QuickBooks Online or Xero and hate them, you can export your data and import it into the other option without too much hassle.
If you need more than just these two options – and I would recommend you at least check the other players out – swing over to Capterra’s accounting software directory for a full listing.
Looking for Accounting software? Check out Capterra's list of the best Accounting software solutions.